What is Impact Investing?

PYMWYMIC

30 Mar 201904:30

Summary

TLDRThis video script explores the concept of impact investing, an investment approach that seeks to generate both positive social and environmental impacts alongside financial returns. It distinguishes impact investing from traditional, responsible, and sustainable investing, as well as venture philanthropy and traditional philanthropy. Emphasizing the importance of intentionality in creating impact, the script encourages viewers to consider their values and strategy, experiment with funds, and contribute to addressing pressing environmental and social challenges for future generations.

Takeaways

🌐 The economy is designed to add value to the collective, not just to make money, indicating a need for a shift towards more meaningful economic activities.
🔄 The world requires serious economic shifting, and those who recognize this may consider impact investing as a part of their future plans.
📈 Impact investing has seen significant growth, with capital invested doubling over the last five years, according to Financial Times research.
💡 Impact investing is defined as investing with the intention of achieving positive social and/or environmental impact alongside financial returns.
⚖️ Impact investing sits on a spectrum with traditional investing focused solely on financial returns, responsible investing that excludes harmful investments, and sustainable investing that considers environmental, social, and governance criteria.
🌿 The philosophy of impact investing moves from 'do no harm' to 'intentionally do good', emphasizing both positive impact and financial returns.
🚫 Impact investing is not a single asset class but an investment approach that can be applied across all asset classes, themes, and geographies.
🌱 It offers a range of risks and returns, with investments ranging from private equity in fintech to supporting sustainable agriculture or renewable energy funds.
🛠️ Impact can be created in various ways, such as through services, products, or the operational practices of businesses, aiming to change the industry they are part of.
💭 When starting impact investing, it's advised to decide on what you care about, carve out funds for experimentation, and seek advice from experienced peers and professionals.
🌳 The script encourages considering the long-term impact of investments for future generations, emphasizing the power of choice in shaping tomorrow's world.

Q & A

What is the primary purpose of the economy according to the video script?
-The primary purpose of the economy, as mentioned in the script, is not to make money but to add value to the collective.
What does the term 'impact investing' refer to?
-Impact investing refers to investing with a specific objective of achieving positive social and/or environmental impact alongside financial return.
How has the amount of capital invested in impact investing changed over the last five years?
-The amount of capital invested in impact has doubled over the last five years according to the research by the Financial Times.
What differentiates impact investing from traditional investing?
-Traditional investing focuses solely on financial return with no impact objectives, while impact investing aims to achieve both a positive impact and financial return.
What is the main difference between responsible investing and sustainable investing?
-Responsible investing filters out harmful investments, while sustainable investing involves investing in companies that consider environmental, social, and governance criteria, still focusing on financial returns.
What is the essence of impact investing?
-The essence of impact investing is the intentional effort to do good, moving from a philosophy of 'do no harm' to actively creating positive social and environmental outcomes.
How does venture philanthropy differ from impact investing?
-Venture philanthropy involves taking high financial risks to drive the impact of social purpose organizations, whereas impact investing is about intentional impact and financial returns across a range of asset classes, themes, and geographies.
What are some examples of impact investments mentioned in the script?
-Examples include a direct private equity investment in a fintech company providing access to finance for underserved populations, supporting sustainable agricultural businesses, investing in a renewable energy fund, or purchasing shares in a sustainable forestry fund.
What are some areas where impact can be created according to the script?
-Areas where impact can be created include services or products provided, such as building solar-powered lamps for developing regions, developing natural washing products, producing healthy foods, and running businesses in ways that safeguard fair raw materials, honest working conditions, waste management, and offering jobs to those with fewer opportunities.
What advice does the script give for someone considering starting impact investing?
-The script advises to decide on what you care about and what your strategy is, carve out some funds to experiment, learn from experienced peers, professionals, and intermediaries, and to get started without waiting, as environmental challenges and social structures need attention now more than ever.
What is the final message of the script regarding the role of the viewer in impact investing?
-The final message is that the viewer has a choice in where their money creates impact, and they should consider doing this for the generations to come, as it is a story about choice and potentially about their future plans.

Outlines

00:00

🚀 Introduction to Impact Investing

The script introduces the concept of impact investing, emphasizing that the economy's purpose is to add value rather than solely generate profit. It suggests that the world needs a significant shift and that the viewer is likely aware of this need for change. Impact investing is defined as investing with the aim of achieving positive social and environmental impacts alongside financial returns. The script contrasts impact investing with traditional investing, responsible investing, sustainable investing, venture philanthropy, and traditional philanthropy, highlighting the intentional 'do good' philosophy of impact investing.

