What is Impact Investing
Impact investing is an exciting type of investment. It’s investment done with the intention of generating a revenue, but also with the intention to generate a positive environmental and social impact that’s measurable. Impact investing is not limited to just emerging markets, but also has a place in developed markets. Impact investing is growing in popularity as people realize it’s possible to have great social benefits while also seeing financial returns. Impact investing is a large market that includes microfinancing, ensuring basic services such as housing and healthcare are both affordable and available, through to sustainable agriculture and renewable energy sources. If you’re interested in beginning your own impact investing, Colorado Capital Management can help get you started. If you’d like to learn more about what is impact investing, read on to learn more.
What Makes Impact Investing?
There are four criteria that need to be met to fall into the impact investing category, that is: an intentional social or environmental impact, an investment with the expectation of financial returns, range of return expectations and asset classes, and the ability to measure the impact. If all four of these pillars are not met, then it cannot be considered true impact investing. Impact investing allows the investor to anticipate a financial return, while being able to see a measurable social impact, too.
Who Would Benefit from Impact Investing?
The real benefit to impact investing is that you don’t have to choose between making a social or environmental impact and financial returns. Finding the right impact investing program can allow you to enjoy philanthropy while still seeing returns on your investments. Because you’re able to generate income from your money, it may allow you the possibility to be involved in more philanthropic projects, which over the long term can make a considerable difference to the impact you can have.
How Do Impact Investments Perform?
The impact investments returns are as diverse as the projects themselves. Some investments intentionally seek below-market-rate returns in order to funnel more of the profit back into the project so that the social and environmental impacts can be greater. Others perform as well as more traditional investments. A good way to see how the impact investments perform is to look at their historical performance before committing to them. It’s up to you to decide how much you want to focus on the financial returns, versus the social impact.
Impact investing allows you to generate profits while being involved in projects that set out to make the world a better place. It’s the perfect balance between financial returns and social impact.