Impact investments are being made by investors all around the world to harness the power of finance for good. Continue reading to understand impact investing’s basic characteristics, who makes impact investments, the outcomes these investments can produce, and more.
What Is Impact Investing
The phrase “impact investing” was coined in 2007, but the practice has existed for many years before that. One of the primary goals of impact investing is to assist in reducing the negative consequences of economic activity on society. As a result, impact investing is sometimes regarded as a form of philanthropy.
Before investing in a firm, investors that utilize impact investing as a strategy assess the company’s commitment to corporate social responsibility (CSR), or the sense of obligation to positively assist society as a whole. The type of impact that investing can have varies by industry and by a company within that industry. For example, Social Impact Capital is a venture capital business situated in New York that was founded in 2016. Minority seed and early-stage impact investments are the firm’s goal. The company prefers to invest in businesses that deal with energy, water, food, health, the environment, housing, social justice, education, and other consumer goods and services.
3 Characteristics Of Impact Investing
Intentionality
A conscious desire to contribute to a demonstrable social or environmental benefit of the impact investment. The goal of impact investors is to fix issues and capitalize on opportunities. This is what sets impact investing apart from other investment strategies that may take into account social and environmental factors.
Manage Impact Performance
Impact investing has a specific goal in mind, and it necessitates that investments be managed to achieve that goal. This includes putting in place feedback loops and communicating performance data to help others in the investment chain manage toward impact.
Contribute to the Growth of the Industry
For describing their impact plans, goals, and results, investors with credible impact investing practices employ common industry vocabulary, conventions, and metrics. They also share lessons learned whenever feasible so that others can benefit from their knowledge of what leads to social and environmental benefits.
These Core Characteristics of Impact Investing add to the Social Impact Capital existing definition of effective investing, which is defined as investments undertaken with the goal of generating a positive, measurable social and environmental impact in addition to a financial return. Ask and find out more on the Sarah Cone Twitter page
Benefits Of Impact Investing
Impact investing has a number of advantages, some of which are quantifiable and concrete, while others are less so but nonetheless significant. Here are a few of the advantages of impact investing:
- Corporate practices that are important to you, such as fair labor practices or environmental sustainability, should be promoted and encouraged.
- Use more of your resources to support topics that are important to you, in addition to what you pay to charity.
- Support long-term solutions to social problems that aren’t entirely reliant on philanthropy donations.
- Make your money last longer. Returns on impact investments can be recycled to have a greater social impact.
It’s also worth noting that investing in social effects doesn’t always imply sacrificing financial benefits. Several studies have looked at the performance of impact investments and found that they frequently meet, if not always exceed, the performance of standard investments.
No. of times viewed = 54
