Impact Investing: A Primer

Impact investing is not for the faint of heart, according to Adam Grosser, a venture capitalist and clean energy/climate-tech investor. While Grosser’s statement was made in reference to the big news in clean energy/climate-tech investing this week, it’s also a good summary of impact investing as a whole. However, the general population still needs to familiarize themselves with this term. Simply put, impact investing is a type of investment that takes into account the financial, social, and environmental benefits of a particular venture.

Traditional investment focus solely on the financial return, disregarding any potential impact it could have on society or the environment. Impact investment, on the other hand, take all three financial, social, and environmental benefits into consideration, and may even prioritize them over the financial return. To achieve this, investor, fund managers, and organizations need to assess the social, environmental, and financial sustainability of a venture, and then determine if it meets their criteria.

There are two main types of impact investing. The first is direct impact investment, which are made directly into a project or company. These investment are often associated with venture capital and private equity funds, as well as crowdfunding platforms. The second type of impact investment is indirect investment, which are made into funds that invest in companies or projects with social and environmental benefits.

Impact investing is gaining traction in the financial world, thanks to the growing awareness of sustainability issues and the need for solutions. There are now a number of funds and organizations dedicated to impact investing, such as the Global Impact investing Network (GIIN) and the Impact investing Exchange (IIX). Furthermore, the United Nations has also developed an impact investing framework, which provides guidance on how to assess and manage investment.

There are several advantages to impact investing. For example, it can offer investor the opportunity to have a positive impact on society, as well as the potential for financial returns. Additionally, it can also provide access to markets and investment that may otherwise be difficult to access.

Impact investing is an increasingly popular concept, and it has the potential to have a positive impact on society, the environment, and investor’ portfolios. As such, it should be considered by any investor looking to make a positive social and environmental impact.