Fixed-income impact investments can provide all the benefits of many traditional fixed income products — stable income, high liquidity, and a relatively low risk profile — plus high scalable impact.
Bonds are the most common type of fixed-income product and present a growing range of impact investing options. Municipal bonds are a natural fit as they fund projects for the public good including infrastructure, schools, and hospitals. Now investors can target the impact of their municipal bond purchases more precisely using investment platforms such as Neighborly. Growing availability of data on companies’ ESG performance (for environmental, social and governance) increasingly allows investors to screen corporate bonds for the issues they care about.
Green bonds are going mainstream. A growing number of corporations and municipalities are issuing these instruments to fund environmental projects. In February 2016, for example, Apple issued a $1.5 billion bond to finance the company’s renewable energy, energy storage, and energy efficiency projects.
Private debt can be used to lend much needed capital to non-profits, such as Community Development Financial Institutions (CDFIs), or mission-driven for-profit companies and funds, such as Community Investment Management.
Project finance provides capital for long-term infrastructure investments, such as renewable energy and energy-efficiency projects. For example, Generate Capital, which claims to be financing the “resource revolution,” provides project finance for sustainable energy, water, and agricultural infrastructure projects.
Royalty-based financing is an innovative financing solution that provides flexible financing to early-stage enterprises in return for a percentage of the businesses’ ongoing revenues. For example, Fresh Source Capital provides debt and royalty-financing options to growth-stage food-related businesses in the US.
Hear Abigail Noble discuss The ImPact on ImpactAlpha’s ROI Podcast
- 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: Daria Nepriakhina