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Farming as a Service (Bain & Company)
Claudius Gutemann, Farming as a Service (Bain & Company) 15 Mar 2018
Acumen Energy Impact Report 2017
Claudius Gutemann, Acumen Energy Impact Report 2017 28 Feb 2018

A De-risking Toolkit for Impact Investment

The debate about a supply-demand mismatch in impact investing has often centred on its characterisation as a relatively high risk strategy and therefore on whether sufficiently high risk-adjusted financial returns are achievable. This report shifts the lens: while demonstrating a track record of sufficient financial return is one way to bring supply-and-demand into line (and is a key step forward for the impact investment industry), another approach is to adjust the risk side of the equation – to ‘de-risk’ impact investment.

Despite the compelling win-win of generating both a financial and societal return, the addition of an impact lens to investment propositions has increased the sense of risk for many asset owners, deterring or even prohibiting them from entering the market. One way to reduce this sense of risk (and to scale the market) is to wait for the industry to prove itself. We do not have time. As one interviewee for this report remarked, ‘it takes 10 years to build a 10 year track record’ and yet the societal challenges that impact investing can address are too urgent to wait this long.

To help accelerate the de-risking of impact investments, this report unpacks the general ‘sense of risk’ associated with impact investing into five distinct risk factors that are most deterring asset owners.
It then investigates de-risking features that can mitigate each one.

The result is a practical de-risking toolkit for those designing impact investment products, brought to life by a catalogue: real-world examples of de-risking features already at work, on which we hope
the market will readily build. The report closes with actionable recommendations for those investing, or facilitating investment,
into the market.