Generating positive social and environmental outcomes alongside financial returns.
Impact investment vehicles provide capital to companies and organizations – in both emerging and developed markets – to address the most pressing social and environmental challenges in the world. Impact is not an asset category but rather a theme that can be applied across asset classes, geographies and sectors. For example, various sector themes may include sustainable agriculture, renewable energy, conservation, microfinance, affordable housing, healthcare, education and more.
The impact investment market has been around long before the term was coined around 2007. Foundations, community development organizations and others have been serving our society as impact investors for decades. More recent developments have attracted financial institutions, fund managers, pensions, family offices and individual investors to participate.
The growing market is becoming increasingly diverse, dynamic and viable – and as the pipeline continues to mature, we will only continue to see more impact investment opportunities delivering real value for society alongside a financial return in line with traditional market performance. New investment options, innovative ways to measure impact, and a renewed emphasis on shareholder activism are just of few of the ways the industry is redefining itself.
As with any investment strategy, impact investing has some inherent trade-offs. Short-term volatility can be higher because of the exclusion of certain industries that tend to be less economically sensitive. Underlying expenses can be higher due to the additional due diligence required and the relatively small asset bases of the funds relative to larger non-impact focused funds. Finally, impact investments can be less tax efficient. Changes in investment allocations, asset selection, and asset location can help mitigate these concerns.
Disclaimer: Any investment strategy involves risk, including the possible loss of principal invested. Moreover, you should not assume that any discussion or information provided here serves as the receipt of, or as a substitute for, personalized investment advice from an investment professional. No part of Silicon Hills’ online content is intended to serve as a recommendation or testimonial for any investment product, service, or strategy. Additionally, the information posted is not to be construed as solicitation to offer or sell any security. To the extent that you have any questions regarding the applicability of any specific issue discussed to your individual situation, you are encouraged to consult the professional advisor of your choosing.