Traditionally, environmental or social issues were addressed only through charitable philanthropic donations and actions. Impact investing provides an alternative perspective, as market investment does not need to focus solely on achieving financial returns. Investors have the opportunity to use investment vehicles which have a dual purpose; the production of financial returns as well as a positive impact on solutions to environmental and social issues.

Valued at US$46 billion in 2014, the impact funds market is a small but growing sector. Recent annual growth of 20% led J.P. Morgan to conclude that the market is moving from a proof of concept phase to a growth phase (JP Morgan Spotlight on the Market, Impact Investor Survey May 2014). Jersey’s strong funds and philanthropy pedigree have seen the Island develop into a hub for this developing market, with a number of impact funds being established in recent years.

The key characteristics of impact investing include:

Intentionality

Investors consciously participate in funds which generate both financial and social and/or environmental returns. Non-financial returns may include, for example, increasing the use of green energy, improving access to healthcare or the provision of social housing.

Financial return

Investors and funds remain within the ‘forprofit’ classification. The degree of financial return varies widely, with some funds seeking market rates of return and others accepting a lower return in exchange for the achievement of a social outcome. There is usually a minimum expectation of the return of capital.

Accountability

The desired social or environmental impact is quantifiable and measurement helps to ensure transparency. Whilst many impact funds continue to remunerate managers solely on financial performance, some are aligned to a combination of both financial and social impact measurements.

US$46billion

The impact investment market was valued at a relatively modest US$46 billion in 2014 but it’s growing.

Urban regeneration

Mourant Ozannes advised a listed Hong Kong multinational on the investment arrangements for a Jersey Property Unit Trust, which was authorised as an Expert Fund and listed on the Channel Islands Stock Exchange. The fund provided investment capital for two separate and highly successful urban regeneration projects in London, resulting in the development of over 500 residential homes and social housing units.

Ethical and environmental investments

Quilter Cheviot is supporting a Swiss-based high-net-worth individual in establishing a portfolio of positive-impact ethical and environmental investments. At the same time, the firm is helping this client identify global environmental initiatives that they can support personally on a philanthropic basis.

Work
Jersey for Philanthropy
Jersey is an ideal jurisdiction for the formation and administration of philanthropic structures. It has the technical means and the experience, and is continuing to develop its laws to make philanthropic activity even easier. Professional firms in Jersey are working with individuals and families around the world to assist them with their endeavours.
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