How does Impact Investing Work?


Nowadays you’ll witness a big chunk of our generation looking towards investments – not just for securing their futures but also to support the present, which is marred by the fluctuating economies of today. However, the type of investment we choose to capitalize in, says a lot. While some may have lower returns and negative effects, others largely benefit on the community and economy as a whole. Whether you resort to quick ways of making money or want a long-term investing plan with good returns, your choice highly affects your lifestyle as well as the quality of living of everyone around you.

What is Impact Investing?

Any investment you do with an objective to generate positive and measurable social impacts on both the environment and the economy is known as impact investing. Whether you invest in an organization, school, a multinational company or even a vehicle, you should aim to contribute to society along with gaining financially over the years. Impact investing plays a vital role in stabilizing the national economy which results in an improved lifestyle of the public. So, if the investment is really your choice of making money, do not forget to ensure that it leaves good impacts on your country and society as well.

Why Impact Investing?

The growing trend of impact investing focuses primarily on developing various sectors such as agriculture, conservation, education, healthcare, housing, and energy. By making people invest in these areas not only benefits them but other classes of the population too, hence creating jobs and employment opportunities around.

The concept that social and environmental industries can only grow through government funds and public donations is a stereotype now. Impact investment challenges such notions and offers a huge market to advance our social and environmental issues through long-term investments.

For people who want to attain wholesome benefits from investing any amount, impact investing is a great way to achieve those benefits on a personal and public level.

Types of Investors

A number of times we see a social project in development but don’t expect it to be capitalized through investments. However, this idea is a great step and should be more encouraged about. The type of investors we usually see are:

  • Financial Institutions
  • Banks investing or sponsoring for local projects
  • Private institutions
  • Fund Managers
  • Insurance companies
  • NGOS- both governmental and private
  • Individuals
  • Religious organizations

The Circulating Myth about Lower Returns

Revenue generated through impact investments in the USA for the last five years proves that the returns through social and environmental enterprises are clearly achievable and can meet the expectations of the investors. In most cases, the rumors getting lower returns from impact investment are nothing less of a hoax created to scare away investors. You are likely to get your desired returns which continue to increase over time through impact investing. Hence, we can brush off the myth of low returns and start financing for a good cause.

How it is Influencing Socially?

The culture of impact investing took a major turn in under-developed and developing countries where more than half of the population were in need of basic services. According to a survey, these investments have touched the lives of more than 80 million people just in Asia.

As investors around the world understand more about the benefits of impact investing, their financial commitments will expand too. Moreover, with more investors, the development projects will increase too.

Future prospects

The future is clearly very bright for impact investing. A well-developed impact investing market will lead to a number of prospects for including:

  • Self-sustaining and growing Economies
  • Job opportunities in the region
  • More welfare programs
  • A good way to meet social and environmental needs
  • The trend of targeted investment will change in future
  • Will bring a positive impact to society

In short, impact investing one of the promising methods of benefitting yourself as well as everyone around in a number of financially supporting ways. If you are someone who is considering investing your money into something, it is recommended that you pay close attention at impact investing at least for once.

Have you got any predictions as to how impact investing would grow over time? Share in comments below!



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