That the impact desire doesn't take over and squeeze out the profit motive and turn the investment into charity.
What challenges might foreign private equity companies face in the U.S. when it comes to the impact investing market?
We have followed the new trend in the U.S. market, which is the concept of impact investing. We feel this is an innovative field of investment that will bring both profit and benefit society at-large. However, what are the potential risks involved? What are some challenges that foreign private companies need to pay attention to in the U.S. impact investing market?
In our opinion, the three most important things for any impact investment is: the risk, the return and value the investment brings. You have to be creative with model and, most importantly, have the right local sponsors on the ground to support your investment for the right cause. As in any investment, you can diminish risk, but you cannot eliminate it.
I think the challenges are very similar to those that impact domestic investors. I personally like impact investing, but today a lot of smart people are sharing those thoughts, and there is so much cash. It may be too early, but some areas may be nearing an inflection point. An example: I spent some time in Hudson Yards this week and also speaking with people at Silverstein. The business geography of Manhattan is undergoing a shift. So many blue chip companies have already signed leases for the new center. Business meetings and events have shifted. What happens to the Plaza District? More worrying yet, are buildings obsolete buildings on Third Avenue? Sixth is still a destination. Zoning changes have been made on the East Side. I am currently looking at a couple of sites with potential investors. That's the way I assess opportunities.
Impact investing is certainly a new trend we are seeing more of in the marketplace. The reaction, generally, seems to be that it is nice to see investors not only seeking normal business-type objectives in their investment philosophy, but also seeking to do some greater good for society, be it in environmental or social areas. I don't think private foreign investors really face more challenges than domestic ones, as long as they understand the markets they are investing in, the risks involved and have a good understanding of benefits and consequences in what they are doing. Of course, cross-border tax issues may make things more challenging for a foreign investor than a domestic one in this area, just like any other.