Although any investment has the potential to land a positive social or environmental impact, an impact investor specifically seeks opportunities which will create positive social as well as deliver financial returns. These dual goals therefore are of key importance when identifying and evaluating potential investment opportunities. Some approaches focus on financial return while still seeking to benefit society. Conversely, other strategies put social and environmental impact first while accepting below-market returns.
There field of impact investing is fast growing, some estimates predict a worldwide market in excess of $400 billion by 2020. The reasons for its growing popularity:
Donors and investors are afforded a great degree of freedom and flexibility. Nonprofits as well as for-profit organizations may be supported, and investors can try out new ways of drawing financial return while doing social and environmental good.
Investors introduce innovation to their portfolios while supporting large-scale improvement upon society and the environment.
Individual investors and foundations have a new and potent way to wield philanthropic resources. Investment returns can be reused in perpetuity to compound impact.
The RS Group, a Hong Kong-based family office, incorporates climate change goals into the fund's investment portfolio.
Investment growth clichés aside, more 401(k) participants are turning to impact investing.
Many people use the terms “B Corp” and “Benefit Corporation” interchangeably. While similar in concept, there are important differences.