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Impact Investing for Beginners

Impact investing is the term used to describe investments made not solely for their financial returns, but also for their societal and environmental benefits.

Impact investors seek to make a difference by generating measurable environmental and societal gains alongside making a profit. Most impact investors, while still seeking to generate positive financial returns, are willing to invest in areas that may be less profitable if those areas provide gains for humanity or for the planet.

Jonathan Bennion-Pedley is the founder of a business that advises on fund generation and investment.

Multi-Asset Classes

Impact investing takes place across multiple asset classes and can have a range of desired results. The aim of impact investing is to make a quantifiable difference to the lives of people or the health of the planet.

While impact investors are still looking for profitable investment opportunities, their motivation is broader than that of investors only seeking to make a profit. This may involve investing in non-profit organisations that are working for the benefit of local communities, or exploring enterprises focusing on clean technologies that have the potential to reverse some of the damage caused to the environment by human endeavours.

As Jon Bennion-Pedley knows, different investors have different priorities when looking at impact investing -you can find out more about the most popular sectors for impact investing by watching the embedded short video.

Philanthropic Extension

Impact investing can be considered as an extension of philanthropic work. However, as impact investing benefits the investor financially as well as emotionally, it is often a longer-term plan that attracts greater investment from a wider demographic.

The majority of impact investing comes from institutional investors seeking to enhance their corporate social responsibility. However, there are still many individual impact investors, particularly high-net-worth individuals, who want to give something back to communities and the planet.

Microfinance Loans

One area that many individual investors are currently exploring in terms of impact investing is microfinance loans. These types of loans enable people – and especially women – in developing nations to access funds to start a business that may otherwise be unavailable to them. This provides unique opportunities for people in some of the most underprivileged areas of the world to start their own businesses or expand an existing enterprise.