What Are Impact Investments

Impact investing challenges the long-held view that social and environmental issues are properly addressed via philanthropic and charitable donations only.  Impact investing offers investors viable opportunities to advance social and/or environmental solutions through investments that also produce financial returns.

Impact investments, therefore, are investments that have a dual or even triple impact: not only do they have a positive financial return, but they also favorably impact the environment and/or some type of social condition like education, housing, microfinance, water quality, etc. This market provides investment capital to address some of the world’s most pressing challenges in sectors such as renewable energy, accessible basic services, sustainable agriculture, etc.

Some of the core characteristics of impact investing are:

 RETURN: Investments that deliver and expected return on capital, or at the very minimum a return of capital.

 INTENTIONALITY: The investor has the specific intention to make a positive environmental or social impact with the investment.

 MEASUREMENT: In general, an important aspect of an impact investment is the desire and the commitment of the investor to understand what impact is being made by his or her investment. This in turn involves the facility to measure and report the results as they impact the environment or the affected social condition. A typical investment will follow some general guidelines:

GENERAL GUIDELINES:

• A beginning statement as to the intended objectives.
• Agreeing to and setting performance metrics and targets.
• Managing and monitoring the performance against the targets.
• Reporting on the performance to the stakeholders.