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Impact Investing

The current pandemic and global warming disaster has increased the need for impact investing. Investors recognize the massive social and financial benefits associated with this kind of business. 

What does it mean for the future, though? For starters, we have to understand the basics of impact investing, and then we can understand how it can have a positive impact on the world around us in the coming years. 

What Is Impact Investing?

In simple terms, impact investing is financial investing targeted at generating measurable and positive environmental and social impact, coupled with financial returns. In other words, it is making money but investing in things that improve the environment, neighborhoods, etc. 

There is also a list of criteria that need to be met if your investment is considered an impact investment. Firstly, the investor needs to specify the goals that will be met throughout the lifecycle of the investment. 

Secondly, the investor needs to specify how their investment will contribute to reaching the goals they state in the step above. As in, which part of the project are they investing in, and how does that aspect contribute to the final goals. 

Thirdly, the investor needs to show how the goals and outcomes can be measured. You can’t just state, “X% of emissions will be reduced through this project” and not back it up. There have to be defined and clear ways of measuring success. 

Benefits and Opportunities

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The current pandemic has exposed many weaknesses in supply chains across the globe. With earth’s population set to exceed 10 billion by 2050, there needs to be more investment into the energy, water, and food sectors. 

There is currently a serious need for cleaner energy, as well as a need to get water to more areas on earth. Food production has lacked for years now and with the population increasing, the time is now for ramping up food production and distribution. 

Environmental health is needed for human health. We all know this and investors are seeing this too. It is no coincidence that people living in areas with bad air pollution were most susceptible to the Coronavirus. 

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There has been a lot of talk on the reduction of fuel emissions for years now, and strangely, a global pandemic has shown how great it can be. The reduced travel of trucks, cars, and aircraft, as well as factories and the like not operating, cleared the skies and air in many major cities worldwide. 

Many saw this as the future that we would all want, and more work, money, and time has been put in to find ways to get the same results, but with different methods. Clean air benefits every living thing on this planet and we should be working towards getting more of it. 

Lastly, and probably the biggest benefit and opportunity, is the fact that prevention is needed if we are hoping to keep this planet green and healthy. There is no use in constantly putting out fires when the time and resources are available to prevent them from happening altogether. 

More money should be put into businesses that are working on green fuels, companies designing cleaner modes of transport, etc. The sooner solutions are in place before the problem arises, the more equipped we will be to fix it. 

Why You Should Become Involved

The point of impact investing is to use your money to improve the world for yourself, your children, and everyone around you. It is also more than just putting your money into something and hoping for the best. 

You invest in real companies that have stocks and a business model and everything else, and therefore as they grow, your investment and money grow as well. This is another option, buying stocks in a company that is making those environmentally friendly fuels or the like. 

It is important to remember that impact investing is not new. What is new, however, is the ever-growing realization that it is becoming more necessary. Sustainable investments are also very reliable. 

During the crashes that were brought on due to the pandemic, sustainable investments held firm and pulled through better than their counterparts. Investors are still nervous about impact investing though. 

Some surveys have shown that 8 out of 10 investors would be interested in impact investing, yet only half actually had gone through with doing it. This is changing though, and that change has occurred over the past few years. 

As time goes on, impact investing is going to become the norm. As mentioned, more people are seeing the long and short term benefits, as well as how they are able to make money while making the world around them a better place. 

Nathalie Nicole Smith states that working hard and staying true to yourself are sure ways to win in life.

At some point, investing in oil companies or something similar won’t be the standard, as investing in green fuel companies, sustainable energy projects or the like will be seen as the norm and the right thing to do. Until then, impact investing is most definitely gaining traction, and is becoming far more mainstream in the world of big finance.