Impact investing has caught the attention of families, family offices, and private investors alike in recent years. In the latest report by the Global Impact Investing Network (GIIN), the global impact investment market is worth more than half a trillion dollars qualifying it as one of the fastest-growing areas of asset management. Every action we take has an impact. The notion that your investments can be better aligned to your family and values whilst still generating market-related returns, is certainly an appealing one.
Yet in spite of this impact-led zeitgeist, some investors have voiced concerns on whether impact investment can truly attract market-rate returns. The idea that profit and purpose cannot go hand-in-hand prevails amongst some groups. For other investors who hold a more hopeful view, there exists uncertainty on how exactly to approach this new field. How do you begin?
If you’re considering venturing into the world of impact investments but are a little unsure whether to start, here are a few points to consider…
1. Define what impact investing means to you
Important work is being done on creating a collective understanding of impact and impact investing by the likes of GIIN and the Impact Management Project. Nonetheless, it is fundamental to define what impact means to you as an investor, using the above mentioned as a guide. Each investor’s journey will look different depending on their objectives and approach to investment. Impact investment means very different things to different people based on their personal experiences within the field. Today, many types are grouped under the same umbrella, from investments with no monetary return and major social returns to investments with a market-rate financial return and minor social returns. In reality, there is no single definition of ‘impact’.
Whilst there is a need for a broad consensus and collateral behind the impact movement, there is freedom for self-definition. Concerns over ‘green washing’, ‘impact washing’ and ‘SDG washing’ are valid. However, if the field is to further develop it is up to investors to add colour to the discussion and articulate what impact investment means to them, and ultimately better define an investible universe.