The Benefits of Investing in Impact
Impact investing has been gathering momentum over the last decade and it has proven it’s not just a trend; it’s here to stay. As younger generations age into money and become more financially literate, we’ve seen a fundamental paradigm shift in investment strategies. If you're an investor or wealth manager, it's important that you start incorporating impact-driven companies into your portfolios. To help you better understand why you don’t want to miss out on impact investing, we’ve outlined a few key points you should consider. Let’s dive in.
What is Impact Investing?
As mentioned in the introduction, impact investing isn't new. As early as the late 1980s, charitable foundations began making contributions to corporations and other institutions with an interest in social or environmental impact, which later gave rise to the term "impact investing".
Impact investing is a form of investment that focuses on helping or promoting social, economic, or environmental change. While impact investing might sound a lot like philanthropy, it’s not the same. Both have the intent of contributing money to create change, but impact investments generate a return. Through impact investing, you can invest in companies that are focused on the areas that matter most to you or your clients, such as for-profit businesses that promote sustainability, organizations that support healthcare in low-income communities, or institutions that promote housing security.
It's actually been proven that something as finite as investing in housing security can increase a family’s financial health, allow children to remain at their schools and ultimately do better in school, decrease hospitalizations, and improve the community’s overall well-being. Imagine what investing in other organizations could do too!
Why Invest in Impact?
Not only does impact investing help you or your clients make a difference in the world, which satisfies the rising younger generations that want to invest in things that matter to them, but it also helps diversify portfolios. Generally, impact investments are in alternative asset classes that provide the much-needed protection from market shocks.
Now, not all impact investments are created equally. You shouldn’t ignore profit at the expense of purpose. Do your research to find companies where you can benefit from high quality, low risk investments so you can receive risk adjusted returns.
With interest in social, economic, and environmental issues on the rise, impact investing is becoming a popular way to earn financial returns while addressing these issues. If you’re interested in finding ways to diversify your portfolio or you’d like to make a difference with your investments, consider impact investing.