November 11, 2015
When investors want to make a social or environmental impact, they traditionally focus on charity — giving money to nonprofits and foundations to support their cause of choice rather than investing that money with the goal of a later return. We believe that these two financial strategies don’t have to be mutually exclusive.
Many conscientious investors today are considering funneling more of their resources into impact investing, which refers to investments made in companies, organizations and funds that may generate social or environmental impact as well as a financial return.
Impact investing is a popular way to merge financial goals with personal interests, allowing investors to potentially generate a triple bottom-line impact (social, environmental, financial) from their investments.
For many investors, the pursuit of impact is fundamental to their efforts to define a family legacy that ties their good work to future generations. “Impact investing serves the dual purpose of doing good and making money,” says Jonathan Firestein, Managing Director of Private Capital and Impact Investing at Ascent
Private Capital Management of U.S. Bank.
However, choosing the funds, companies or projects in which to invest isn’t as simple as looking at a list of options and picking the ones with the best social and financial projections. There is no definitive list of investments that is officially targeted for this investment category. It requires a more qualitative approach, Firestein says.
While there are certainly obvious choices, like funds that support renewable energy projects or microloans for small businesses in emerging markets, it really is a matter of preference and research. “Impact can be broadly defined as anything that is doing good for people, society or the planet,” he says.