Impact investment has become an increasingly popular approach for investors who want to generate social and environmental impact alongside financial returns. However, finding suitable impact investment opportunities can be challenging for individual investors. This has led to the emergence of impact investing platforms and exchanges which aim to connect investors with vetted impact investment products. In this article, we will take a closer look at some of the leading impact investment exchanges and review their key features.
Overview and trends of impact investing exchanges
The impact investing industry has seen rapid growth in recent years, with assets estimated to be over $700 billion globally in 2019. Much of this growth has been fueled by high net worth individuals, family offices, foundations, and institutional investors seeking market-rate impact investment opportunities. This has led to the proliferation of impact investing intermediaries and fund managers focused on aggregating and originating deals. However, the impact investment deal flow remains fragmented. Impact investment exchanges seek to address this by providing a centralized marketplace for investors to access impact investment opportunities across asset classes, sectors, and geographies. Some of the notable impact investment exchanges include ImpactAssets, CapShift, Mission Markets, and Impact Exchange. These platforms provide visibility into hundreds of impact investment opportunities that have been vetted for impact and financial sustainability.
Analysis of leading impact investing exchanges
Let’s take a closer look at some of the leading impact investing exchanges:
ImpactAssets is one of the largest impact investment exchanges with over $2 billion in assets listed on its marketplace. They curate investment opportunities across asset classes and focus on transparency. ImpactAssets provides independent research on impact and financial performance of listed opportunities. Investors can browse deals online and connect directly with fund managers.
Mission Markets is an online private markets exchange focused on impact investing. They provide access to a range of private debt and equity impact investments. Mission Markets emphasizes technology-enabled solutions for impact reporting and investor management. All opportunities are screened and approved by an independent review board.
CapShift operates both an online marketplace and advisory business for impact investments. They focus on bringing institutional-grade impact investment products to individual and small family office investors. CapShift provides independent due diligence and research on all listed opportunities. Investors get access to CapShift’s proprietary impact and financial ratings.
Impact Exchange from ImpactAssets is specifically focused on donor-advised funds. It enables individual donors and family offices to find and fund impact investments through their DAF accounts. Investors can access proprietary community insights and direct support from ImpactAssets’ team.
Key factors for evaluating impact investing exchanges
When reviewing impact investing exchanges, some of the key factors for investors to evaluate include:
– Deal pipeline and investment opportunities: The number and diversity of deals, across sectors, geographies and asset classes. Exchanges with a robust and high-quality deal pipeline are more attractive.
– Due diligence and curation: The rigor of due diligence conducted upfront and ongoing curation of opportunities. Independent vetting for impact and financial sustainability is important.
– Platform features: Usability of the online platform, impact reporting dashboards, tools to manage investments, and investor community forums add value.
– Fees: Platform fees, annual memberships, transaction costs and other expenses charged to investors. Comparison with alternatives is necessary.
– Investor support: Resources like research, education, technical assistance and investor management support provided by the exchange team.
Role of impact investing exchanges in the ecosystem
Impact investing exchanges are playing an important role in the broader ecosystem in a few key ways:
– Aggregating opportunities: Exchanges consolidate, diligence and provide easier access to deals that would otherwise be difficult for individual investors to source themselves.
– Enabling new investors: By lowering barriers, exchanges help newer investors confidently enter the impact investing space in a low-friction way.
– Promoting best practices: Exchanges can incentivize and promote adoption of independent impact measurement, management and reporting standards.
– Building community: Exchanges cultivate investor education and collaboration through forums, events and facilitating co-investment.
– Influencing product development: By tracking demand and gaps, exchanges provide valuable market feedback to fund managers on developing new products.
In conclusion, impact investing exchanges are playing a valuable role in aggregating, diligencing and providing access to impact investment opportunities across sectors, geographies and asset classes. For individual investors in particular, they lower barriers to entry and enable participation in private debt and equity impact investments that would otherwise be out of reach. However, exchanges have different strengths based on their platforms, deal pipelines, due diligence rigour and investor support capabilities. As the industry matures, constant innovation and specialization by exchanges will be key to meeting the diverse needs of the growing impact investor community.