MAKE A PROFIT WITH IMPACT INVESTING
In 2012 I decided to create more freedom for myself and my family. So I handed over my business. I sold my house. I set up passive income streams. Then came the ultimate question: What is the best way to manage this money now? On the one hand, I wanted to secure my money for the future. I wanted to make a nice return so that at least purchasing power would be preserved. On the other hand, I also wanted something useful to happen with the money. Something that would lead to a sustainable change for the better. This is how I came in touch with Impact Investing.
SELECT PROFITABLE IMPACT PROJECTS
As a starting entrepreneur, your biggest challenge is to establish steady revenue streams. I described some strategies for this in a previous blog article. As soon as you master that one, you get a new challenge. How do you make sure that you manage that income wisely, so you make a recurring return? Yes, as an entrepreneur you can reinvest some of it back into your business. But you also want to make a sustainable difference, leave a legacy, help build a new society. Luckily, there are many impact projects to choose from.
Impact investing is relatively new. The term is often used very broadly for both funding and financing sustainable projects. I also notice that there are quite a few projects that claim to be sustainable while they are not. Greenwashing is truly a thing. When I select Impact Projects, I look at several criteria.
Makes lasting impact
I prefer Impact Projects that grow sustainably and intend to create lasting change over the long term. The sooner a project becomes financially independent, the better. This is why I always look at the growth and stability of its own revenue streams. It is never healthy for a project to depend on the goodwill of third parties. Be it grants, donations or investors. A project that wants to make lasting impact must ensure sufficient revenue streams of its own.
Helps build a new world
There are quite a few fields where innovation is welcome. More so, many domains can be completely rethought and reshaped. I am thinking of the educational system, health system, financial system, food production, media distribution, energy supply, waste management… In short, there is a wide choice of sustainable projects that offer a solution in one or more of these domains. Personally, I like to invest in sectors I have an affinity with, or in companies whose activity and products I understand. This is why, for many years, I have been supporting Impact Projects in the fields of education, media, entrepreneurship and (international) living. Recently, I’ve also been exploring recycling & upcycling, regenerative farming methods, autonomous systems of renewable energy, shoes and clothing made of vegetable leather.
Makes at least as much profit
In the old way of thinking, you have 2 types of organizations: profit and nonprofit. Profit companies have the ultimate goal of maximizing profits. Non-profit organizations, according to the name, are not allowed to make a profit. This, of course, is the biggest nonsense. Established nonprofit organizations are often very commercial as well. Anyway, as always, the ideal approach lies in the middle: a healthy social enterprise that makes a profit and does so in a sustainable way, with respect for people, animals and planet. Win-win-win. These are the Impact Businesses or Social Ventures I like to support.
Runs less risk
In times of crisis, people start saving first on expenses that are not vital. That’s why I like to invest in those sectors that do remain vital such as alternative forms of energy generation, drinking water and food production. Social housing will also be a major challenge. Immigration and natural population growth, will soon leave millions of people homeless, without any shelter. Even today, finding affordable housing is already a problem for many. Both in Europe and internationally.
Ensures a win-win-win
For me, this is the most important criterium. Is there a win-win-win for all stakeholders. Does it benefit all parties involved? The entrepreneur, the team, the suppliers, the customers, the environment, … Wherever the project is, in Europe, Africa or Latin America, it is a must to talk with local people and local authorities. When investing in a region, I like to depart from the question: what do the local people need first? For example, in the Netherlands we start with nature preservation. In Costa Rica we start with the school for entrepreneurs and leaders of the future. In Tanzania, it’s about creating jobs and social housing that benefits people in rural areas. And so on.
The greater the positive ripple effect, the more successful the Impact Project. That’s why I believe communication and education are indispensable. Any blog, any video, any book, any presentation, any training… can inspire and activate people to make a change. They, in turn, can inspire and empower others, consciously or unconsciously. The positive ripple effect of your actions will often go further than you realize. I remember one day after giving a keynote, I was approached, by a woman who came to thank me. She had been suffering from depression and burnout. She had started reading my books and that inspired her to get back on top and pay it forward. Now she helps other women, who used to have a burnout, to become passionate entrepreneurs. Mission accomplished.
