What is ‘impact investing’?
It is defined by the Global Impact Investing Network as ‘investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return’.
Traditional investments are solely for-profit. Investors are driven by the incentive of short-term financial gains and disregard the lack of impacts or negatives of the investments. For example, an investment in non-renewable sources of energy, like oil, comes under this category.
On the other hand, we have philanthropic donations that focus on the benefit of society, without expectation any returns. This could be in the form of a donation by a high net worth individual such as Bill Gates, in the form of medical equipment to a Less Economically Developed Country (LEDC).
Impact investments are an amalgamation of philanthropy and traditional investing, and works to combine the best of both worlds.