One of the most heartwarming financial trends in business strategy is that of impact investment, which sees business leaders putting money into programs and causes with the intention of generating social and environmental good. A 2019 report from the Global Impact Investing Network (GIIN) estimates that corporations collectively have more than $2 trillion available for investment in initiatives that could reduce poverty, improve public health, support environmental protection and more. The rise of impact investing could have outstanding implications for the future of the world — but only if business leaders can get impact investment right.
Benefits of Impact Investing
Traditionally, investors have a single core interest guiding their investment strategy: increase their wealth. Some investors feel more comfortable with long-term investments that grow wealth slowly; other investors might prefer day trading to build wealth quickly — but in both cases, the rising value of the security or asset is of prime importance.
In impact investing, not only is the value of the investment important, but the values of the investment are also important. This can provide the following benefits:
- Global solutions. Impact investing provides the funding to organizations developing solutions to pressing and shared problems, like climate change or homelessness.
- Market-rate returns. The accumulation of wealth remains possible, as many opportunities to do good involve solving complex problems that result in income and success.
- Stable portfolio. Research has found that social impact funds are usually less volatile than comparable non-impact funds, suggesting they can provide balance to a more aggressive investment strategy.
- Social and responsibility goals. Most organizations have stated goals to help their community, and impact investing provides leaders the opportunity to meet those goals.
- Consumer demand. Companies without extant social and responsibility goals are still likely to experience demand for consumers to do some good with available capital.
- Influential connections. Impact investing can put brands in contact with influential members of the culture, such as human rights activists and development experts. Such connections can be helpful in boosting a brand’s reputation and guiding leaders toward additional impactful strategies.
Not every attempt to invest in good causes provides both a return to the investor and the financial support needed to make a difference. Impact investing can be good for everyone involved — if business leaders can make wise financial decisions that align their values and money with reputable causes.
Better Strategies for Impact Investing
Business leaders interested in engaging with impact investing for the benefit of their brands should first pursue an impact investing certificate. Courses on impact investing that award the certificate will provide leaders with the foundation of knowledge and skill they need to navigate the market with success. As an added benefit, the certificate could be a valuable credential to help business leaders secure more attractive employment throughout their careers.
In addition to engaging with continuing education, executives should prepare for impact investing by clarifying their strategies. They might work with staff to identify which causes might align with which corporate values or to rank those values from most to least important. Business leaders should also develop both short- and long-term goals to guide their investment strategies, so they can measure the success of their efforts through time.
It is critical that business leaders remember that impact investing is not a different style of investing; it does not involve different tools or strategies, and it does not involve a specific class of securities or assets. Rather, it might be useful to think of impact investing as a lens through which leaders can assess all potential investments. If an investment does not make the desired impact — as determined by the guiding values and goals of the corporation — it should not be considered as an option worthy of the portfolio.
Impact investing is not a new concept. Some historians suggest that “doing well by doing good” is a concept that dates back thousands of years. Still, business leaders interested in doing more with their corporate investment strategy should research the potential of impact investing for aligning goals, values and financial success.
About the author: Muhammad Shykh
Muhammad is an aspiring blogger, bibliomaniac, and versatile wordsmith who enjoys writing news. Currently, he is seriously indulged in Case-Studies, innovative studies, especially articles having a pragmatic impact on society. His acumen ship on diction is unparalleled having ingenuine appeal to his readers. In fact, he is a remarkable personality.