This post is part of Acuity’s Master Class Series, dedicated to shedding light on financial and other influential industry topics. Our goal is to provide a deeper understanding to the business community to empower their strategic decisions. We recently sat down with Chintan Panchal, Founder and Managing Principal of RPCK Rastegar Panchal, a boutique global law firm based out of New York City on a mission to help investors and entrepreneurs build great, long-lasting companies that achieve impact worldwide, to discuss impact investing.
What is Impact Investing?
According to GIIN (Global Impact Investing Network), impact investments are those made into companies, organizations, and funds with the intention of generating social and environmental impact alongside a financial return.
Impact investing is a space that lives between traditional investing (the main goal being to make a market rate financial return) and philanthropy (the main goal being to solve global challenges). Impact investing gives business owners and investors the opportunity to gain the best of both worlds – doing well while doing good.
Impact Investing Lightening Round Questions:
Q: First of all, who do you see typically getting into this impact investing space?
About 40% of the deals we work on are part of the impact investing world. Our investor clientele can be broken down into three main categories: 1) High net worth individuals looking to reinvest with a mission-driven purpose. 2) Multi-generational family offices of all sizes. 3) Professional investors with private equity funds who have identified an inefficiency in the market related to social and/or environmental challenges. We also work with social entrepreneurs who are building businesses with inherent missions to help solve these social or environmental challenges around the world.
Q: Do most social enterprises in this space follow a similar business model?
Not necessarily. There are two different types of mission-driven companies: those whose impact mission is baked into the business, and those whose mission is not inherent to the business model. These two different types of companies offer very different types of investment opportunities. For example, Tesla is a mission-driven company whose impact mission is inherent to their business model. For every car they sell, that’s one less gasoline-powered car on the road. In other words, the better the company does, the bigger their environmental impact.
Q: How can those interested become an impact investor?
There are three main options for investors looking to get involved.
- Look to public markets. There are a handful of socially-driven public companies (like Etsy) and ESG products to get involved with.
- Find a manager that has industry-specific experience and choose to invest in a fund. There are a number of private equity fund products out there. GIIN offers the most robust, vetted database of impact investing funds called ImpactBase.org.
- Make direct impact investments. This is where you invest directly to a company you believe in (basically taking on the role of an angel investor). Note that this option is not available to everyone – you have to be an accredited investor to go this route.
Q: Are there any direct benefits for launching a mission-driven company?
Not necessarily on a federal level. There are some incentive programs based on industry that come and go. However, there are many benefits associated with pursuing a Benefit Corporation structure. Companies can also choose to undergo the B Corp certification process for additional benefits – the main one being the ability to signal to your customers, vendors, potential employees and potential investors that you’re a mission-driven organization.
Q: Is it worth it to undergo the certification process?
In my opinion, absolutely. There are a lot of investors out there looking specifically for mission-driven enterprises to invest in – not to mention the fact that this group is growing by leaps and bounds. It’s actually the most rapidly growing field of investing in the world and has been referred to as the new venture capital. Millennials are largely to thank in that they are uniquely focused on impact in their investment portfolios.
Q: What are some of the caveats or pitfalls associated with impact investing? Any advice for those looking to navigate the space?
The biggest problem we see is misalignment between impact and the financial objectives of the company. Social enterprises need to be hyper-focused on efficient measurement strategies, as reporting is the key ingredients for achieving success in this space. With the right financial team, you’ll have the data you need in place to present to potential investors, your customer base and beyond while ensuring that that your mission is not cutting against your financial objectives.
Q: Any final takeaways for our readers?
Just know that the idea of doing good for the world while doing well as a founder, business owner, entrepreneur, investor…is possible.
You can make a lot of money AND make an incredible impact on humanity. It’s all a question of how you go about it. Visionary entrepreneurs and investors can work together to scale amazing business growth with social impact baked in.
Looking to achieve a socially-driven mission through for-profit, smart investing or need help navigating major business decisions? Contact Acuity’s Director of Development and Partnership. We’ll help you navigate through financial hurdles while connecting you with our trusted partners like Chintan Panchal at RPCK Rastegar Panchal.