Impact Investing

For a growing number of investors, it is important that an investment has a social impact in addition to a financial return. These investors want to invest sustainably and they are increasingly taking a holistic view of their investments. After all, the wise use of capital can also drive social developments, be it on an ecological, medical or social level.

Companisto also offers sustainable investments. Currently, for example, there are the companies Solarnative and cureVision, which want to solve social problems (energy transition and health care) in an entrepreneurial way. The success of these investment rounds shows us that there is great demand among investors for impact-oriented investments.

Impact investing – a growth market in Germany 

Sustainable investments are often summarised under the term impact investing. Impact investing describes investments in companies, organisations or funds with the intention of achieving a measurable social or ecological effect in addition to a financial return. This effect is measured by previously determined key figures and is an integral part of the investment strategy. This distinguishes impact investing from classic, purely return-driven investments on the one hand and donations to charities on the other.

For a long time, impact investing eked out a niche existence in Germany, but it is gradually developing into a real growth market. This is shown by a market study of the Bundesinitiative Impact Investing e. V. (Biii), which was conducted in 2020 by the Centre for Social Investment and Innovation at the University of Heidelberg (CSI). According to this, the market comes to a total volume of around 18 billion euros of capital invested in sustainable capital investments. This includes funds that invest their money in debt and equity according to various sustainability criteria (e.g. ESG) as well as impact-oriented lending, which in Germany is put at around 830 million euros, according to the market study.

Especially in the last three years, the market for impact investments in Germany has developed very dynamically. This is particularly evident in the annual market report published by the Forum Nachhaltige Geldanlagen (FNG). For 2019, the report showed a market volume for impact investments by private investors of 13 billion euros. In 2020, almost 40 billion euros of private money flowed into impact investments. And in 2021, this volume even rose to 130 billion euros - a jump of 230 percent compared to the previous year. If we compare this growth dynamic with that of the ESG segment, impact investing is growing significantly faster, albeit still at a lower absolute level.

Do investors have to sacrifice returns with impact investing?

– Spoiler Alert: No! –

A widespread prejudice about sustainable investing is that a sustainable investment is not compatible with a market return. These doubts discourage many investors from investing more in sustainable investments. But does impact investing really always come at a price in terms of lower returns?  

An analysis by Forbes magazine concludes that it is often a misconception when financial market actors assume that impact investing can only be realised with sacrifices in returns. Forbes quotes from two exciting studies that have taken a closer look at the field of impact investing.

The first is by Jeff Finkelman, Vice President at Athena Capital, and is called Building Impact Portfolios. Finkelman concludes that there is an area in the financial market where investors can find investment opportunities that have both a social or environmental impact and a market rate of financial return. Here, investors could find impact-oriented investments "for free" without having to forego returns.

The second study by researcher Rachel Browning is an investor survey in the Scandinavian countries from 2019. The investors surveyed were 83 professional investors, including business angels, family offices, venture capital companies and institutional investment funds. The result stunned even the researchers: the vast majority (83 percent) of these professional investors expected their impact investments to generate financial returns that were in line with the market or even above average. The investment focus of the investors surveyed was on healthcare, the promotion of renewable energies, industrial innovation and sustainable solutions for urban spaces (smart cities).

Impact investing on Companisto: Solarnative and cureVision

A frequent criticism of impact investments is that investments in sustainable funds are not impact investing in the strict sense. Although these funds meet common standards (e.g. the exclusion of fossil fuels), in the end the sustainable effect of fund investments is difficult to measure. Moreover, it is primarily large companies that benefit from funds, while smaller companies, which sometimes have a greater social impact in relative terms, often go away empty-handed.

Impact investments with the highest possible effect for impact-oriented investors are therefore often direct investments in equity or debt capital of a company as well as project-related loans. This is the only way investors can be sure that their capital is used for the purpose they are aiming for. It also makes it easier for them to measure the sustainable effect of their investment.

Solarnative - An important contribution to the successful energy transition

The energy transition is a social challenge of global significance. In view of the threat of climate change, humanity is called upon to break its dependence on fossil fuels and replace them with renewable energies. Germany has a role model function here, because it is proving that even an industrial nation can secure its electricity needs with the help of renewable energies.

A side effect of the energy transition in Germany is that the electricity consumption of private households is increasing by leaps and bounds. According to estimates, the use of electric heat pumps and electric vehicles will permanently triple average electricity consumption. In response, more German homeowners than ever want to install photovoltaic systems. The challenges here are, on the one hand, the limited space and, on the other hand, the available skilled labour for the often-complex installation of the systems.

After years of development, Solarnative has brought a micro-inverter to market maturity that can make optimal use of all available roof space and increase the energy yield of photovoltaic systems by up to 10 percent - a quantum leap for the PV market, which is geared towards high efficiency. The micro-inverter can be integrated into each individual solar module and thus offers the possibility of precise monitoring.

Solarnative has also developed a total energy solution for homes due to the surge in market demand. In addition to the miniaturised micro-inverter for PV modules, the system includes a battery storage system and a charging station for electric vehicles. This total solution represents a radically simplified system with a focus on simple planning, easy installation, maximum energy yield and safety at the lowest possible cost. In the Companisto Angel Club, Solarnative was thus able to convince our business angels. The company raised a record €1.8 million in the closed investment round.

cureVision - Improving wound care through high technology

In Germany alone, about 3 million people suffer from chronic wounds. In order to be able to assess the success of a chosen therapy, the changes in the wound over time must be analysed as precisely as possible and thus made comparable. Currently, however, wound documentation is almost exclusively done manually in paper form, supplemented by photos with a paper ruler next to the wound as a reference.

This analysis is very time-consuming and prone to errors, as an objective and thus comparable recording of the wound parameters (such as size, depth and types of tissue in the wound) is not guaranteed, especially with changing specialist staff. Wound healing is delayed, causing unnecessary costs and pain. 

cureVision offers a combination of hardware and AI software that revolutionises the documentation of wounds. The sensors of the specially developed scanner capture the wound in seconds without touching the patient. The software, which is supported by artificial intelligence, then determines the required wound parameters objectively and with repeat accuracy.

 Even the smallest deviations from 1 mm are reliably detected and documented. The cureVision solution saves a lot of time and at the same time allows a precise observation of the wound over time. This makes it

This makes it possible for the treating physicians to optimise the therapy and thus achieve the fastest possible wound healing. In a market comparison, cureVision probably offers the most advanced solution for wound analysis.