Have you been looking for a way to start giving back to the world, but you just don’t have the money to spare for charitable donations at the moment?
Or maybe you’re not sure where to begin or which organizations are the most trustworthy?
Impact investing may be the perfect solution for you.
This investment strategy allows you to make a positive impact in the world while simultaneously earning a profit to boost your own income or savings.
Read on as we explore frequently asked questions about impact investing and explain how you can start investing your money in a socially responsible way.
What Is Impact Investing and Why Is It Important?
Impact investing is an investment strategy that keeps two main goals in mind for the investor: making a positive change in the social or environmental sphere and earning some level of financial return.
Typically the returns in these types of investments is lower than most investments but what you get is more than money – you’re literally helping to change the world.
An important aspect of impact investing is measurement.
You want to be able to distinctly measure both your financial return on the investment and the amount of positive change your investment generated socially or environmentally.
Since both of your outputs from an impact investment are beneficial to yourself and the social climate, you should aim to maximize both of them by keeping track of your investment’s impacts.
If you’re not seeing enough growth from your investments, whether financially or in terms of their impact, you may want to consider investing somewhere else.
The effect that impact investing can have on the well-being of society is immense.
Americans invest millions of dollars each year with plenty of different goals in mind, from saving for your retirement to simply stabilizing your income.
Impact investing adds another layer to the usual goals by throwing in the opportunity to benefit a cause in need of support at the same time.
If more Americans utilized impact investing, the increase in funds funneling into philanthropic organizations would allow more good to be done in the United States and around the world.
Investment, Charity, or Philanthropy?
While impact investing has the potential to benefit charitable and philanthropic organizations, it is slightly different from normal charitable donations.
Impact investors focus on companies that have a high commitment to corporate social responsibility (CSR). CSR is a business model that companies use to ensure they are held socially accountable for their actions.
A company that is committed to CSR will try to benefit society rather than impacting it negatively or simply remaining neutral.
Charitable donations may not be as picky about CSR, but since the goal of impact investing is to generate personal and societal gain, these investors need to keep CSR in mind when selecting which companies to invest in.
Quite often, the returns from impact investing can be put right back into further impact investments at the same or other CSR-focused companies.
Do I Need to Be a Millionaire to Invest in Impact Investments?
While a large number of impact investments are made by institutional investors, the opportunity is perfectly accessible for any hard-working individual with the desire to make a change in the world. Impact investment opportunities are available across a wide variety of fields, such as education, renewable energy, healthcare, sustainable agriculture, conservation, and many more.
So, depending on where your conscience lies, you can select companies or organizations that work within the field that is most important to you.
Once you have a clear picture of the issues you want your investments to impact, the best way to get your foot in the door, especially for less-experienced investors, is to contact an impact investment firm or other investment platforms.
Currently, the five best-ranked impact investment firms are as follows:
- Vital Capital Fund. Interested in infrastructure, housing projects, agro-industrial projects, renewable energy, health care, and education.
- Triodos Investment Management. Interested in renewable energy, sustainable food and agriculture, health care, and education.
- The Reinvestment Fund. Interested in housing projects, access to health care, educational programs, and job initiatives.
- BlueOrchard Finance S.A. Interested in alleviating hunger and poverty, fostering entrepreneurship, establishing food production and education programs, and working on climate change issues.
- Community Reinvestment Fund, USA. Interested in community housing projects, health care centers, charter schools, daycare centers, and small businesses.
This ranking is based on the amount of assets that each firm manages.
Encompassing a wide variety of important issues, any of these firms would be an excellent place to start.
Impact investing is a way to make money for yourself and your loved ones while also doing good in the world around you. Why not get in on the action?