Impact investing is a type of sustainable investing strategy where an investor seeks financial returns alongside a measurable positive impact on society or the environment.
What is impact-focused investing?
Impact-focused investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. By generating profits from an innovative business model, a company can pay financial returns to investors alongside doing something good for the world.
How does impact investing work?
Impact investing works by finding companies that have turned some kind of environmental protection or social progress into a business opportunity. By attracting capital and entrepreneurial talent to companies that create positive change, impact investing approaches can contribute to more sustainable economic development.
The type and stage of companies in a portfolio can also influence the extent of the impact. Investors may have the greatest impact when they help fund early-stage companies to get truly innovative ideas off the ground, or by choosing companies and projects in developing countries (where capital is scarce and expensive).