Our Panel at the Impact Festival 2021 – The five building blocks of an impact investing ecosystem

“Younger generations are more prone to challenge existing beliefs”

This article is a follow-up documentation of our panel discussion at the Impact Festival 2021. The event was held in English language. To make the findings also available to our English-speaking community, we write this article in English.

We organized a panel discussion at the Impact Festival 2021in collaboration with some of our member organizations: Manuela Fritzsch from Agents for Impact, Safar Sarif from Impactive Values, Sophie Kazmierczak from Next Generation Invest and Ariane Schoen from Invest in Visions were part of our virtual discussion round.

The topic was “Building blocks of an impact investing ecosystem”. Impact Investing can play an important role in the transformative process of social and ecological change. Hence, it’s important to assess how an impact investing ecosystem can be built. Five building blocks are essential for that:

1. Know-How – Without transparency there is no mainstreaming

Manuela Fritzsch stated, that the ecosystem would need profound expertise in the field. This means, that a large number of organizations and institutions will have to to educate themselves as well as their employees in more detail about impact investing. Further, only by combining theory and practice, knowledge will turn into action. Ariane Schoen added, that this will be a longtime process – over the years the knowledge will add up and become more “impactful”. As an example Ariane mentioned her company Invest in Visions: They launched the “Mikrofinanzfonds”, for which it was essential to develop know-how over time.

2. Products – A growing demand still isn’t met by an adequate product offer

There’s a lot of investable capital in the market, however the capital has to be channeled into the right directions. Safar Sarif stressed the fact that currently there is a lack of clear impact investing products. Sophie Kazmierczak added, that in the real estate sphere only very limited products are on offer. Especially those that are characterized by a comprehensive and efficient strategy. She underlined that the number of products offered on the market would need to be increased.

3. Match-making – How to find the right co-investors and investees

Match-making is another essential building block of an impact investing ecosystem, as available capital has to be matched with the “right” products. Its all about products with a clear impact. Hence, investment managers have to function as match-makers. Sophie gave insights into the real estate sector by stating that project developers are only now starting to get engaged in impact investing products. She called Impact Investing a somewhat still “novel-approach” for them.

4. Transparency – The dangers of impact washing

A great threat to impact investing is impact washing. Safar Sarif stated that the first step towards impact washing is transparency. Manuela Fritzsch added that a Great Transformation will only be possible, if transparency is being traced. Hence, evidence of the real impact of an institution is vital. It further builds trust for the market actors.

5. Framework conditions – The central role of political decisionmakers

The Biii has established a working group on politics which sees as its core mission to help improve the framework conditions for impact investing in Germany.  Before the backdrop of the federal elections in late September the members of this working group have published a number of building blocks for developing the German impact investing ecosystem. These have been submitted to the major parties represented in the Bundestag (German Federal Parliament). Through this exercise we would like to get a better understanding of where political decision makers stand when it comes to sustainable investing.  There is a building block focussing on a social start-up seed fund, another one asks for additional reporting obligations for companies in order to create more transparency in the market and there is also one building block on government support for flagship projects that can showcase the scalability of impact-driven products and services. 

The panelists vividly explained that an impact investing ecosystem can be a key element when it comes to achieving the Great Transformation. It is now up to the political players to provide the political framework, so that the various building blocks can be further developed.