Eytan Stibbe

Investing in a Positive Impact on Climate Change

Investing in climate change
Investing in climate change

In recent years, investors have increasingly sought social and environmental gains alongside financial returns, acknowledging the significant effect of issues like climate change on their portfolios. This growing awareness has created a demand for investment opportunities in sectors such as renewable energy and urban planning.

The Growth of the Impact Investment Market:

Over the past decade, the impact investment sector has experienced steady growth. A survey conducted by the Global Impact Investing Network (GIIN) in 2010, with only 50 respondents, revealed that 75% of them believed impact investment was still in its infancy, with an expected investment of only $4 billion the following year.

Fast forward to 2020, the GIIN’s report included nearly 300 investors, of whom 69% observed a steady market growth, projecting an investment of $48 billion for the following year. At that time, the estimated total market size was approximately $715 billion.

Investing in Climate-Friendly Alternatives:

Climate change affects the global environment through a complex process primarily driven by CO2 and other greenhouse gases. In response, many governments have announced plans to curb greenhouse gas emissions while creating economic opportunities by promoting the adoption of carbon-neutral practices.

These regulatory measures impose higher costs on fossil fuel usage, prompting companies to explore climate-friendly alternatives. With numerous climate-friendly technologies available, entrepreneurs, investors, and mutual funds are all keen to capitalize on them.

Impact on the Energy Sector:

Climate change impacts various sectors of the market, some positively and others negatively. The energy sector, in particular, is significantly affected. While the coal industry is predicted to experience significant losses, with the average annual return dropping by 26% to 138% over the next 10 years, the renewable energy sector is poised for substantial gains. Studies suggest that the average annual return for renewable energy could rise by 4-97% over the same period.

Impact investing is a relatively new field that continues to evolve, leading to limited understanding among the general public and investors who are unaware of its strategies and potential opportunities. However, the increasing recognition of the need to address social and environmental challenges has garnered attention from governments, businesses, and individuals.

Introducing policies to promote social and environmental impact poses challenges as it requires balancing profitability with generating positive social outcomes. Moreover, many impact investments involve new technologies and business models, making them inherently riskier.

Rise in Demand for Impact Investment:

Many institutional investors are strongly motivated to create positive social impact and possess the capacity to make substantial investments. This has led to a surge in demand for impact investment products. Collaborations among individuals, governments, and other stakeholders facilitate investments in public goods and provide critical infrastructure to achieve desired environmental and social outcomes.

Impact investing offers a compelling proposition for various entities, including individuals, venture capitalists, foundations, and investment banks. It provides a platform to measure intentional positive impact and opportunities to collaborate with leading entrepreneurs, activists, investors, and development experts from diverse backgrounds.

Addressing global challenges such as limited access to education and healthcare, extreme poverty, and climate change, impact investing aligns values and profits. It enables us to drive positive change, make a measurable difference to our planet, and secure a market-rate return by providing solutions to today’s problems.

A study showed that social impact funds exhibit lower volatility than non-impact funds, contributing to portfolio stability. Investment firms are responding to increased client demand by expanding their offerings of impact investments. This cultural shift in investing will eventually make impact investing the new norm.

Impact Investment: An Integral Part of Our Future

Impact investing is not only here to stay but is expected to grow exponentially as people understand that our future depends on it. Although it has gained significant traction, there is still much work to be done to bridge the gap and achieve the Sustainable Development Goals by 2030. Climate change’s inevitable effects, combined with the potential for impactful returns, make impact investment comparable to traditional investments while offering the added benefit of creating a positive change for society.

About the Author
Impact investor, philanthropist and pilot, Eytan Stibbe was the second Israeli astronaut to ever go to space. As a crew member of the Ax-1 mission, in April 2022, Eytan spent 17 days on the International Space Station. Together with the Ramon foundation and the Israeli Space Agency, a work plan was assembled and called the RAKIA mission. It included experiments in medicine, earth observation, production in space as well as educational programs and art, all under the banner “There is no dream beyond reach”.
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