Private equity firms and philanthropists have predominantly been associated with impact investing.
For the longest time, the two have made investments into social enterprises to improve people’s lives, focusing on those at the bottom of the pyramid.
Fast forward, the landscape is increasingly changing, and more local organizations are joining the fray thanks to the proliferation of impact investing services.
Place-based impact investing is the new trend that is transforming the impact investing landscape. Gone are the days when philanthropists were the only ones playing a role in addressing social and governance issues that have destroyed the human fabric for decades.
The local deployment of impact capital is gathering pace driven by the growing need to yield financial and social returns while addressing marginalized communities’ needs. Foundations, private investors, and others are increasingly directing capital to investments that address marginalized communities’ needs.
Most place-based impact investment initiatives seek to provide a framework for mobilizing greater inflows for institutional investment into place-based impact investment.
Place-Based Investing Characteristics
The core objective of any place-based impact investing is to direct capital towards specific regions of local communities. The primary goal in most cases is to enhance economic resilience to enable the prosperity of local communities and improve the standard of living.
Place-based impact investing also entails engaging and collaborating with local stakeholders to ensure investments respond to local needs and priorities. This is the only way an investment would benefit local people and businesses while also generating financial returns to impact investors.
“Unlike other forms of investing, place-based investing calls for patience in pursuit of impact investing returns. The aim is to seek long-term sustainable financial returns while creating social value,” said Milos Maricic, The Altruist League’s President.
Place-based impact investments are opened to for-profit and non-profit organizations. Unlike grant-making programs, they are designed to finance projects that provide a financial return to impact investors or impact investing funds while also having a social impact. Investments can be made either through equity into a program, a loan, or through a loan guarantee.
The broadening up of the impact investing landscape has been the fuel behind growth in place-based impact investing. Similarly, place-based impact investing service makes it easy for organizations and impacts investors to better serve their beneficiaries in particular geographic regions with investments.
Such services stand out partly because they can dig deep into communities, thus uncover issues that have clobbered the society for decades. Impact investing services also help in the magnification of issues, therefore, drawing the much-needed financing.
For impact investing funds looking to serve local communities, several place-based investment strategies exist. The strategies are designed to align impact investing returns with the desired impact on local communities.
The Role of Place-Based Impact Investing Services
Place-based impact services are playing a pivotal role in drawing much-needed capital into investment projects and products that also go a long way in benefiting local communities. According to The Altruist League’s Managing Partner, Ekaterina Chernova, such services are helping create a better understanding of the community needs, capital gaps, and capital flows.
“Place-based investing systems are enabling collaboration between impact investors, conversely enhancing sector collaboration trust. Such services are also facilitating cross-sector conversations, therefore, attracting more capital as a group”, Chernova added.
Such impact investing services are also spearheading collaborative place-based impact investing models whereby capital is mobilized and deployed on the ground together to maximize impact.
While this can be a one-time investment, its impact could be felt for the longest time. For instance, investing in affordable housing targeting society’s lower echelons goes a long way in having a long-term impact.
Besides, place-based impact investing services play a pivotal role in mapping and assessing local capacities and opportunities. Assessing defined geographies for impact investing allows would-be investors to uncover ideal investment areas of opportunities that can significantly impact while generating desired market returns.
The future for place-based impact investments is bright. The proliferation of impact investing services providing data and insights on ideal investment projects that have the potential to have a significant impact on local communities while generating significant financial returns should be the catalyst to accelerate growth.