Impact investing as a force for good

The most obvious way to have an impact on the environment or society is to change our consumption behaviour - from meat lover to vegan, from car to bike, from bottled water to tap water.

What we often don’t realise is that we can also use our money through investing and saving to make a change - and the impact of that can be enormous. But how does it work?

Impact Investing

Impact investing means investing with the intention of generating positive environmental and social impact alongside financial returns.

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    Company impact is the change that company’s activities have generated through their operations or products.

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    Direct investor impact means the amount of company impact generated that can be directly linked to the amount invested.

  • Collective power

    Indirect investor impact cannot be directly linked to your investment, but is essential nonetheless, e.g. in forcing companies to change how they do business

Public assets

Public assets are corporate equities (stocks) and bonds that are listed in one of the world's stock exchanges. With equity investment you buy a slice of the pie that is a company or fund. Since you buy shares from other shareholders that sell, the company doesn't receive money directly through your investment.

Listed companies generate a majority of global emissions and it is therefore very important for reaching a net zero economy that they commit to become more sustainable. Let's explore how you can generate impact as a climate activist investor in public assets.

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Public assets
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A public company can change its operations or products to cut down on carbon emissions e.g. by producing renewable energy instead of fossil energy. The company impact is the amount of reduced emission.

Growing money

When more investors want to buy shares of the company than sell, its stock price goes up making it cheaper and easier for the company to raise capital and therefore reach future climate targets.

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The company's impact can be attributed to the investors or shareholders as indirect impact in the amount of their holding. The investor can also generate direct impact as a shareholder by voting and engaging at general meetings.

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    Divestment is the withdrawal of capital in certain companies or sectors by selling equity making it harder for these companies to raise new capital and fund projects.

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    Collective engagement can put pressure on public companies to change their processes, measure and address their emissions or set more ambitious climate goals.

Depending on the sector and company, different strategies can lead to higher impact.

Whereas for very carbon-intensive sectors like fossil fuels, divesting and investing in renewables can have an immense impact.

For other sectors, collective engagement in traditional companies, e.g. in the form of a fund where asset managers follow ESG policies might lead to bigger impact.

Green projects

Green projects

Direct green projects are financed with project finance, which is the long-term financing of infrastructure and industrial projects. Direct projects have a clear beginning and end like building a wind farm or a solar power plant.

Compared to public assets, investing in direct green projects is also more risky and less liquid (typically a 3-5 year investment to develop the project).

Stay tuned! 💡 We're currently looking into this asset class and will add it to the Cooler Future platform in the future.

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When building a new solar park or wind farm in a region, the company impact would be the reduced emissions when switching from fossil fuels to renewables in the regions energy production.

Growing money

In contrast to investments in public assets, the invested capital directly flows into the project and entitles you with a % holding of the project. The investor impact is therefore direct based on your share of ownership.

Megaphone

Direct green projects usually don't enable you to vote or engage in the project directly other than through your capital. The investor impact is therefore solely based on the investment.

Private equity

Private Equity (PE) refers to investments made into companies that are not publicly traded. The stakes needed to enter private equity investing are larger than needed in listed companies.

Private equity funds also have a longer investment horizon of approximately five years - so your money is tied-up for a longer period of time - meaning less liquidity.

Stay tuned! 💡 We're currently looking into this asset class and will add it to the Cooler Future platform in the future.

Private assets
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Similar to a public company, a private company's impact is generated within its existing business or through new technologies that e.g. reduce carbon emissions. The company impact would then be the amount of reduced emission.

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Different to investments in public assets, investing in private companies usually means buying shares directly from the company. The additional capital can then be used by the company to achieve its climate targets.

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The company's impact can be attributed directly to the investors according to their holdings in the company or fund. The ability to engage actively depends on the form of the company and the amount of the investors holdings.

Learn more about impact investing

We know that finance can be an overwhelming topic by itself and adding climate change to the discussion doesn't make it easier to follow.

That's why at Cooler Future, we aim to educate about sustainable finances step by step so you can understand what you invest in and how this has an impact on the world.

Explore our free learning opportunities. 👉🏽

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