Impact investing: Pay it forward
Sustainable and impact investing are experiencing remarkable growth. Marisa Drew, Chief Executive Officer of the Impact Advisory & Finance department at Credit Suisse explains the opportunities offered by sustainable investing.
Interest in sustainable and impact investing is growing
There has been ever-increasing interest in sustainable and impact investing in recent years. More and more people are looking for investment opportunities that generate financial returns, while making a positive contribution to environmental protection.
Impact investing focuses on gender equality, clean water, zero hunger and quality primary, secondary and tertiary education. Among these goals, higher education stands out as an investment that has a deep impact. The creation of innovative structures in impact finance makes it possible to invest in higher education projects that yield market returns for investors. Students for example have access to funding at moderate rates, allowing them to attend a quality university.
Impact investing makes a difference
Marisa Drew, Chief Executive Officer of the Impact Advisory & Finance Department (IAF) at Credit Suisse, is responsible for setting the strategy and directing, coordinating and facilitating activities across the bank which lead to impact investing on behalf of the bank’s private wealth, institutional and corporate clients. She explains how investors can make a positive contribution to improving access to education through impact investing.
How great is the need for private initiatives in education?
It is absolutely critical that the private sector step in. In a 2015 report, UNESCO estimated that the annual funding gap for education would be at least 9 billion US dollars between 2015 and 2030. UNESCO is calling for more and better financing: a quality education, for all levels of education, in all countries, regardless of gender.
How developed is the overall impact investing market for education?
Today the impact investing market for education is relatively nascent. Historically, education funding has largely rested within philanthropic circles and the non-profit sector. The 2018 Global Impact Investing Network (GIIN) survey showed that only 4 percent of total impact investing assets under management are dedicated to education. However, there is increasing awareness within the private sector that enormous funding gaps exist. According to GIIN, 20 percent of impact investors surveyed deployed capital in education in 2017 and 36 percent planned to increase their allocations to education in 2018.
What motivates someone to invest in education?
One of the biggest motivators I see for our private clients is that they benefitted from access to a quality education themselves. This is particularly true for clients who come from developing countries where universal education is a privilege, not a right. They often feel that education was their lottery ticket to a fortunate life and they want to pay it forward.
What are the financial returns vs. risks in this space?
A key tenet of impact investing – and this is very important for investors – is that the investment must come with a commitment to measure the impact. There are two kinds of strategies: impact investors can seek to achieve returns consistent with traditional returns for a given asset class; or they can generate concessionary returns with a portion of the return coming in the form of the impact the investment is making. The risks are the same as for traditional asset classes, although most impact investments tend to be in private markets where duration is longer and liquidity is more limited.
Why does Credit Suisse believe education is an attractive investment area?
At Credit Suisse, we believe in the multiplier effect of investing in education. The recent Goalkeepers Report from the Gates Foundation highlighted the importance of investing in young people and especially in their education and health in order to create opportunities. If an individual’s investment in education can help reduce mortality, increase peace and security, stem the effects of climate change, lift people out of extreme poverty and foster economic prosperity – all while generating a financial return – we think the attractiveness of the investment case speaks for itself.