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What is Impact Investing

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Topic in This Article

What is Impact Investing?

Why should one practice impact investing?

Elements of impact investing.

Who make impact investments?

How do impact investments perform financially?

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What are some examples of impact investing?

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What is Impact Investing?

The word impact investing in finance holds the exact same meaning as it does in plain English.

Investing into a project which will create impact.

Impact, that we speak of here could be in any field of development, social activity or measurable sustainability. Impact investing is the concept of investing for the greater good all while reaping profits from your investments. Investments of these forms can be made in both emerging markets or already developed markets. It also depends upon market to market viability and the investors strategic goals.

The growth of impact investing adopted by the investors provides financial backbone to the world’s most pressing economic and ecological issues such as renewable energy, sustainability, eco friendly materials, climate change and soil conservation.

It also includes microfinance and affordable and accessible basic human needs such as healthcare, education and housing facilities.

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Why should one practice impact investing?

Impact investing deals with the world’s most critical issues which need to be worked on for better sustainability and development. Investing in two such projects brings about peace and harmony on a great scale even if it does not hold much capitalist value.

Also, impact investing offers an assorted

mixture of diverse markets and exhilarating opportunities to the investors to make advancements and social and environmental solutions through investment and financial returns.

A large number of investors have been attracted to this newly emerged market.

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Elements of impact investing.

  1. INTENTIONALITY

It refers to the investors mindset and intentions while investing into a certain project or a cause towards a positive change in social, ecological or socio-economic parameters.

2.INVESTMENT WITH RETURN EXPECTATIONS

It refers to the situation where the investor expects a return or a margin of profit on his investments while keeping an intention to create a positive change as well.

3.RANGE OF RETURN EXPECTATIONS AND ASSET CLASSES

Impact investments set certain expectations in return for their investments that range from below market rate to risk-adjusted market rate.

4.IMPACT MEASUREMENT

A major factor when it comes to the impact investing concept. It is how much of a great change does your investment make or how well does it perform according to your benchmarks. This parameter varies from investor to investor and their financial capabilities.

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Who make impact investments?

Fund Managers

Development finance institutions

Diversified financial institutions/banks

Private foundations

Pension funds and insurance companies

Family Offices

Individual investors

NGOs

Religious institutions

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How do impact investments perform financially?

Impact investors have a wide range of financial return expectations from their investments.

Some investors deliberately invest in below the market return rate projects according to the strategic investment policy while some are very bullish on market competitive projects and market beating returns.

Although a large majority pursues competitive and market beating return investments.

There are many surveys which proved that the impact investing market has done great things to their portfolios. There are very few cases of incurring huge losses and mostly they are up to the expected mark or even exceeding the expectations.

The trend has allowed the development of markets that are emerging as well as provides great stability to the already developed markets.

This is also on par with the social, environmental and economic change they want to bring about through their investing.

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What are some examples of impact investing?

Some Global Example:

Acumen and Everytable: Bringing Good Health into Reach

https://thegiin.org/acumen-and-everytable-bringing-good-health-into-reach

LeapFrog and Bima: Reaching the Unreachable

https://thegiin.org/leapfrog-and-bima-reaching-the-unreachable

The Green Bond Principles

https://www.icmagroup.org/assets/documents/Sustainable-finance/2021-updates/Green-Bond-Principles-June-2021-140621.pdf

For more information about National Investors , join the India Impact Investors Council:

https://iiic.in/

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Conclusion: 

Impact investing is a trend that not only helps you build your portfolio but also brings about a great impact in a global scale.

It’s highly recommended to follow such constructive methods.

We hope that you have found what you are looking for!

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