What is Impact Investing?

Impact investing is the kind of investment that targets to bring about positive social impact. These kinds of investments create a lot of value for the community involved and the investors that cough their money to support the investment. The concept of impact investment has been around for a long period of time, but it is only until recently that it is starting to catch on. More and more investors are diversifying their portfolios to include impact investment projects because they understand the value that these kinds of investments carry.

Below, let us take a look at the key characteristics of impact investments.

Key characteristics of impact investing

The first characteristic that makes an investment impact investment is its focus on issues that aim to generate a positive social or environmental impact. The main goal should be to change something in the society socially or environmentally so as to improve life on planet earth. Some of the issues that are mainly targeted by impact investments include HIV/AIDs epidemic, homelessness, poverty, hunger, and climate change just to mention a few of them.

Impact investment is not a charity that should not generate financial return. In fact, you should understand that impact investment is a business activity that aims to field a financial return for the investors who provide the money that run them. Thus, the service provider in charge of the investment must provide a clear path regarding how investors with get their investment back plus profit from whatever the project is being suggested.

Impact investment is not a concept that is limited by such things as religion or sectors. Instead, it spans all asset classes from microfinance and cash equivalents to clean technology and private equity. The social or environmental impact that is generated from the investment must also be measured on a regular basis to determine how effective the project is.

Why venture into impact investing?

According to conventional wisdom, the only way to solve social and environmental problems is through state subsidies and philanthropic donations. According to this line of reasoning, it means that objectives such as sourcing consumer goods responsibly and environmental conservation come in direct conflict with generation of profit, which is the primary goal of any business. However, impact environment stands between the primary business goal of making profit and issues such as environmental conservation, by providing a way for investors to invest in social and environmental projects that generate returns for them while benefiting the society.

Specific opportunities that may result from impact investing

The resources that come from public coffers and philanthropic donations go a long way in solving social and environmental problems, but they are never enough. Impact investment can augment financial efforts made by the government and philanthropists to achieve even bigger impact. Impact investments also ensure that businesses are able to continue with their operations without having to deplete the planet’s resources.

Bo Parfet and other impact investors are making such a huge impact around the world with their investments. They drive change and motivate more people to take part.

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