“Impact” is an improvement accrued in the social or environmental aspects of an investment. The impact is an added value in an investment’s social or environmental performance.

Impact investing yields the best results when the intention for social and environmental value creation is incorporated into the business plan alongside the profits excepted for the initiative. In this way, the social and environmental gain is monitored, sought and attained while achieving the business’s financial targets. When an investment is targeted as an impact investment, there is a triple bottom return which mitigates risk, guarantees financial return and generates social or environmental value.

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Impact investments are made both in emerging and developed markets, targeting areas like sustainable agriculture, renewable energy, energy conservation, microfinance, and affordable and accessible basic services like housing, education and healthcare.

When the United Nations announced the Sustainable Development Goals in 2015, there was a paradigm shift which led to an increase in impact investments. United Nations has 17 Sustainable Development Goals and 169 targets to be met by 2030.

• Impact investing challenges the long-held views that social and environmental issues should be addressed only by philanthropic donations and that market investments should focus exclusively on achieving financial returns.
• The impact investing market offers diverse and viable opportunities for investors to advance social and environmental solutions through investments that produce financial returns.

• Banks
• Insurance Companies
• Individual Investors
• Fund Managers
• Private Equity Companies
• Pension Funds
• Foundations
• Public Organisations
• Public Companies
• Private Companies
• Municipalities
• Development Agencies
• Non-Profit Organisations

• The purpose of the investment is to make a contribution to social or environmental solutions,
• Targets a financial return between a below-market-rate return and a risk-adjusted market rate,
• Different kinds of assets may be utilised,
• Investor commits to measure and report social or environmental performance.

Philanthropy is not impact investing. It is rather a donation of money, goods and even time directed to the individuals/ institutions in need. The motivation behind a donation is usually the feeling of gratitude and a will to give back to society. The purpose of donation can also be religious or social motivations. A donation comes from the feeling that it is right to give back, as society has once given opportunities to this individual. There is no intention to make a profit.

CSR is not impact investing; it is about sustainability and caring for the community. It plays a critical role in protecting the environment, seeking human rights, and preserving a company’s ethical values. At the same time, it defines the image and reputation of the company and indirectly has an impact on the company’s financial performance. CSR projects do not aim to make a direct profit but to generate a good image and reputation for the corporation’s benefit.