🌐 Impact Investing vs. Other Investment Approaches

This section of the script explains the differences between impact investing and other types of investments. Traditional investing focuses solely on financial returns, while responsible investing excludes harmful investments. Sustainable investing considers environmental, social, and governance (ESG) criteria. Impact investing is distinguished by its intentional pursuit of positive impact alongside financial returns. The script also clarifies that impact investing is not an asset class but an investment approach applicable across all asset classes, themes, and geographies, with a range of risks and returns.

💡 Examples of Impact Investments

The script provides examples of impact investments, such as private equity in fintech companies that provide financial access to underserved populations, supporting sustainable agriculture businesses, investing in renewable energy funds, or sustainable forestry funds. It emphasizes the intentional creation of impact through various means, including services, products, business operations, and industry-wide changes. The frontrunner companies mentioned aim to revolutionize their respective industries.

🛠 Advice for Starting Impact Investing

The script offers advice for those considering impact investing. It suggests deciding on the areas of impact one cares about, developing a strategy, and setting aside funds to experiment. It also recommends learning from experienced peers, professionals, and intermediaries. The call to action is to start investing now, given the urgent need for attention to environmental and social challenges, with a focus on the long-term impact for future generations.

Mindmap

Keywords

💡Economy

The term 'economy' refers to the system of production, distribution, and consumption of goods and services in a region or country. In the video's context, it is emphasized that the economy's purpose is not solely to generate profit but to add value to the collective, indicating a broader social and environmental focus.

💡Impact Investing

Impact investing is defined as investing with the intention of generating a positive social and/or environmental impact alongside a financial return. It is central to the video's theme, illustrating a shift from traditional investment practices to ones that prioritize societal and environmental benefits.

💡Financial Return

Financial return refers to the profit or gain derived from an investment. The video discusses the balance between seeking financial return and creating a positive impact, which is the dual goal of impact investing.

💡Social Impact

Social impact denotes the effects an investment has on societal issues, such as education, health, or poverty alleviation. The video script highlights the importance of achieving social impact through investment decisions.

💡Environmental Impact

Environmental impact refers to the effects an investment has on the natural environment, including factors like pollution, resource conservation, and climate change. The video underscores the significance of considering environmental impact in investment strategies.

💡Responsible Investing

Responsible investing involves filtering out harmful investments, such as those in weapons or tobacco, and aligning investments with ethical considerations. The video places it on a scale of investment types, showing a progression towards impact investing.

💡Sustainable Investing

Sustainable investing is the practice of investing in companies that consider environmental, social, and governance (ESG) criteria. The video mentions this as a step towards intentionally doing good through investments.

💡Venture Philanthropy

Venture philanthropy involves taking high financial risks to drive the impact of social purpose organizations. The video script differentiates it from impact investing by highlighting the higher risk and focus on social impact.

💡Traditional Philanthropy

Traditional philanthropy is characterized by grant-based funding or donations to create maximum social impact. The video contrasts this with impact investing, which seeks both impact and financial return.

💡Asset Classes

Asset classes refer to the categories of investments, such as stocks, bonds, or real estate. The video clarifies that impact investing is not a specific asset class but an approach that can be applied across all types of investments.

💡Risks and Returns

Risks and returns are fundamental aspects of investing, referring to the potential for loss or gain. The video mentions that impact investing encompasses a full range of risks and returns, just like traditional investing.

Highlights

The economy was created to add value to the collective, not just to make money.

There is a recognized need for a serious shift in the world's economic approach.

The video discusses the concept of impact investing and its growing importance.

Impact investing aims to achieve positive social and/or environmental impact alongside financial returns.

The amount of capital in impact investing has doubled over the last five years according to the Financial Times.

Impact investing is distinguished from traditional investing by its focus on intentional good.

Responsible investing filters out harmful investments, unlike traditional investing.

Sustainable investing considers environmental, social, and governance criteria.

Venture philanthropy involves high financial risks for social impact, contrasting with traditional philanthropy.

Impact investing is an investment approach applicable across all asset classes, themes, and geographies.

Impact investments can range from private equity to renewable energy funds.

Investors can choose the type of impact they want to create, such as in services, products, or business operations.

Frontrunner companies in impact investing aim to change the entire industry they operate in.

Impact investing requires a balance between potential financial profit and social/environmental impact.

Advice for starting impact investing includes deciding on personal values and strategy, and experimenting with funds.

The need for environmental and social change is urgent, making impact investing crucial for future generations.

Impact investing is a story of choice, allowing individuals to direct their money towards creating necessary impacts.