Impact investing services is the latest sensation taking the investment world by storm. It’s become increasingly popular thanks to the growing need to create financial returns while at the same time having a positive social and environmental impact.
A good number of investors, led by institutions, are increasingly providing capital for Impact investing. Over 80% of impact investments are owned and led by finance institutions. In contrast, finance institutions only hold a small share of global capital. Likewise, the same implies the tremendous potential of growth on impact investments.
What is Impact Investing?
Impact investing amounts to the act of making investments to companies, organizations, or funds to generate financial returns while also having social or environmental impact The point is to use underlying capital to create positive social results.
Impact investing services are increasingly cropping up, intending to attract individuals and institutional investors, including hedge funds and fund managers looking to make a positive impact by investing.
How Impact Investing Services Work
Any impact investing service’s primary goal is to help reduce the negative effects of business activity on the social environment. In this case, such services are considered extensions of philanthropy. Investors turn to such services with the sense of duty to serve and impact the community positively through investments.
The type of Impact investing service depends on the industry and the specific company one wishes to invest in. While institutional investors do bulk Impact investing, socially conscious financial service companies, and web-based investment platforms and investor networks provide ideal opportunities.
For instance, there are Impact investing services that focus on microfinance loans. While such loans are offered on interest, they go a long way in helping small business owners in emerging nations. Women have proved to be the biggest beneficiaries of such loans, offered at the lowest cost possible.
Impact investing services are appealing, mainly to the younger generations looking to make the world a better place. A good chunk of such investors has dedicated their investments to giving back to society at the expense of sizable returns.
Impact Investing and Philanthropy
While Impact investing and venture philanthropy aim for financial return, they also differ in some attributes. While venture philanthropy focuses on social causes, impact investing is best known for its broader remit of social and environmental causes.
Impact investing has also proved to be highly effective in allowing greater deployment of resources that help in social change. Similarly, instead of venture capital firms making a small percentage of assets, impact investing allows investors to invest some or all of the remaining assets for social benefit.
Philanthropy, on its own, is more powerful or enough to help in solving most social problems. In contrast, impact investing leverages the marketplace’s power to achieve scale and more financially sustainable solutions.
Impact Investing Market Size
The world of Impact investing is growing at an impressive rate as more people become wary of the need to impact the environment through investments. As of 2012, the Forum for Sustainable and Responsible Investment had $3.31 trillion in U.S assets held by 443 institutional investments.
A Morgan Stanley’s report affirms that sustainable investing funds continue to meet or exceed expectations on returns. The 2015 report showed that as many as two-thirds of companies surveyed with social impact purposes enjoyed higher profitability and lower volatility.
Impact investing market size is poised to continue growing as millennials continue to gain more equity in the markets. Likewise, impact investing is not a fad but here to stay as 90% of millennials are expected to switch brands and associate themselves with a cause that seeks to benefit other people and the environment.
Widespread Impact of Investing Services
Leap Frog Investment
Leap Frog Investment is one of the biggest Impact investment services that impact investors with exposure to firmsthat offer health and financial services to emerging consumers in Africa and Asia.
The firm has over $1 billion in assets under management and is committed to profit with purpose while delivering private equity-style returns with measurable social impact.
Tin Shed Ventures
Tin Shed Ventures is an impact investing service firm that also doubles up as a venture capital fund. The investment service is ideal for investors looking to gain exposure to startups looking to have environmental and social impact.
Heed Capital is another impact investing service that strives to normalize sustainable innovations. The impact venture fund helps mission-driven founders worldwide transform the world’s biggest challenges into the world’s biggest business opportunities.
FMO is an impact investing service for investors looking to gain exposure in various industries while also improving the lives and livelihoods across the globe. Powered by the Dutch development bank, the service focuses on sectors with the highest long-term Impact, namely financial services, energy, agribusiness, food, and water.
Why Impact Investing Services
Impact investing services provide a way of challenging the long-held views that philanthropic donations can only address social and environmental issues. They also demystify the notion that investments should be focused purely on generating financial returns.
Conversely, impact investing services offer diverse and viable opportunities for investors to advance social and environmental solutions through investments. Such investments produce financial returns and go a long way in having a social and environmental impact.
Impact investment services also provide investors a way of meeting their diverse financial return expectations. In this case, most investors invest below-market returns to meet their strategic objectives. However, some investors pursue market competitive and market-beating returns. Likewise, this gives rise to diverse financial returns.
While Impact investing is a relatively new concept, it is growing at an impressive rate. The emergence of well-curated Impact investing services has made it possible for investors of all walks of life to invest in a cause to impact society and, in return, generate significant returns.
Investors remain optimistic about Impact investing overall prospects, with millennials expected to accelerate its popularity and growth.