The challenge for finance: after the shock, the impact

Finance that is more " positive " and connected to the real economy is one of the key responses to the crisis we are going through. More than ever, impact finance is showing a way : it is promoting new ways of investing and high-potential social and environmental innovations.

The shock we are going through is disrupting the global economy and our daily lives. It does not come, as twelve years ago, from a new drift of the financial sphere but, nevertheless, raises with acuity the question of its social utility, so often disputed. Finance is called upon to reconnect with the real economy and effectively mobilize savings to finance what must be called reconstruction, that is to say projects that bring innovation and progress for the community.

We are convinced that impact  finance is one of the most relevant  responses to the crisis. These investments are made “  with the intention of generating social and environmental impact coupled with a financial return”. Their weight is currently low (around $715 billion in 2020 compared to $502 billion last year [1] ) but if their growth is accelerating markedly, it is precisely because they are trying to place at the heart of the model research and measurement of positive effects on the real economy.

Impact finance is first and foremost a pioneering way, another way of investing and getting involved. It introduces simpler financing, making an explicit link between a desired impact and the company financed. It sets up tools to measure these " externalités " to check the consistency between commitments made and concrete achievements. It is driven by a new generation of committed financiers, who invest as closely as possible with companies and their teams and rediscover the value of the long term. They deploy, including on the listed markets, a more patient vision of investment.

Repair broken bones

The shock made us rediscover the virtues of proximity, especially in access to the essentials (food, health care, staying in contact with our loved ones). The debate is open on the need to relocate certain value chains, but without delay, finance can help respond to the vast opportunities for impact projects in the territories able to revitalize the fabric economic with a triple objective: to capture more local added value, distribute it more equitably and operate in a more ecological way. A few examples: the Comptoirs de campagne sell local products on a short circuit and services (post, press, etc.) to the inhabitants of rural areas. The impact fund launched by SWEN on renewable gases supports farmers in setting up methanization projects that allow them to supplement their income, recycle organic waste and then use it as fertilizer for their fields. Companies like Medadom or Tessan offer teleconsultation services in pharmacies in medical deserts. These projects also show that technology is not opposed to proximity: combined with “physical” approaches, thought in terms of its societal utility, it can on the contrary facilitate it. 

The " finance à impact " can then help to repair the fractures that will increase with the crisis and the digital acceleration._cc781905-5cde -3194-bb3b -136bad5cf58d_ The financial sector has made extensive use (and sometimes abused) of the concept " of alignment of interest ", supposed to guarantee greater efficiency between economic agents and counterparties in a transaction. We are now looking for a " ligne " on the needs of the most vulnerable people : the least qualified, employees in the sectors most affected by the current crisis, young graduates and certain categories of self-employed and seniors. In a destabilized job market, let's support, for example, the emergence of smart solutions: these new digital platforms that facilitate the matching of business needs and the availability of “blue-collar” employees, such as CleverConnect or Andjaro, or the Friday platform, which puts employees in contact with associations to help them solve social problems in their time of work. Without forgetting to strengthen, through solidarity finance more mobilized than ever, all these projects which have proven themselves for several years on the reintegration of employees, access to professional training or even micro-credit for the development of projects. entrepreneurial, as proposed by the ADIE for example.

Consider social and environmental resilience

To the essential measurement of the environmental footprint,  let us associate in a more systematic way the measurement of the social footprint of investments . Approaches are developing : launch of an extra-financial rating centered on local employment by Humpact, or evaluation, by the management company Sycomore, of the contribution to employment of listed companies of its portfolio in terms of quality, quantity and accessibility. And let's use these tools to select and manage investments, beyond communication on the financing already made.

On the environmental level, political and citizen debate has begun on the orientation of the recovery plan and the possibility of directing funding towards low-carbon sectors to prepare for the "after " . Finance today gives pride of place to major infrastructure projects " propres " : the latest energy fund Renewables from Copenhagen Infrastructure Partners has just raised 1.5 billion euros to develop wind, solar, storage and energy recovery projects from waste. These infrastructures are essential, but let's not forget the projects on a human scale which allow us to act individually and to be less vulnerable to the shocks to come on oil: new forms of mobility for example (electric motorcycles, carpooling, etc.) or applications that track the carbon impact of our daily consumption, like Greenly.

One of the crucial missions of finance is to allocate capital in the economy in an “ optimal ” manner. This optimality can no longer be defined today without also taking into account an objective of resilience of society in its various social and environmental dimensions. After COVID, responsible finance is impact finance.

     Elodie Nocquet _cc781905-5cde-3194-bb3b- 136bad5cf58d_      _cc781905- 5cde-3194-bb3b-136bad5cf58d_     _cc781905-5cde- 3194-bb3b-136bad5cf58d_     _cc781905-5cde-3194- bb3b-136bad5cf58d__cc781905-5cde-3194-bb3b-136bad5cf5 8d_   Antoine de Salins

Antoine de Salins  is associate director of cabinet  I Care & Consult   and as such supports financial players in the success of their "transition environmental »

Elodie Nocquet is the founder of firm  Better Way , which wishes to advance the cause of impact, by supporting the current shift of financial players and companies towards more positive impacts.

 

 

[1]  Sources GIIN Impact Investing Market Assessment : https://thegiin.org/research/publication/impinv-survey- 2020 

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