Impact Investing: Balancing Profit and Purpose

Impact investing is the Investment strategy that is meant to

• Contribute to the society’s overall benefit (in terms of social and environmental factors)
• Create positive returns for the investor

IMPACT INVESTORS

Impact Investors generally invest in those start-ups, companies and organizations that are functioning to address environmental and social problems such as climate change, water scarcity, illiteracy and poverty. In impact investing, social and financial returns can be balanced in various ways:

• Investor should invest in those companies that have a proven track record generating a positive value for the overall environment and society.
• Investor should invest in those start-ups that possess high potential of generating social and financial returns.

There are a variety of tools and techniques that can assist investors in assessing the impact of their investments on the overall society and track the progress of their investments over time. Some of these techniques and tools are:

• Environmental Impact Assessment is an assessment tool for investors with qualitative and quantitative analysis to evaluate the impact of an investment on multiple factors such as air, water, climate change etc.
• Social Impact Assessment is an assessment tool that involves engagement with stakeholders, conducting interviews and surveys to evaluate the impact of an investment on various social factors i.e. community wellbeing, basic human rights and social equity.
• Social Return on Investment is a framework that involves the identification and quantification of social outcome which are assigned monetary value in the next step. This framework is use to determine the overall value being generated from an investment.
• Sustainable Reporting is a tool used by companies to publish a report that is meant to inform the general public and investors about their social and ethical environmental practices and performances. This report includes the performance of these companies in terms of community engagements, waste management, emissions etc.
• Environmental, Social and Governance metrics are used to measure the ethical impact of an investment. It includes the performance evaluation of a company in Corporate Governance, labor practices, heath and safety of workers, waste management, emissions, ethical standards etc.

Although balancing the social and financial returns in impact investing can be challenging, but  it is possible to achieve a balance between financial and social goals with attention to detail, strategic  planning and execution. These actions will prove to be mutually beneficial for the investor and the society. Here are some of the benefits of impact investing:

• Impact investing creates a win-win position for both the investor and society in terms of financial returns and benefits for the society and environment respectively. The ethical environmental business practices are meant to minimise waste, ensuring fair labor practices.
• Impact investing can be beneficial in addressing the social and environmental challenges, such as poverty, climate change, water scarcity, waste management, minimizing Pollutants, ensuring well-being of the overall society.
• Impact investing can lead to innovative ways to address social and environmental challenges through the use of latest technology.
• Impact investing can create numerous employment opportunities for the youth.

Impact investing is a flourishing field that has a potential to transform the world. Impact investors should critically analyse the available options in choosing investments opportunities that are aligned to their vision, goals and values.