A Short Guide to Impact Investing and Its Benefits

When people choose to invest their money, they have many vehicles they can use, including stocks, bonds, mutual funds and more. Especially if you are planning for retirement, having many different investment options is a must, as this is often the best way for your money to grow. These days, many people are also looking towards investment options that allow their money to help the cause of a specific organization or business. These people want to make a statement with their investment, so this type of investing is called impact investing.

Impact investing is most often investing in organizations that offer an environmental or social impact of some kind. Many people simply prefer to use their investments not only as a way to save money, but to make a point as well. The investments are still bona fide investments, but they offer investors a way to feel that they are investing in a business whose morals and objectives they agree with.

Impact Investing Is Slightly Different from Regular Investing

Impact investing differs from regular investing only in regards to the intentions and interests of the investor. With impact investing, the money goes only to companies, funds or organizations that have goals compatible with that of the investor. Impact investing, therefore, often means investing in many non-profit companies, which tend to be more altruistic in their goals. This type of investing, however, still includes asset classes such as fixed income, debt or private equity/venture capital. With impact investing, investors wish to both make money and invest in companies that produce some type of social impact on the world.

Who Participates in Impact Investing?

Both individuals and a variety of institutions are involved in impact investing, including fund managers, pension funds, insurance companies, development finance companies and diversified financial organizations. There are several characteristics of impact investing:

• The investor wishes to measure the organization’s environmental and social progress, and the underlying investments’ progress
• Impact investors invest in a wide range of organizations, from below-market to market-rate investments
• Investors expect their investments to provide at least a return of their investment, if not a return on their capital
• Investors have, as one of their main goals, the intention of investing in companies that they know will make a difference in the world

More often than not, impact investing results in both excellent returns on investment and excellent opportunities to see the organization grow and achieve its goals. With most investors, at least, the impact investments exceed their expectations, both financially and socially.

Impact Investing Offers Many Advantages

Because of the laws and the potential tax breaks offered, it is beneficial financially to invest in companies that make some type of social impact. Even the government realizes the importance of investing in social organizations, as many of these organizations offer services that are beneficial to the environment, the poor, making the world greener and many other services that are good for everyone. The number of impact investors is difficult to determine, but many companies that track financial trends expect the number of impact investors to triple by the year 2020. This is good for both investors and the organizations they are investing in.

These days, many communities are struggling, in part because local and state governments are finding it more and more difficult to support them. If they can receive extra donations because of impact investors, this helps the community tremendously, which is another huge asset to impact investing. People need sustainable solutions to their problems, and it takes the government, the private sector and philanthropists to provide the solutions most of these communities are looking for. Also, when people help the community, they help themselves, and impact investing helps them do just that.

Finding Impact Investing Opportunities

Finding impact investing options is simple if you start with the Internet. Whether you are interested in a non-profit that helps children, or one that is developing solar power solutions, you can usually find them online and explore ways to invest in them. Because it is a win-win situation for both parties, impact investing is smart and financially advantageous, and many people agree that it is the wave of the future when it comes to investing.