WHAT IS IMPACT INVESTING?
In this guide, we cover everything you need to know about impact investing. From what impact investing is to why it is beneficial and important.
Impact investments are investments that have been made to generate specific, positive measurable results. For example, an impact investment could be made to create positive social or environmental impacts, along with a financial return. Any investment that is used to address sustainability, social or environmental issues could, therefore, be seen as an impact investment.
Some popular impact investments include investment into sustainable agriculture, climate change, renewable energy, conservation, affordable housing and accessible healthcare. Impact investments are popular in both emerging and developed markets, the target of the return of impact investments can vary and depend on the strategic goals of the investor.
HOW CAN THE IMPACT BE MEASURED?
ESG, or environmental, social and governance, are the three main factors that are used to analyse the impact of an investment made by a company or business. These three criteria can be assessed and measured to determine what impact investments have had, although we have our concerns on how they are being used and how effective they can be: ESG methods should have strong values to support them.
WHY IS IMPACT INVESTING IMPORTANT?
Impact investing is important because it challenges the traditional opinion that social and environmental issues should be addressed by charitable donations alone. For a long period of time, investors have been told that they should only focus on market investments that achieve financial returns exclusively, impact investment shows that there is another way. Impact investments can, therefore, be seen as important because they are changing the culture and norms of investing.
WHAT ARE THE BENEFITS OF IMPACT INVESTMENTS?
Of course, one of the main reasons why impact investments are both important and beneficial is the lives you can change by investing in a cause or initiative that will have positive, substantial change or limit existential threats. But there are additional considerations to make:
- The impact investment market is very diverse, meaning investors have a lot of viable options for addressing social and environmental issues whilst receiving a financial return.
- Impact investments often attract positive media attention and can help a company grow its philanthropic reputation.
- Impact investments are not greater risks than other forms of investments, in fact, many investors use impact investments to stabilise their portfolio by choosing impact investments with low-volatility.
- Impact investments can create harmony between the values and profit margin of your business. Impact investing is a great way to solidify the values of your company and fulfil your environmental and social responsibility goals.
At Matters2, we believe all investments should be impact investments, in one way or another. Contact us today to learn more about how you could be making a difference.