While some industries focus on creating profits for themselves despite the damage they are causing, there are some industries and investors that are taking responsibility by making use of social impact investments.
The development today has come at a cost that our nature is paying. With more and more companies being set up every day, more and more natural resources are being used, a high level of pollution is being caused, and the environment is being degraded at an alarming rate.
First introduced in 2007, social impact investment was introduced with only one purpose that is to create a positive environmental and social impact and to control the consequences of technology on the environment. These are applicable to both developed and emerging markets.
Impact Investments refers to those investments made in organizations and multinational companies with an aim to generate an impactful financial return. Social impact investment challenges on the most basic and old belief that the issues of environment and social care do not matter to investors and are a concern of philanthropists only.
This investment aims at providing capital for social and environmental issues while providing basic facilities like housing, healthcare, education, micro-finance, and even sustainable agriculture. These investments also help investors by offering a diverse and large number of opportunities to advance and eradicate social and environmental issues through investments that generate financial returns. The number of investors interested in social impact investments is increasing day by day.
Social Impact Investments: Important Features
Intentionality
This refers to the intentions of the investors. These types of investments should be positive and should focus on an environmental or social cause. Investors should aim at dealing with at least one of the major social or environmental issues. They should work with a positive mindset of bringing happiness to others and doing something for the environment. Intentions made with a positive outlook have a favorable impact on the outcomes.
Return Expectation Oriented Investments
These kinds of investments are expected to provide a good sum of returns. That is one of the major reasons why investors are interested in it. Not only does it help socially and environmentally it also generates a financial return. It helps the environment and society all the while promoting business.
Expectations and Assets
Social impact investments aim for financial returns over a wide range of the market. From limited risk-adjusted market range to below-market range. It provides assets including cash fixed income, equivalents, private equity, and venture capital.
Impactful Measurements
Social impact investment guarantees to keep a record and a measure of the environmental and social progress and performance for the investment provided.
It offers complete transparency of the projects and offers to take complete responsibility while performing any method of impact investment. Investors’ interest varies according to their objectives and capacities. They set goals related to objectives, monitor and manage the performance according to these targets.
Who Makes Social Impact Investments?
Most people who get involved in social impact investment are those who opt to invest in such companies that have projects that deal with our ecosystem and various social problems. Investments like these can be made by various kinds of investors; it could be an individual or an institution.
- Private Foundations
- Fund Managers
- Pension Funds and Insurance Companies
- Family Offices
- Finance Institutes
- Individual Investors
- Religious Institutes
- NGOs
Investors putting their money on impact investments have various expectations In terms of financial returns. While some invest deliberately in the below-market range to meet their specific objectives, others are more intent to pursue competitive returns.
The Latest Investment Trends
Important Industry Shifts
Investments should be made by keeping in mind the latest industry shifts and how will they affect our current issues. Always keep in mind all the environmental and social issues.
Creating big strategies
Investors should set sustainable investment goals keeping in mind the increased diversity. One should also focus on online platforms like OpenInvest, Swell, Hedgeable, etc. Retirement funds increasingly provide social impact options.
Focusing on the “Impact” in Impact Investing
Investment should be evidence-based so that the investment tent continues to grow. There are many investors starting to tie their own compensation to social goals by their investments.
Focusing on Opportunities
Sometimes opportunities for investments provide a vast field like Community Housing, Community Investing, Blockchain, Energy and many more.
Despite being a relatively new term, Impact investment is already making its mark globally. Some companies have been making impact investments for decades while the new companies are collaborating together to promote such investment that brings profit and environmental and social protection together.
The investors, all over the world are optimistic about its success and predict that over the years these investments will flourish more brightly as more and more investors would try to adapt to these investments. Though sometimes people may confuse social impact investment with socially responsible investing, the two-term hold very different meanings.
While the latter means choosing those investments that promote social and environmental good along with issuing financial rewards, that is, it differentiates between companies according to how they fall on the spectrum of being socially and environmentally responsible.
The former, on the other hand, don’t tend to differentiate between companies, but simply include those companies who actively seek out investments that carry the potential to deal with social and environmental issues. Social impact investment is another step into the realm of trying to make a difference. It makes sure that the responsibility of a better world doesn’t only rest on the shoulders of the benevolent.
Aditya works as a Growth Assistant at AirTract.Com, a social platform wherein people ask questions, get answers, share knowledge and experience. He has a Bachelor’s Degree in Computer Science Engineering and has been working in the field of Digital Marketing for the past two years. He is also a voracious reader and a big sports fan.