What is impact investing?
Is there such thing as socially responsible investing? It is comforting to know that there is, and we call it, “impact investing.” Some nonprofit organizations, financial managers, and investment banks worked together to make products that allow impact investing for investors. The aim is to invest money in entities or causes that create positive social change and generate financial returns to investors. Goodness is being contributed while making profits.
Impact investing over the years
Impact investing has been in the works for a few years. It slowly and sturdily grew along with the number of products offered. Some companies initially offered mutual funds that invest in companies that are socially and environmentally conscious. However, more and more investors are interested in investing in bonds and other investment instruments that directly invest in socially-oriented projects.
For example, we have microfinance loans. It is a vehicle that some use in impact investing. It helps people with minimal or even zero capital start a business. Who finds these investments really interesting? People who are sophisticated and high net worth do and are willing to invest in them even when there is a risk. They generate competitive loans through bonds that support them. In fact, when we say that these investments provide competitive returns, the returns are higher than what the broader markets can give, especially during cycles.
Many people are getting interested.
Rich people were indeed the first ones to take an interest in such investments. This action got the attention of massive retail markets. Of course, many more organizations started offering this kind of product. For example, ImpactAssets is an organization that provides donor-advised funds to people who want to impact society and the environment positively. It publishes 50 investment managers who focus on impact investing techniques called IA 50.
Massive investment banks like Goldman Sachs and Rockefeller Foundation also took interest. It might be a great idea to offer more impact investing products because they can be profitable. The GIIN study tells us that the current estimated size of the market today has $715 billion excess when they surveyed 294 impact investors. Many surveyed people said that their impact investments exceeded their expectations if they did not meet them. Two-thirds said that their investments’ target was market-rate returns.
Aside from them, millennial investors seem to be getting interested in investing as well. They are willing to do so for those projects, funds, companies, and the like that match their core values. They believe that these investments can represent their beliefs and generate profits at the same time.
What a time to be alive and invest
It is great that aside from wealthy people, the average investors are also interested in making investments while being socially responsible. We only hope that these investments continue to generate competitive returns to be even more popular in the future. And when we say returns, we talk about social and financial returns. The groundwork is already done for investors. Numerous products are already there. We are hoping that more and more investors will become socially conscious while investing.