To effectively engage with an investor, you must grasp key financial and strategic concepts, but you must also understand how an investor thinks. For the first one, please refer to our dictionary (link to come soon). For the second, let’s talk about it a bit:

By definition, impact-seeking investors, unlike other investors, aim for both financial returns and measurable impact. However, as conservationists and project managers should recognize that impact investors remain investors nonetheless and thus take into account their risk tolerance, nature of the sought financial instrument, time, scale and liquidity constraints, and targeted impact.  We will now briefly address these topics

Some impact investors such as venture capital firms have a higher risk appetite but some others, as intuitional investors might be ready for larger capital investment but would be very risk averse. To bear the risk, a third party might come in such as a governmental institution to provide capital that covers the risk. This is called blended finance and in short, means it is a blend between public and private capital.

Depending on the investor, they might be seeking to buy equities (a share of the company), invest in a bond or loan (lending on a project), or other types of investment instruments. Knowing the types of financial instruments out there might help conservationists to understand what kind of investor they are looking for. In addition, investors sometimes target long-term investments over ten to twenty years or short-term ones over a few years only. They will certainly have constraints with a maximum investment amount, but in terms of scale, they might also only consider a minimum volume of investment. Therefore, to invest in small-scale projects, they might only consider fund investments or more mature projects. Investors also have liquidity concerns, meaning how easily they will be able to sell out of the investment to get the cash back if needed. Some private investments as especially illiquid, and the investor will not be able to recover the cash until the maturity of the investment and thus may not be willing to invest for such a long term.

In terms of impact, investors often value quantitative indicators both for their internal investment decision-making and their external communication. Investors have to understand the many layers of real-world impact of their investment to make informed choices.  Simplification of impact measures is therefore necessary, but communication should remain transparent. This requires both education efforts from the impact investor and simplification efforts from the conservationist.  External communication is also a strong motivation for impact investors. Investors like a good story with straight-forward data indicators that can be easily communicated and target standard impact goals linked to international frameworks if possible (e.g, think of SDGs ). For example, they will look for an impact that can be quantified in terms of planted trees or species protected. Today, there are no standardization in the market as to how investors should quantify and report on their impact. Some organisations, such as PRI or GIIN, or OPIM, or countries, are offering solutions, but they have not been picked up by the market, and most investors have their measurement framework and require the projects to adapt and report accordingly.

In short, conservationists have to structure their work into single impact metrics and understand which sort of capital they need. Investors have got to understand that nature is a complex matter where no single metric will be able to cover all impact, and they need to be open-minded on innovative financial vehicles such as blended finance. Which step would you take to spark the discussion between them all?