Social impact investing


Social impact investing is an approach that seeks to create positive social change alongside financial returns. It involves investing in companies or organisations that have a positive impact on society, such as those that promote sustainability, social justice, or community development. This investment practice aims to use the power of capital markets to support businesses and initiatives that have a positive impact on society and the environment.


How is this different to a traditional investment?

Social impact investments have shown to perform on a par with or even better than traditional investments in terms of financial returns. Studies have shown that they are not only capable of producing competitive returns but also have lower volatility and lower correlation to traditional asset classes. As well as this they also provide investors with a sense of purpose and meaning beyond just financial returns.

What is the relationship with ESG factors?

Environmental, Social, and Governance (ESG) factors are important considerations in this type of investing. ESG factors are a set of criteria that investors use to evaluate companies on their environmental, social, and governance performance, so organisations that prioritise ESG factors as they are more likely to have a positive impact on society and the environment.

What are the key drivers of social impact investing?

There are several key drivers, including demand from investors who are increasingly interested in investing in companies that have a positive social and environmental impact. More people are also becoming aware of the negative impact of traditional investments and the need for more sustainable and socially responsible investment options. Finally, governments around the world are promoting this type of investing as a way to address social and environmental issues.

What are the potential risks and challenges?

Like any investment, there are also some risks and challenges. Some of the potential risks and challenges include a lack of data, making it challenging to assess the impact of this type of investment due to a lack of standardised data and metrics. The social impact investing market is also still relatively small, so limited investment opportunities are still a challenge. And while social impact investing aims to provide both social impact and financial returns, there is no guarantee that investors will achieve their financial goals.

How does social impact investing create positive social change and financial returns for investors?

By investing in companies or organisations that have a positive impact on society and the environment, impact investors can help to address some of the world’s most pressing issues while also achieving financial goals. Impact investing has the potential to drive positive change, create jobs, improve communities, and address environmental challenges, all while delivering competitive financial returns.

Social impact investing represents a growing trend in the financial industry, reflecting a desire among investors to make a positive impact on society and the environment. While it is not without risks and challenges, it offers a powerful way to align personal values with investment decisions. As more investors embrace this type of investing, it has the potential to drive positive social and environmental change while delivering competitive financial returns.