What is Impact Investing?

Summary

This 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.