Impact investing refers to investments made with the intention of generating positive, measurable social and environmental impact alongside a financial return. This form of investing operates on the premise that capital can be deployed to address pressing global challenges, such as poverty, climate change, and inequality, while also providing investors with financial gains.
Impact investors actively seek to put their funds into businesses, organizations, and funds that aim to produce both financial returns and significant, quantifiable benefits to society or the environment. A key characteristic of impact investing is the commitment to measuring and reporting the social and environmental performance and progress of underlying investments. This emphasis on accountability and transparency ensures that the intended impacts are not only aspirational but also achieved and sustained.
Investors typically use various frameworks and metrics, such as the Global Impact Investing Network’s (GIIN) Impact Reporting and Investment Standards (IRIS), to gauge the effectiveness and outcomes of their investments.
By focusing on these measurable impacts, impact investors distinguish themselves from traditional investors who primarily seek financial returns or from philanthropists who prioritize social outcomes without expecting financial returns. The growth of impact investing reflects a broader trend toward socially responsible and sustainable investing.
It appeals to a diverse range of investors, including institutional investors, foundations, family offices, and individual investors, all of whom are driven by the desire to make a difference while securing financial returns.
IESE Impact Fund: A Student-Led Initiative for Responsible Investment.
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