Impact Investing is one of the investment strategies that aim to generate, not only financial profits, particularly beneficial environmental or social effects. With this investment strategy, there may be a form of various asset classes that can result in many different outcomes.
The key point of this strategy is to utilize the money and investment capital to get positive social results. This strategy seeks to create a positive impact. For instance, they purchase the stock of a company that is non-profit that helps the community or is clean technology enterprises that help the environment.
Impact investing attracts various people ranging from private foundations, banks, hedge funds, and other fund managers.
The types of Impact Investing
There are various capital and investment vehicles for this investment strategy. Similar to the other investment strategy, this strategy also gives a various range of possibilities of the returns.
The most essential part of this strategy is that it provides financial returns and also are in line with the investor’s conscience. Investors using this strategy have the choice to put their money in the emerging market or developed economy.
This strategy includes the various sectors of industries, including healthcare, education, energy (especially renewable energy), and agriculture.
How does Impact Investing Work?
The term appeared in 2007, but the practice came years later. Its main goal is to reduce the negative impacts produced by business activity on the social environment. Some people, therefore, consider this investment as the extension of philanthropy.
Usually, investors consider the company’s commitment to corporate social responsibility (CSR) or to serve society as a whole before deciding to choose a particular company. However, the impact of this investment can also vary based on the company and industry chosen.
Most of the impact of investing is done by institutional investors. However, there is also a range of socially conscious web-based investment platform, financial service companies, and investor networks also offer individual investors this opportunity to use it.
One of the major venues is microfinance loans. The loans usually offered to small-business owners within the emerging nations with startups or expansion capital.
