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Created on 04.02.2021

What is impact investing?

Are you looking to achieve more with your investments than simply financial return? There are ways of investing money that specifically aim to also deliver social and environmental benefits as far as possible. One such example is impact investing. But what exactly does it involve, and who is it available to?

Impact investing? Allow us to explain. Sustainable investment is a very broad area: sustainable investment is about investing in companies... ...that perform well in criteria relating to the environment, social responsibility and governance. However these types of investment still focus on generating a financial return. Impact investing pursues a different objective: the goal is to make investments that will have a social or environmental benefit. You invest in companies that, in addition to making a financial return, ...also prioritize social and environmental values. By doing so, you make a substantial contribution towards the environment and society as a whole.

Have you ever considered investing your money in a sustainable way? More and more people are opting for a sustainable lifestyle. This trend is also reflected among investors.

There are various ways that you can invest your money sustainably. Read our article “Want to invest sustainably? What you need to know“ for an introduction to sustainable investment.

The various methods for investing sustainably differ primarily in their level of restriction. In other words, how “strict” your approach to sustainable investment is. Impact investing – compared to sustainable investing according to ESG criteria, for example – is one of the more rigorous methods of investing sustainably, as it is possible to determine at regular intervals the extent to which the funds provided have actually met their ethical objective. Find out more about approaches to choosing sustainable investments in our article “Green and fair? How you can invest money sustainably“.

Definition of impact investing: achieving measurable added value

The goal is exactly as it sounds – to make an impact. The GIIN (Global Impact Investing Network) definition is probably the most widely used:

“Impact investing means investing with the goal of achieving a positive and measurable social and environmental impact along with a financial return.”

Investors invest their assets to benefit specifically selected social and environmental projects. These projects have goals such as reducing waste or usage of plastic, minimizing CO2 emissions, or establishing fair working conditions. So impact investing combines economic, ecological and social objectives in an optimal way.

Can I make a profit with these investments?

The main aim of the impact investor – in addition to financial return – is to achieve quantifiable added value for society and the environment. However, this in no way means impact investors must forgo financial returns while achieving social benefits.

For more information on the opportunities of sustainable investment, also see our article “Investing sustainably: do good while securing potential returns with sustainable investments“.

Which specific companies should I invest in?

There are various industries and areas that are eligible for impact investment.

For example, regenerative systems (circular economy), water, healthcare and renewable energy.

Find your area by reflecting on your own interests, values, and where you see the greatest need for action – as well as the opportunity to make the world a better place while growing your wealth with an investment portfolio.

Can anyone become an impact investor?

If you would like to become an impact investor, you first need to consider which issues are most important to you. Then there’s nothing to stand in your way.

The same basic rules apply to impact investing as to conventional investing. If you would like to improve your investment expertise, we recommend our knowledge path on investing. Here, both beginners and advanced investors can find clear explanations and instructions on the various investment instruments, as well as the risks and opportunities when investing.

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