Impact investing is an investment strategy that seeks to generate positive, measurable social and environmental impact alongside financial returns. Impact investors intentionally deploy their capital to address specific social and environmental challenges, such as climate change, affordable housing, and healthcare access.
The impact investing market is growing rapidly, with global assets under management reaching $715 billion in 2022. This growth is being driven by a number of factors, including:
- Increasing awareness of the social and environmental challenges facing the world
- Demand from investors for investments that align with their values
- Growing evidence that impact investments can generate competitive financial returns
Impact investing can be done across a wide range of asset classes, including public and private equity, debt, and real estate. Some common examples of impact investments include:
- Investing in renewable energy companies
- Investing in affordable housing projects
- Investing in companies that are developing new technologies to address climate change
- Selling to and financing credit challenged home buyers
- Providing loans to microfinance institutions
- Investing in properties with owners overwhelmed by debt
Impact investors use a variety of methods to measure the impact of their investments. Some common metrics include:
- Number of jobs created
- Amount of affordable housing built
- Relief from institutional or private debt
- Reduction in greenhouse gas emissions
- Number of home renters promoted to home buyers
- Improvement in access to healthcare
Impact investing is a complex and evolving field, but it is one that is attracting increasing attention from investors of all types. Impact investors believe that they can use their capital to make a positive impact on the world while also generating competitive financial returns.
Here are some of the benefits of impact investing:
- Make a positive impact on the world: Impact investors can use their capital to support causes that they care about and make a real difference in the lives of others.
- Generate competitive financial returns: There is growing evidence that impact investments can generate competitive financial returns. A 2020 study by the Global Impact Investing Network found that impact investments outperformed traditional investments in 33% of cases and underperformed in just 13% of cases.
- Align your investments with your values: Impact investing allows you to invest in companies and projects that are aligned with your values and beliefs. This can give you peace of mind and make your investment journey more meaningful.
If you are interested in impact investing, there are a number of resources available to help you get started. You can learn more about impact investing on the websites of organizations such as the Global Impact Investing Network and the Impact Investing Council. You can also work with a financial advisor who specializes in impact investing to develop an investment strategy that is right for you.
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