8 Things You Absolutely Need To Know About Impact Investing

1.  Financial and Social Impact

Impact investing offers new ways to improve social and economic outcomes. Impact investments are investments that intend to generate social impact and financial performance. The approach impacts society and benefits investors both economically and philanthropically.

2.  Outperformance

Investing in the best interests of a portfolio and in the growth of society can go hand in hand. Research on impact investments shows outperformance versus the S&P 500 over time. In another example, the Blue HavenInitiative is 100% invested for impact, aiming to earn market-rate returns across asset classes.

3.  Growth

Environmental, Social and Governance (“ESG”) investment allocations have grown tremendously in recent years. According to Bank of New York Mellon, assets in socially responsible investments currently sit at $22 trillion. One of the fastest-growing and most successful aspects of ESG is impact investing.

4.  Problem-solving Opportunities

Impact investing creates the opportunity to scale solutions to some of the world’s most difficult problems. Top concerns include climate change, education, and agricultural sustainability. At the forefront is massive global poverty, a fundamental issue of our time, and one of the biggest global problems that we now attempt to correct.

5.  Public Image and Reputation

Corporate Social Responsibility (“CSR”) is one of the most important elements in developing a company’s reputation and public image. According to Reputation Institute, a recent study found that 42% of how people feel about a company is based on their perceptions of the firm’s CSR. In addition, a KL Felicitas study suggests that companies that take care of their employees or the environment tend to outperform more conventional firms. The benefits of CSR include improved public perception and improved business performance.

6.  Philanthropy

Impact investing allows investors to finance projects that benefit society. Effective impact strategies offer progressive solutions to real-world problems such as poverty, climate change, or promoting a special cause, by devoting capital toward sustainable processes and solutions. Impact initiatives make it possible for individuals, corporations and institutions, and foundations to invest philanthropically and benefit financially.

7.  Unlock New Capital

A survey conducted by US Trust finds that roughly 73% of millennial investors would prefer to make impact investments rather than investments in non-socially responsible companies. The survey also notes that approximately 40% of women are similarly interested. In addition, data released by Merrill Lynch and Age Wave, show that 72% of retirees say that impact investing is a more effective way to help the causes they care about. Recently revised ERISA regulations now support ESG and enable more funds toward impact investments.

8.  Compounding Returns

Impact investment strategies that are guided by reinvestment have the capacity to optimize and harness the power of the capital markets system. By integrating a continuous cycle of reinvestment, Main Research impact strategies actively pursue compounding returns on both social impact and financial performance.