The first half of 2020 hasn’t been easy on mainstream investors. Nor has it been a good six months for the planet.

During this period, the COVID-19 pandemic has precipitated dramatic stock market declines, resulting in losses in many investor’s portfolios not seen since the 2008 financial crisis. Alongside, we’ve seen catastrophic wildfires in Australia and near record-breaking sea ice melts in the Arctic.

For environmentally-conscious investors, these conditions make private market impact bonds, products like CoPower’s Green Bonds and the Centre for Social Innovation’s Community Bonds, increasingly attractive.

In this piece, the second in a series of interviews with financial advisors and planners about private impact bonds, we learn from Tim Nash, the founder of Good Investing, a Toronto-based investment coaching service.

 

Coaching for Impact: the Good Investing Approach

Tim Nash’s business is unique. He’s not a financial advisor, nor a broker, but rather acts as an investment coach for values-driven investors, providing education that allows clients to self-manage their investment portfolios.

Nash’s clients tend to be interested in both “doing less evil” and “doing more good”. To support the former, he educates clients about strategies such as divesting their portfolio from fossil fuels, including through purchasing socially responsible Exchange Traded Funds (ETFs). To accommodate the latter impulse, he often encourages his clients to take a look at private market impact bonds.

These private debt investment products create a measurable social or environmental impact and offer competitive financial returns, often in the neighborhood of 1-5%. Impact bonds are interest-bearing loans, which are repaid to investors with interest either in quarterly installments or at maturity.

 

Client Motivation for Private Impact Bonds

According to Nash, impact bonds have become popular with clients who are interested in moving their money out of the volatile stock market and into products with a locally-rooted, social or environmental mission.

“Right now, given the health and economic uncertainty, people are cautious, he said. “They are looking for ways to invest in their local communities... to diversify away from the stock market, and to invest in things that are really going to address social and environmental issues.”

“Impact bonds are a slow, steady part of your portfolio that are expected to earn consistent returns for a set period of time,” said Nash.

 

Investor Archetype: Who’s a good fit for Impact Bonds

When determining whether impact bonds are right for their clients, the Good Investing team looks for several key characteristics, namely: capacity for a long-term time horizon, low-liquidity needs, and impact orientation.

“[Impact bonds are] suitable when the client has a longer-term outlook, when they’re willing to deviate from a standard investment approach, and [when] they have a desire to increase their impact,” said Nash.

Some impact bonds are not eligible to be held in a TFSA or RRSP. And so additionally, Nash and his team sometimes recommend that clients maximize their investments within these tax-sheltered vehicles before opting for purchasing impact bonds. Moreover, the team typically only encourages those with larger portfolios to look at private impact bonds with higher minimum investment amounts, suggesting that they make up only a small proportion of a client’s portfolio.

 

Benefits for Clients and Advisors - Impact Investing & Impact Bonds

For Nash’s business, impact bonds and other impact investments have offered opportunities for deeper relationships with clients.

“In my practice, relationships are so important. Rather than just looking at where the economy is right now, we discuss the future people want to invest in,” he said.

“Impact investing allows me to really connect with my clients. It’s broadened the conversation and deepened the relationship. It allows clients to get excited and reminds them what they’re investing for,” Nash explained.

Alongside, clients are benefitting from the education and investment support they receive.

“When I speak to clients who have bought private investments in the past -- they’re really happy with them right now,” explained Nash. “The rate of return they locked in for has been very competitive. [They are] solid investments that are uncorrelated to market volatility.”

 

Future Orientation: Impact Positive

As the search for a COVID-19 vaccine continues, many financial advisors predict that the public markets will continue to fluctuate.

In this time and beyond, private market impact investments offer value-driven investors an attractive offering, both from an ecological and financial perspective.

 

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The information provided herein is intended for informational purposes only and is not intended to constitute a public offer, or investment advice or financial, legal, accounting, tax or other advice and should not be relied upon for such purpose.  Always consult a professional regarding your specific needs and circumstances.  For information specific to your situation you should consult a professional.  Securities offered by affiliates of CoPower Inc. and sold by CoPower Inc. are available only to those investors resident in the Permitted Jurisdictions who meet certain legal requirements. Please carefully read the applicable offering documents and ensure that your questions are thoroughly answered by a dealing representative before investing.  Green Bonds purchased through CoPower Inc., are not eligible for protection by the Canada Deposit Insurance Corporation or any other government insurer or by VCIB.