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It’s Time To Consider Impact Investing

It’s Time To Consider Impact Investing

Impact investing refers to investments “made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return”.

Impact investing refers to investments “made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return”. Impact investments provide capital to address social and/or environmental issues. – Wikipedia

Evidence from a study reported in Journal of Sustainable Finance and Investment, in 2015 shows that 70% of investors are willing to pay more for goods and services from companies whose values align with theirs, with most of them being between the ages of 18-34.

Why is now the time to make Impact Investments?

 
Impact Investing
Impact Investments

Impact investments bring both financial returns and social or environmental good. There is no better time than now to invest in companies that are conscious about the changing climate and the resulting change to socioeconomic and natural environments.  Impact investing is also capable of eradicating poverty, feeding the hungry, securing our food supply, expand access to quality healthcare and many more social issues. The best news is that it can be done anywhere and by anyone. 

Many challenges cannot be solved through government grants or subsidies alone. It requires private capital to meet Sustainable Development Goals (SDGs) set by countries around the world. The total need for such investments is estimated at $2.5 trillion. 

What about the Return?

Global Impact Investing Network data shows that much of the estimated $15 billion impact investment market produces market rate returns. This creates opportunity for investors while providing solutions to the global crisis.

Morgan Stanley surveyed over 10,000 equity mutual funds and found that social impacts funds on average have lower volatility than comparable no-impact funds, making them a useful complement to other investments in your portfolio.

Impact investing help recipients grow sustainable businesses, such as a small organic farm or alternative energy projects and provide a much larger ROI than just a donation or hand out. It is also more efficient to meet your individual or organizational socially responsible goals. 

Partnership of Values and Profits

There is every opportunity to achieve a triple bottom line of “people, planet, profit.” Impact investing removes the competition between values and profits and allows you to be a responsible investor and still earn market rate returns.

Investing in social change is rising with most funds having been created over the past decade which creates opportunity to take advantage of this energy and bring impact investing up front and center.

 

Core Characteristics of Impact Investing

Global Impact Investing Network developed four tenets that establish baseline expectations for impact investing in collaboration with leading impact investors around the world. 

Investors making impact investments:

  • Intentionally contribute to positive social and environmental impacts. 
  • Use evidence and impact data in investment design.
  • Manage impact performance.
  •  Contribute to the growth of impact investing.

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