How does Impact Investing work?
Impact investing requires investors to consider a company’s commitment to corporate social responsibility (CSR), or the sense of duty to positively serve society as a whole, before becoming involved with that company.
This societal impact differs depending on the industry and the specific company within that industry, but some common examples include giving back to the community by helping the less fortunate or investing in sustainable energy practices.
Financial Benefits of Impact Investing
Because socially and environmentally responsible practices tend to attract impact investors, companies can financially benefit from committing to socially responsible practices, and investors also tend to profit. A 2013 study by GIIN and JP Morgan found that over 90% of impact investors reported that their investments were meeting or surpassing their projections.
The Future of Impact Investing
Impact investing appeals largely to younger generations, such as millennials, who want to give back to society, so this trend is likely to expand as these investors gain more influence in the market. By impact investing, individuals or entities essentially state that they support the message and the mission of the company in which they’re investing, and they have a stake in the company’s welfare. As more people realize the social and financial benefits of impact investing, more companies will engage in social responsibility.