Mind the Financing Gap
Appetite to ESG and Impact investing continue to rise for both private and institutional investors. They are ready to allocate a significant part of wealth as patient capital in projects, companies and asset classes generating a diverse set of non-financial values: social, human, ecological along with a “fair” financial return. This trend should help to bridge the several trillion USD annual financial gap to achieve SDGs and scale-up private-public partnership for climate change.
Despite the established interest, investors indicate obstacles in their effort to channel capital in this direction. These hurdles relate mainly to the difficulty of finding suitable investment vehicles that transparently measure and report on the impact.
From Greenwashing to Impact Investing
Impact is about outcome not output, it is about changes resulting from that output, positive or negative, intentional or unintentional, direct or indirect, short-term or long-term, positive or negative.
Impact investing is about assessing the expected outcome of an investment, the positive additionality linked to the latter. The role of the financial system is to favour a better capital allocation, moving from the risk-return to the risk-return-impact trade-off. Favouring projects or corporate financing able to deliver measurable positive additionality in their investment decisional process- economic, environmental and social.
One of the challenges is to create common standards and taxonomies in a complex and interconnected world, especially to understand the complex causality within the impact value-chain. Favouring transparency impact accounting and disclosure within a unified framework are important steps in this journey.
But the true paradigm shift will be once the real side of the economy – the value creator- start to systematically embed governance and impact in their business model and accountancy system. Moving from shareholders’ profit maximisation to the maximisation of value – profit and purpose – among the stakeholders.
Systems thinking, and systems innovations may facilitate a better understanding of such value system and foster a new economic model, moving from i) shareholders to stakeholders, ii) from centralized to polycentric governance and iii) from risk/return trade-off to risk/return/impact in asset allocation and wealth management.
Investment in Nature-based Solutions (NbS) and innovations are vital part in this journey, especially to maintain the planet’s natural balance, contain biodiversity loss and provide good services human well-being and economic development.
Business interest in investing in NbS is rising as a complement in their quest to “climate neutrality” in line with the Paris Climate Agreement and SDGs. To ensure strong integrity and that those initiatives are not misused and fuel greenwashing, we need more transparency and trust in the accountability model within a resilient framework. Such transparency and impact accountability will also help consumers to change behaviours and make responsible choices.
AxessImpact’ s mission is to bridge those financing gap and bring together domain experts and cutting-edge technology, to guarantee projects with the highest levels of trust and transparency. A Fintech platform build around strong integrity and governance at three levels:
- Technological to ensure trust, traceability and avoiding double spending and claiming.
- Data quality, scope, accessibility, and monitoring with living metrics to reduce asymmetry of information and adverse selection.
- Economic and revenue sharing model.
Blockchain technology, geo-intelligence, IoT and Machine Learning (ML) will reinforce governance models, allow real-time monitoring and marketplace dashboards. It will also help the validation and creation of virtuous cycles and new business models – the Impact Economy.