There is simply no denying that investing is tricky and scary these days. Scarcity and inequality are already major concerns, but you throw in the COVID-19 pandemic and it makes things even that much seedier. This is why you have to be extremely careful where you are putting your money and how much you are putting in certain ventures. This is why many individuals these days are eager to generate both business and social returns by doing one. It is completely understandable as to why one would want to take an approach like this, but how do you? This is where impact investing comes in. However, before you just run out and start investing here and there you need to understand impact investing and how it can impact you.
What Exactly Is Impact Investing?
Just in case you are unfamiliar with the term or process, you need to understand that impact investing is defined as investments into companies, organizations, and funds with the intention of generating social or environmental impact alongside a financial return. Sounds kind of confusing and technical, right? It is, but it simply means that you are making investments into companies, organizations, or funds that are aligned with certain issues, causes, or values. You could call it somewhat of a middle ground between traditional investing and charitable giving. Now, this doesn’t mean that you won’t be able to reap returns.
How Impact Investing Works
If you have been doing your research on sites like Budgetable then you likely already know that impact investing isn’t all that much different than investing in mutual funds. In fact, it works in a similar manner and the biggest difference is where the fund’s goals are. For instance, just say that you are passionate about technology and making sure that everyone has an equal opportunity at it. You can seek out low-income schools or neighborhoods and invest in their cause. First, you’ll likely have to find some kind of impact investing fund made up of companies that are providing access to technology for folks in these areas, and then you’ll simply invest money into projects and companies that they have established. Sounds simple enough, right?
Meeting Global Challenges
The world is truly making history right now and it is currently in a place that it has never been before. Some of today’s most pressing problems like climate change, extreme poverty, limited access to healthcare and education, and social injustice cannot be solved through government grants alone. The government simply doesn’t have enough money to contribute to all these causes, even though it would like to. This is where personal investors come in. Through impact investing, investors can donate money to these causes to make the world a better place in general.
Achieving Market Returns
There will be returns with impact investing. This much has already been proven. Those who provide solutions to today’s problems will be the financial winners of tomorrow. Data from the Global Impact Investing Network has already proven that the majority of the estimated $15 billion impact investment market produces regular market returns. It’s time for you to get in there and claim some of these returns for your own.