1.7.2018

What is Impact Venture Capital/Private Equity Investing?

 Pasi Vanttinen, Managing partner, Vana Capital & Ventures

Sustainable, Responsible and Impact Investing means investments to projects, companies, organizations and/or funds that create and provide solutions to global sustainable economic, environmental and social development. There are different focus and emphasis differences in these investing areas.

Impact investing means investments to funds, companies, projects or organizations that create and provide solutions with positive impact in different social or environmental problems along with some returns too. Positive impact measurement is very important to impact investing. These investments are allocated to critical societal environmental or social problems, in which changes are wanted in the future. There are many segments in impact investing, in which there are different in focuses and return expectations.

Impact venture capital and private equity is one segment of impact investing, in which investments are made to funds, companies and/or projects that focuses on solutions and business having within their business model positive impact in sustainable development along with aiming for good returns. Impact measurement is important, but impact is typically integrated into and part of the business already.

Impact venture capital investing is often stated that one gets good returns with positive impact in sustainable economic, environmental and social development. Investment targets are globally scalable, which tells us that the emphasis and aim are in sustainable development and impact in the world.

Impact venture capital market overview

Impact venture capital/private equity is small, but growing segment of impact investing market that is estimated to be around 114 billion USD based on the GIIN members assets under management in 2016. The market is big and developing fast in the US, but it is also evolving and developing around the world.

We know from the data and information about the impact venture capital investing and funds that it has provided similar or even better returns than traditional venture capital market in under 100 million USD funds in some past venture capital funds cycles for example during 1998-2010.

Investor interests have grown to the market segment with its aim for good returns while offering also positive impact in sustainable development. Impact is often part of and integrated within the target companies business and business models rather than being separate and important focus for actions. These companies have responsibility and good corporate governance as natural part of their operations too. The natural global scalability of the business is also interesting from investors perspective in the first place.

Impact venture capital vs impact investing

Impact venture capital

Impact venture capital targets for companies that are genuinely globally scalable businesses and having potential for good returns. Positive impact in global sustainable economic, environmental and social development are also important. Good administration and responsible governance are also important.

Positive sustainable economic, environmental and social development are important in impact measurement along with the importance of good and responsible governance. Impact measurement models are build and constructed based on UN PRI, ESG, GRI standard and UN Sustainable Development Goals (SDGs) based on purposes in target companies and investments. IRIS can be used in modified form.

Impact venture capital/private equity investment targets are typically in different green economy (e.g. renewable energy, energy efficiency, sustainable agriculture and food production, circular economy, transport, infrastructure, digitalization sectors etc.) technology, product and services solutions companies.

Impact investing

Impact investing targets are more often different social or environmental projects and organizations or companies, which provide these kind of solutions and return targets varies from good profits to market rate. Positive impact and impact measurement is very important especially in defined social or environmental problem at hand that investing is aimed to offer solution and changing it for better.

Impact measurement is focused on clear social and/or environmental problems impact measuring with standard models, which are typically in use in impact investing. There are standard models such as IRIS, GSIR, GIIRS, SROI and SPI4 in use. But there are also different own build and modified versions from these.

Impact investing targets are typically directed to different societal specific environmental or social problems, which are tried to be solved and changed by specific project or organization or company. Typical investment targets are for example different solutions to improve employment, education, social exclusion, special groups problems in access to health care or finance, energy or clean water or sanitation problems among other similar big and particular societal problems needed to be improved or changed in the world.

Impact venture capital at Vana Capital & Ventures

We focus on Nordic early growth companies, which have solutions to offer in sustainable urban development problems and globally scalable business opportunities with potential for good returns. In addition make also positive impact in sustainable economic, environmental and social development.

We believe strongly that cities growth and development along with focus on sustainable urban development provides good base for cities to make concrete positive impact in the climate change and in sustainable development around the world. In impact measurement we consider that UN PRI, ESG and UN SDGs are good basis to build the purposeful models for impact measurement in our cases.

We look for our target companies to invest in the green economy areas of bioeconomy, cleantech and digitalization. Bioeconomy focus is on sustainable agriculture and food production, natural raw materials and processing, and wood fibre solutions businesses. Cleantech focus is on renewable energy, energy efficiency, circular economy and different infra solutions businesses. Digitalization focus is on sustainable urban planning and management, education and health care solutions businesses that are key for the sustainable urban areas and cities development in the future.

Our motto is ”good returns with positive impact in sustainable economic, environmental and social development in business”.