Increasing urbanization in the developing world, resource scarcity, population growth, and climate change are creating investment opportunities in real assets.
“Real asset impact investments provide families a physical, experiential alignment of their values and their investments,” write the author of Real Assets and Impact Investing, the latest report from The ImPact, a new investor network aiming to normalize impact investing among the world’s wealthiest families.
These investments can produce tangible, scalable impact alongside attractive financial returns. The ImPact primer on real assets, the fourth in its asset class series, explores two categories of investment opportunities in real assets. A few highlights:
Impact Investing in the Built Environment can generate place-based or people-based impact with investments in areas such as affordable housing and energy efficient real estate. The real estate industry's gradual recognition of environmental and regulatory risks is creating investment opportunities in sustainable Real Estate Investment Trusts (REITs) and ESG-screened real estate funds. The market for green buildings is already more than $260 billion, with anticipated growth of 13 percent per year through 2020.
Growing population – the world’s cities will add approximately 1.5 billion residents in the next 15 years – presents another opportunity for impact investors in affordable housing. Vital Capital Fund, for example, targets market-rate returns alongside scalable impact. Among its investments is Angola-based company Kora Housing that builds affordable housing, recreational spaces, and healthcare and education centers for low-income communities.
Impact Investing in the Natural Environment such as sustainable investments in farmland, timber, fisheries can promote responsible management and stewardship of natural resources and restoration of ecosystems. For example, several timber land investment management organizations (TIMOs) are monetizing their environmental impact by selling conservation easements on their land to governments and conservation organizations or generating and selling carbon credits and water rights in environmental commodity markets. Sustainable fisheries is still a new but growing area for impact investing in natural environment with both large foundations, such as Bloomberg Philanthropies and the Rockefeller Foundation, and a number of small family foundations coming in.
See more of ImpactAlpha’s briefs on The ImPact’s asset class primer series, including:
- Frameworks for impact investing
- Fixed income impact investing
- Public equity impact investing
- Early-stage impact investing
- Real assets impact investing
- Private equity impact investing
Photo by Kim Daniel.