Investors put money away for specific purposes like starting a new business, creating a rainy day fund, or preparing for retirement. Along the way, we find that we also want to make a positive difference with our lives and our investing. If you want your investments to work for making the world a better place as well as providing for your retirement, consider positive impact investing. The point of this approach is to make a have a measurable environmental or social impact as well as a healthy financial return on investment. In this way, positive impact investing differs from purely socially responsible investing in that the later simply chooses to reward good corporate behavior with targeted investments.
Types of Impact Investing
The Harvard Business Review looked at the many kinds of impact investing. They note that the types of impact investments can range from microfinancing in the Third World to the development of new health technologies to renewable energy. The challenges in this area include being able to measure the impact of the organization into which you pour your investments. Types of impact investing may be broadly focused on issues such as climate change, social impact, clean energy, financial inclusion, educational reform, or affordable healthcare. But, to really know what you are doing and what to measure, you need to know examples. One mentioned in the HBR article is the Hoxton Hotel located in a poor London neighborhood that focuses on hiring local residents to improve the lives of those living in the neighborhood. All of this takes a bit of homework.
Successful Impact Investments
To know if your impact investments are successful you need to know just what the organization or company is targeting. It is useful to look at the impact they hope to achieve compared to their total financial resources. One of the risks in this area is that some organizations spin a great story but are top-heavy with administrative and fundraising costs and rather weak on providing measures of their achievements not to mention their timelines. The most successful impact investments are those that achieve tangible results within a reasonable time frame at a reasonable cost. And, that same impact investment should be providing you with a reliable return or, in fact, you are giving money to a charity.
Sustainable Impact Investment
The best investment of this sort is a sustainable impact investment. A good example would be a company that works on developing efficient clean energy technologies that generate a steadily increasing profit. This sort of company has good intrinsic stock value making it a good investment for your retirement. This same company is then able to continue their work and increase their positive impact without having to continually look for new money. The same can be true of a startup in biotech that creates new and affordable (but profitable) treatments for diseases. This company will have a huge benefit to society while generating the funds needed for ongoing R&D.
Impact Investment Marketing
Many investors find their positive impact investing opportunities as a result of impact investment marketing. Marketing of these investments is generally necessary or interested parties would never know that many investment opportunities exist. But, this realm is a big case of “let the buyer beware.” There are too many organizations and companies that are well-intended but lack the expertise at the necessary levels to turn their dreams into reality. And, there are always investment scams in which someone promotes their investment as having the potential for a strong impact but in reality, the company spends lots on marketing, too much on administration, and makes little or no headway toward their stated goals.
Impact Investment Hub
This can be a general term for an organization that helps connect investors with impact investments and is also the name of an organization in Australia that provides insights into the impact investing opportunities in Australia and attempts to connect interested investors with appropriate impact investments. The benefits of such organizations are an unbiased overview of the opportunities, a wide range of possible investments, and good advice on how to track these investments for both their positive impact and the efficiency of their operations in generating returns for you as an investor.
Morgan Stanley Social Impact Investing
Morgan Stanley provides its clients with excellent information regarding both socially responsible and impact investing. They also provide a huge range of investment options. Because these folks are a for-profit organization, they are less likely than some other impact investment hubs to promote someone which a great story but little or no substance. They are also more likely to offer investments that are well managed and provide a sustainable and healthy return. In the end, this sort of approach works the best for positive impact investing because when the investor is routinely making money, he or she is more likely to continue on the same investment course.
SRI vs Impact Investing
If your goal is to accomplish something good with your investing, along with increasing your nest egg, you have socially responsible investing (SRI) and impact investing as your options. What is the difference? Investopedia looks at how SRI and impact investing compare. Impact investing is a subset of socially responsible investing. This is what they say.
Socially responsible investing involves actively removing or choosing investments based on specific ethical guidelines.
Impact investing looks to help a business or organization complete a project or develop a program or do something positive to benefit society.
SRI can be as much about what investments you avoid as which ones you embrace. Impact investing always has a precise target to accomplishing something tangible and useful.
Positive Impact Investing – Slideshare Version
Positive Impact Investing – DOC