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May 08, 2014 at 09:20 PM
As the world grows smaller, linked not only by lines of communication that make us aware of natural and man-made disasters and opportunities half a world away but by ties of commerce, blood and belief, some investors look for more than financial results from their investments. They want to have a measurable impact on cultures and lives far from their own, and look for ways to make improvements on a global scale.
To do that, they seek out investments that make a difference, and ways to find them. Opportunities can include projects or startups to build or reconfigure infrastructure, bring anything from technology to clean water to medical care to a region that lacks it, or even just the financing of green technology on an individual basis. Sometimes such investments can offer higher yields than conventional offerings, although they can carry higher risk as well.
Here are seven ways to invest with impact.
1. Impact Notes Bond Program from IFC and Incapital: IFC (International Finance Corporation), a member of the World Bank Group, and Incapital LLC teamed up in March to launch a program that allows U.S. investors to buy triple-A rated IFC bonds and support private sector development in emerging markets.
According to IFC, the new bonds, called IFC Impact Notes, are “an alternative to securities issued by Government Sponsored Enterprises, or GSEs. IFC Impact Notes have the potential to offer more attractive yields than U.S. Treasuries with equivalent maturities.”
IFC, a global development institution, lends in emerging markets and raises funds for those loans from global capital markets. It focuses on the private sector and “invests to support job creation, access to health care, education, food, infrastructure, and finance, and other development priorities.”
2. Asset-Backed Toyota Auto Receivables Owner Trust 2014-A A3 Green Bond. Yes, you read that correctly; it’s an asset-backed security issued by Toyota Financial Services that will support consumer loans and leases for green Toyota vehicles, according to Everence Financial and the Praxis Intermediate Income Fund, which have committed $3.5 million to purchase of the bond.
According to Everence, which advises Praxis Mutual Funds, proceeds of “the $1.75 billion Toyota Financial Services green bond offering [which was increased from its original $1.25 billion due to strong investor demand], will fund new retail finance contracts and lease contracts for qualified Toyota and Lexus hybrid or alternative fuel powertrain vehicles.”
While this particular green bond may be new to Praxis, the fund itself is not new to social impact investments, which make up more than 10% of its holdings. Not only does it also hold World Bank green bonds, but, according to Praxis, “market rate investments also include bonds in solar and wind installations, vaccines, medical research and community infrastructure. The fund’s high social impact investments also include community development investments, which benefit disadvantaged communities in the U.S. and around the world.”
3. Solactive Green Bond Index: Financial markets indices provider Solactive AG recently launched the first index in the market to track green bonds. The index, according to Solactive, is based on a universe provided by the Climate Bonds Initiative, a nonprofit that is working toward climate change solutions via the bond market.
Solactive explained as follows: “Green bonds are now commonly defined as fixed-income securities that raise capital for a project with specific environmental benefits, where the proceeds go to climate mitigation or adaptation efforts. Green bonds are part of the overall climate-themed bond market, which has been rapidly increasing over the last years, amounting to currently $346 billion, with a further growth expectation according to the Climate Bonds Initiative.”
