For many, the understandable desire to be personally and socially responsible can translate into an overwhelming list of options that can seem too burdensome to choose from. The truth is, impact investing is not difficult, and it’s the perfect investment for both seasoned investors and newcomers alike.
Not only does this type of investment provide a unique opportunity for capital gains that go beyond financial performance and financial returns, but it also provides private investors, asset owners, and private foundations with a chance to contribute to the world and have positive impacts in ways they may have never imagined like environmental impact, job creation, clean energy, gender equality, and financial inclusion and many additional benefits.
The Birth of Impact Investing
Impact investing is not a new concept, but it’s in the process of evolving into a widespread and respected investment sector. The history is long and marked by significant differences in how investments are put into action and what contributions to society they seek to make.
Major shifts in how impact investing has developed have resulted from the interplay between charities and businesses, impact investors, and philanthropic organizations. A diverse set of ecosystems has formed between these various groups, each dedicated to promoting the growth of impact investing.
Some of the earliest efforts in the impact investing market can be traced back to the 18th century when religious leaders helped establish savings banks that invested in fledgling industries such as canal building to promote economic development. These were the beginnings of impact investments bringing capital to people and organizations with viable business models.
Meanwhile, in the 19th century, some of the first modern social enterprises came to be. These businesses sought to provide goods and services to help charitable organizations raise funds from institutional investors. This worked by private entities providing goods and services at reduced costs or for free with the expectation of creating improved opportunities for fundraising.
At this point, there was still no distinction between impact investing and traditional investment tactics. There was no such thing as non-profit investing. Still, there was an emerging sector of businesses dedicated to serving the needs of individuals and groups that served social causes.
A more modern approach to impact investing began to take shape at the turn of the century. The results have been significant, not only for access to capital but also for transforming the lives of those who benefit from the impact investing industry. Some estimates suggest that millions of people are impacted by social enterprises and financing activities.
What is Impact Investing?
The easiest way to describe impact investing is to invest in a for-profit business with a positive social or environmental mission. This means that investors seek to pursue environmentally, socially, and ethically impactful ventures. But unlike other types of investments, which often feel like a compromise between profit and social responsibility, impact investing provides the ease of making money and doing good at the same time.
Anyone can invest in impact investing, but it’s not at all daunting. It should be a desirable option for a wide range of people. You don’t have to be wealthy to invest in impact investing or participate in the companies that make up this particular industry.
Instead, you can do so by joining a fund, subscribing to a share impact investing portfolio, or opening an account with one of the many institutions that offer it.
There is also various impact investing opportunities to choose from, based on the type of investment you’re interested in. For instance, many options allow you to invest in companies that offer profitable opportunities and support a social or environmental mission.
You can also invest in impact investment funds and portfolios from organizations like Kiva, which offers loans to small businesses worldwide and has been doing so since 2005. In addition, you can invest in bonds that have a social impact as their primary objective, with solid returns
How to Find Impact Investments
When it comes to finding a suitable investment, there are a few basic ways to get started. First off, you can find a reputable impact investor or organization to work with directly and seek opportunities within that structure. It’s also possible to choose a fund based on its mission and the kind of companies it invests in.
You may also consider joining a community of like-minded people who share a shared vision. Whether it’s an active online community or a local group of impact investors, these are great ways to get started in this growing sector.
The Bottom Line
Investing in impact investing or responsible investing provides you with the chance to invest in a wide range of socially responsible companies while making money and supporting worthwhile causes, having social returns and social outcomes.
