Impact Investing
Impact Investing is a strategy that seeks to create both financial return and positive social or environmental change. It is a way to put your investment dollars to work, promoting good in the world and in your portfolio. Impact investing is a growing area of interest for investors. It offers an alternative to philanthropists who reject the notion that there is a binary decision between investing for profit and giving money to a social cause. The concept of impact investing has expanded to include a broader range of investors and investment vehicles. Ultimately, impact investing is about using your money to make a difference in the world while also earning a profit.
ABOUT IMPACT INVESTING
Impact investing is a strategy that seeks to create a specific positive impact or outcome.
An innovative way of boosting the private sector’s contribution to sustainable development can be achieved with impact investing.
What sets it apart from pure philanthropy is that impact investing includes an expectation of financial returns that are comparable to market returns.
There are many ways to implement the strategy, from set-it-and-forget-it automated portfolios to diligently researching and picking your own individual stocks.
PRACTICING IMPACT INVESTING
Define your impact goals.
Identify the social or environmental issues you care about most. Your goals will shape your investment choices.
Decide how you want to invest.
Do you want to take a DIY approach or let the pros (or robots) handle it for you? While you can select individual investments, it demands extensive research.
Do your research.
If you’re constructing a personalized impact investing portfolio, research is a must. Building and maintaining such a portfolio requires hands-on involvement, including ongoing monitoring of your investments.
Select your impact investments.
If you opt for the DIY route, you can buy mutual funds or ETFs with strong ESG scores, which will give you exposure to multiple companies at once.
RELATED STRATEGIES & APPROACHES
Thematic Investing.
This practice involves focusing on specific areas or themes that align with an investor’s values and desired impact.
Screened Investing.
Investors may incorporate specific criteria based on ESG factors to include or exclude specific industries or practices from an investment portfolio.
Blended Finance.
A blended finance strategy combines philanthropic or grants capital with investment capital to achieve social impact.