CHOOSE THE IMPACT PROJECTS THAT SUIT YOU
Impact Projects come in all shapes and sizes. Start-ups or scale-ups. Small or large. Short-term or long-term. High or low risk. Here are some strategies and solutions I personally like to use.
Impact Lending for a specific project
Maybe you have an idea for an Impact Project. Maybe you know someone with an Impact Project that you would like to support. This Impact Lending can be done with 2 or 3 parties. The Impact Lender lends an amount of money. The Impact Project receives the financing. You can choose to work with a third party who also secures the risk. This offers more options and more flexibility. For example, an Impact Lender can lend an amount for a period of 3 years. While the project gets 10 years to repay the loan. Thus, the Impact Lender can often make a higher and faster return. Moreover, it ensures the repayment of the principal at the end of the term. I like to use this formula for Impact Projects where I am not involved as a director myself. This way, my return and principal is secured, regardless of the profitability of the Impact Project.
Impact Venture Capital
With Impact Venture Capital, you buy shares of an Impact Business. These are often innovative start-ups with a clear and measurable social or environmental objective. Some popular sectors include renewable energy, regenerative agriculture, recycling and upcycling, new manufacturing applications using recycled materials. No need to say this can be high risk investment. So I use this strategy only for Impact Projects where I have a say in, being a director, shareholder, or mentor. In those roles, I share responsibility for the profitability of the Impact Project.
Micro-Finance
I am a big fan of micro-finance. About 25 years ago, I made a video story about a micro-finance project for women in Benin, Africa. Women could borrow a small amount of money from the cooperative. The idea was that they would use this to set up their own profitable small business. With this small business, they could generate income for their families again and again. Additionally, more than 80% of the women managed to pay back their loan within the year. I think this is a great way to empower people. This is why I never donate. Donations make people dependent. Micro-finance gives people a chance to become financially free. For Impact Investors it is a very easy and accessible solution to create a win-win-win and make an impact.
Impact Real Estate
Impact Real Estate is an emerging strategy all over the world. It involves the acquisition and development of land or buildings for a sustainable or social purpose. Some examples include the construction of affordable housing, green buildings in natural settings or buildings for community use. For example, I am involved in the Micro-Society project, both as an investor and as an entrepreneur. The goal is to co-create a self-sufficient Micro-Society in different places around the world. Then we connect these Micro-Societies with each other so that they can work together and exchange information and experiences. The ultimate goal is to co-create an ecosystem where conscious entrepreneurs and their families can live a meaningful and creative life. I invest in this project because I want to live permanently in a Micro-Society myself. But even for Impact Investors who are not planning to do so, it can be an interesting way to acquire real estate in different jurisdictions.
Impact Lending Basket
Instead of lending to a specific Impact Project, you can choose to lend to a basket of Impact Projects. When it comes to smaller amounts, you can easily make your own mix through various Crowdlending platforms. If you want to lend larger amounts, it may be more effective to work with a third party that secures and takes over the project risk. QuantumPreneur has already selected a nice basket of Impact Projects that meet all requirements for third party Impact Lending. Guaranteed minimum returns often start from 10% annually. The bigger your deposit, the bigger the guaranteed return. This is my favorite way to easily support different Impact Projects. At the same time, it can be a great way for the Impact Lender to create a monthly passive income.
CONCLUSION
The myth that as an investor you must choose between making a profit on the one hand or supporting a good cause on the other is long outdated. Sustainable Impact Projects do have profitable business models. We also know from Quantum Thinking that there is no need to choose. All you want can be there at the same time. You can make both profit AND make impact. You can invest safely AND receive a high return. You can be in an economic crisis AND generate a high recurring (passive) income.
Fortunately, there are more and more Impact Businesses that understand and apply these principles. This creates unique opportunities for Impact Investors, now and in the future.
LET’S CONNECT
Would you like to connect and explore more Impact Investing solutions? You are most welcome to contact us by mail or join us in the free Connection Call.
