Impact Investing 2.0: How More Companies Are Doing Well by Doing Good
Our $6 Million investment in Closed Loop Fund will help jump-start recycling programs across the United States
When, where and how companies deploy capital has tremendous impact on the economy, communities, and the environment — be it by investing in people, new equipment and technologies, research and development, or new markets. Companies are becoming increasingly aware of this cause and effect, and are seeking investment opportunities that not only maximize their bottom lines, but at the same time benefit the environment and communities in which they operate or influence.
At Nestlé Waters North America, we recently announced an impact investment into the Closed Loop Fund (CLF). The organization’s mission is to increase the scale of recycling infrastructure to create a more circular economy. This is an exciting and promising opportunity for us to create long-term value for our company, and society by addressing a critical imperative: recovery of post-consumer used material.
Impact Investing Defined
The Global Impact Investing Network (GIIN) defines impact investments as “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.” The funding base is massive and growing. GIIN states that the broad impact investing field is projected to grow to $2 trillion by 2025. And the majority of respondents in GIIN’s 2017 Annual Impact Investor Survey found they are seeing results — portfolio performance is meeting or exceeding their expectations for both impact (98%), and financial performance (91%). It is important to understand that impact investing is not new. In fact, it is perhaps the oldest type of investment — predating the modern corporation, and starting with governments.
Governments are in the business of impact investing — seeking to preserve, and create social and environmental value that drives shared prosperity. For the sake of this piece, I am naming the evolution outlined herein as Impact Investing 2.0 — when the private sector begins to invest with a similar intent and in partnership with government and other organizations intending to create shared environmental, social, and economic value.
Creating Shared Value Through the Closed Loop Fund
In May, we invested $6 million in the CLF as part of a shared effort among business, government, and community partners to support comprehensive recycling infrastructure and programs in cities across the United States. Each year, the U.S. recycling infrastructure deficit requires that cities collectively spend billions of dollars to landfill commodities that could have been recovered and recycled. Moreover, the market value of the landfilled commodities, like plastic, aluminum, and even glass, is greater than the cost of what cities pay to collect and landfill it. This is counterintuitive and bad economics.
For Nestlé Waters, every plastic bottle not recycled represents valuable material that could have had a second, third, fourth and…(well, you get the picture) life. What makes this impact investment so special is that we can work to reorder the traditional economic model by helping cities and other investors realize the economic value of plastics in the waste stream, recapture this significant resource, create jobs, reduce greenhouse gas emissions, and drive more efficient resource use.
Nestlé Waters operates on the principle of creating shared value through everything we do, which is why we decided to invest in CLF. Like us, they are committed to using shared resources sustainably, and investing in communities for the long-term. To date, CLF has diverted more than 100,000 tons of recyclable content, and the 11 projects currently funded are poised to divert 4 million tons by 2025. The projected impact of CLF over the next eight years is similarly impressive: eliminating more than 40 million tons of greenhouse gas; diverting more than 20 million cumulative tons of waste from landfills; and providing a $40M economic benefit to municipalities across the U.S. I am personally very excited to be part of a project that recognizes the tremendous potential value of our investment decisions, and I urge other companies to follow suit.
A Powerful Opportunity
As global business leaders, we have a powerful opportunity, and responsibility, to accelerate the pace of social and environmental value creation and change through impact investing, while also delivering strong financial returns. It’s time for companies to reevaluate their investment portfolios to see how they can accomplish long-term growth in a way that is valuable not only to their shareholders, but to society at large.