The investment space has grown into an entire industry with its own verticals and niches. Venture capital has never before seen such prominence, and there doesn’t seem to be an end in sight. Five decades ago, when someone referred to “investment”, it was usually a simple trust fund with a well structured portfolio providing solid dividends. Today, the term could mean a myriad of different things.
In the year 2000, at the height of the “Dotcom Bubble”, investment took on an entirely new profile. Anyone with a few extra dollars to spare was looking for a golden ticket, hoping their “investment” would multiply by ten like the stock they saw on the news. This was glorified gambling, as “investors” weren’t doing due diligence and were picking stocks based on company names and single paragraph summaries.
The hype ended in catastrophe when the bubble popped on 10 March 2000 as savvy traders took their profit off the table and began one of the greatest “sell offs” financial markets have ever seen.
This cycle has repeated itself with increasing regularity with its subsequent negative impact on the common man: the cryptocurrency bubble of 2017 and the meme stock craze of 2021 being the most obvious examples. What tends to happen in the wake of scenarios like these is that big name investment houses remain, picking up cheaper prices for solid projects and in turn waiting out the downturn and eventually seeing excellent returns.
These investment houses are always on the lookout for diversification opportunities, and will do in-depth research before committing their assets. Such research is what keeps them going for so long.
But it is these very investment houses that have helped transform the investing landscape in recent decades. With their thirst for diversification and desire for advancing growth in their portfolios, the big money investment funds have created new packages that have always attracted mainstream attention.
The funds are now available to any investor, packaged as investment products for a single transaction. The man on the street, with a minimum amount of course, can invest in “Tech Portfolios”, “Social Media Funds”, “Agricultural Indexes”, or “Space Exploration Options” to name but a few.
But one niche of investment seems to be outpacing the rest on a consistent basis… Impacting Investing.
This niche has become the investment of choice in recent years due to the alarming situation the planet finds itself in. Investors are now looking at the impact their investment has on the environment in addition to said investment’s returns. It’s no longer just about the numbers.
Don’t get me wrong. It’s still about the numbers, very much so, but before Impact Investing was commonly understood in investing circles, it was only about the numbers. Now it is very much about both. How much of an impact will the fund have on the environment, and in addition, what kind of return will it generate?
The average return of an investment fund in recent “slow” investment years was 7.4% per annum. The current median average return for an impact fund is 6.4%. With only a 1% differential, it’s not hard to see why Impact Investing is growing at a considerable rate.
So what exactly is it?
Impact Investing is all about the positive impact an investment will have on our environment and future as a species. This of course refers to the turning back of climate change, the mitigating of natural disasters, and the development of new technologies that will be overwhelmingly helpful in an uncertain future.
An impact investment is an investment made into a for-profit company that is making a net positive contribution to the earth’s environment. This includes things like capturing carbon out of earth’s atmosphere, building nuclear energy stations or even developing safer nuclear energy technology, renewable energy sources like wind and solar, carbon-positive agriculture, water sustainability projects and so many more.
The key though is that the investment is made into a for-profit company. This isn’t about charity (which is still vital in the fight for a sustainable future), this is about utilizing sustainable technology for the sake of profit.
How Does It Work?
Companies in the sustainability space are usually in their early stages (because many of their technologies are so new), and are thus looking for early stage investment. This means that many of them are still a few years away (if not more) from holding a public investment offering, and thus are still seeking seed stage funding. Seed stage refers to just that: The early stages of a company before it grows into something significant (like a seed before it becomes a towering tree).
Such early investments are often high risk high return. High risk, because the earlier you invest in a company or project, the less data you have to assume its chance of success. High return because if it does succeed, the returns are exponential due to the law of averages meaning that those who invested early would have entered at a far lower price than the more popular publicly traded price.
In order to mitigate the risk, these large corporate investment companies invest in numerous impact companies, and based on the law of averages will end up with solid returns, because they have weighed up the risks with the rewards.
Impact Investing Without The Middle Man
While Impact Investing has been an investment product of large investment corporates for almost two decades now, it’s important to remember that such investment funds charge hefty transaction and management fees. Ecowatt’s unique tokenized Impact Investing product makes it easy to invest in multiple impact projects around the globe with the single purchase of a single token.
The Ecowatt token is a collateralized investment package that includes a portfolio of sustainable environmental projects making a substantial difference in the world today. Ecowatt has a dedicated team of more than a dozen researchers constantly analyzing hundreds of sustainable projects, and investing in those that will make the most positive differences to our planet all while providing positive returns.
Our two Portfolios are currently focussed on key carbon capture reforestation and renewable energy projects, with Solar and Wind projects already rolling out in Hungary, Romania and Turkey, and reforestation projects rolling out in Uganda, Hungary, and Mongolia.
Reforestation is absolutely paramount to the capturing of deadly heat-trapping CO2 filling our atmosphere, and will be a key driver in seeing Earth maintain a liveable average temperature in coming decades. In our recent blog, we expanded on the importance of reforestation, and why the process plays such an important role in fighting climate change.
Renewable Energy is one of the more obvious solutions to the impending dangers of climate change, because it is imperative that we as a species reduce the amount of coal-based, CO2-laden smoke being released into the atmosphere from coal-generated electricity plants. We must switch over to renewable energy sources like solar and wind as fast as humanly possible, and the costs of such projects are laid out in this blog post here.
The reality is: Impact investing is one of the most responsible ways to put extra funds to work. Ensuring finances are deployed to sustainable impact projects is part of our mission, and establishing such projects as successful businesses makes up a big part of that.
We are proud to be an Impact Investment option in the innovative blockchain and NFT landscape, and believe that our vision is one that will make for crucial headway in the global fight against the terrors of climate change. Find out more about what we’re up to and our mission on our home page, or contact us to get further information here - especially if you’re a business with a groundbreaking impact investment idea!
Impact Investing returns compared to non-impact returns:
Impact investing overview: