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It’s common knowledge that the effects of climate change have been inextricably linked to everything from rising sea levels to increasingly extreme weather. Along with these phenomena wrecking all kinds of havoc upon human lives around the world, experts estimate the global economy could lose 10% of its total value by 2050 at the current rate.
Finding ways to effectively counter climate change is a challenging undertaking, and it is a theme of utmost importance for the United States and other countries but in recent years. So, a trend of impact investors has emerged to accomplish just that. By utilizing their financial resources, knowledge base, and contact network to aid sustainably built businesses, these investors see investment opportunities as a potential avenue to stem the destructive effects of climate change.
Having worked as chief of staff and an officer on special duty within the Union Cabinet Minister of Power and Renewable Energy of India, one such expert is Nishant Tiwary, a globally recognized investment expert in the SaaS, climate tech and decarbonization space.
In a recent interview, the former principal of investments at Green Frontier Capital and current JFK Fellow at Harvard University shared his impassioned belief that impact investing is precisely what the world needs to get back on an environmentally sensible track.
“I judge companies on a number of essential factors such as their ESG criteria, team proficiency, scalability, technical and business advantages and ability to raise subsequent rounds of funding before deciding to invest in them,” said Tiwary.
“There’s no doubt that our current environmental situation is serious. But we believe that with the right investment opportunities identified and nurtured, we can help offset and even reverse the negative consequences of climate change. Impact investing means putting your money where your mouth is to support businesses who don’t just believe, but take real action, to follow sustainable business practices.”
1. Fostering ESG-Friendly Business Seeds
Knowing where and when to support a business is the cornerstone upon which investors build their portfolios but there’s more at stake than pure profit these days. Impact investors differ from the pack in identifying businesses that aren’t just financially solvent but who adamantly follow sustainable processes.
“There’re endless companies out there that claim they follow environmental guidelines,” Tiwary comments. “What we do is thoroughly research these claims before investments are made, so backers are assured their resources are going to companies both fiscally and environmentally sound. The financial rewards speak for themselves, but the sustainability boon matters more than ever to ethical investors who want a portfolio of which they can be proud.”
ESG (environmental, social, and governance) standards have become increasingly attractive and prevalent in recent years. While in 2019 51% of companies disclosed their ESG figures to the public, this rate increased to 64% in 2023 and is projected to continue climbing. ESG awareness and minimization of negative effects isn’t a passing trend but a new norm of which savvy investors are taking note.
2. Driving Diverse Sustainability Initiatives
“Once you commit to an impact investing mindset, the next move is to narrow your scope for maximum effect,” Tiwary explains. “This is why we help investors target areas like electric mobility, clean water, or renewable energy. Ideally, we recommend investors start with a field in which they already have some experience and connections, as their pre-existing knowledge base can then be leveraged for more effective change and help deliver breakthrough green innovations.”
To enact true and lasting change, impact investors first must pick a path and then commit their resources. This kind of specialized focus makes green technology innovations and breakthroughs more likely to occur, offering investors both a financial return and satisfying sustainability advancements in a field of their choosing.
No matter what sustainability initiative investors are intrigued by, there is a path through impact investment to help push it along to progress. By working with experts in both business and sustainability, the speed at which this can be accomplished increases substantially.
3. Investing In Underfunded Areas
In the global age, the breadth of options available for investors has never been wider. No longer constrained by geographical limits, impact investors can aid businesses in areas lacking in financial resources anywhere in the world.
“There’s more innovation sprouting up all over the world than ever,” Tiwary notes. “However, some locations with incredible ideas lack the funding to explore or fulfill them. Impact investing can change this overnight, giving sustainable businesses with brilliant minds behind a chance to succeed that a generation ago wouldn’t have had an honest chance.”
Impact investing helps combat climate change not just via the steady growth of eco-friendly businesses but by making the cause a global, cooperative effort. The global talent pool is more accessible than ever through communications technology which allows ideas to spread further and faster than ever.
Through the process of impact investing innovators can be found, supported, and the sustainable technology developed can then be shared to the benefit of all.
Invest In Sustainably Today, Reap the Benefits Tomorrow
It’s understandable to be alarmed about climate change but there’s still plenty of reason to remain hopeful. There’s no magic overnight solution to the issue, but by approaching it step-by-step, real progress can be made and a cleaner, brighter future attained. Impact investing acts as a bridge between abstract belief and concrete action of businesses, one that very well might be just the push the world needs to correct its course.
“What we essentially provide financial assistance for sustainable business we believe in,” Tiwary notes. “Climate change is too large of an issue to ignore but also too complicated for any one individual to solve. If the right businesses break through and flourish though, then we wholly believe we can help give the world a much-appreciated breath of fresh air.”
