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Our world is in a constant state of change. This holds true for how businesses see their role in the world with the ever-changing ecosystem we live and work in every day. Whether as a business owner or eager investor, the mission and purpose behind a business is much more complex than just the bottom line. Nowhere is this more evident than in the space of impact investing.  

Defined as investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return, this new wave of investing has seen tremendous growth with the overall market reaching an estimated $715 billion (Global Impact Investing Network). But just like any business investment, completing financial due diligence will ensure your objective of a strong double bottom line is achieved.  

There are three key focal areas to keep top of mind to ensure these investing opportunities turn out successful.   

When it comes to impact investing, financial due diligence is more important than ever.

As we think about the businesses that focus on more than just the bottom line, this can create additional challenges when evaluating a potential “impact” opportunity. The investor is trying to balance not only the social impact these businesses are making to our world, but the overall strength of the business today and into the future. The due diligence process can really help assess the business and financial side independently of the social impact. Being able to evaluate these independently will help provide key insights into making a great investment.

The role of the adviser should be critical in the overall investment opportunity.

Though the market data and trends are positive for impact investing, it does not come without challenges. The top three common challenges noted from a recent Global Impact Investing Network survey were:

  • Appropriate capital across the risk and return spectrum
  • Common understanding of definition and segmentation of impact investing market
  • Suitable exit options

Building a strong team of advisers on the front end and investing in the due diligence process at large will help to mitigate these factors prior to any type of investment.  

Stay the course on financial due diligence strategies.  

The key with any due diligence is ensuring the scope and objectives are clear and executed upon — regardless of the investment. Therefore, as these opportunities come up, approach the financial due diligence process with the same vigor and intensity as a conventional investment. As we educate within the marketplace, our role as financial due diligence experts is to:

  • Help you, the investor, better understand the business from a financial perspective
  • Identify and articulate the current and potential financial risks
  • Assess the earning quality and financial results.  

Impact investing is the opportunity to create a positive change, while utilizing financial due diligence to ensure success.

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