Impact investing is about investing to generate a positive social and environment impact and at the same time, positive financial returns. Impact investors are looking for opportunities whether in developed or developing markets to support the economic and social development of disadvantaged communities, in areas such as health, education, housing and financial and economic inclusion, or supporting worthwhile social objectives or environmental objectives such as encouraging diversity or developing sustainable agriculture or clean technologies.
By investing in projects with positive social impact, investors are able to align their investments with their personal values, and deliver broader benefits for society as a whole.
Impact investing represents the confluence of two distinct approaches to investing – previously regarded as being at opposite polls of the investing spectrum – namely, fiduciary investing or investing to maximise financial returns and philanthropy which sought to provide support to socially beneficial activities irrespective of their ability to generate a financial return.
The 1970s saw the emergence of socially responsible investing which started to apply social and environmental criteria to financial investing, but principally in the negative sense of avoiding investment in companies and organisations involved in socially or environmentally harmful activities or practices, while still seeking to maximise financial returns.
Impact Investing is a more recent concept which emerged in the early 2000s, the idea being that investment could be directed towards opportunities that sought to have a positive social or environmental impact but could also generate attractive risk-adjusted returns.
While many top tier investment firms have launched dedicated impact investing funds, the industry is still grappling with how to structure investments in optimal way to satisfy the needs of both investors and the projects that are seeking impact funding, a reflection of the fact that the industry is still at its pioneering stage.
IMPACT INVESTING AND TECHN0LOGY
Advances in technology have had a massive positive impact on living standards and humanity’s ability to deal with a host of challenges and improved our lives in myriad ways.
Technology is also a major driver of innovation and economic progress. Many of those drawn into this fast growing area of activity are motivated above all by a desire to make a difference. They are seeking increasingly to work and invest in companies and organisations that reflect their values round social responsibility and environmental sustainability. Hence the opportunities for cross-fertilization between tech and impact investing.