In the world of investments, there is a lot to be considered. Should an investor choose to invest their money in something that means something to them? Or, are they better to look for opportunities for real growth and return? Finding the right investment is not a straightforward task but it is possible if careful consideration is taken.
So, where does impact investing fall into this? Impact investing is a slightly different kind of investment, but it is certainly one we should all know about in 2020. Read on to find out what you should know about impact investing below.
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What Is Impact Investing?
If you are not familiar with the term impact investing, you should know that this kind of investment is made with the intention to create a measurable environmental or social impact. Of course, that isn’t all – impact investing also requires a financial return. This makes impact investing slightly different from philanthropy and this is something that you should be aware of. Above all else, impact investing is an investment, not a gift given by those who can afford it.
There Must Be Targets
One of the things that many people don’t realise about impact investing is that it needs to be measurable and there must be targets on both sides, not just the financial side. Many believe that impact investments can only be measured by the financial gain at the end, but this is not accurate. If you read Tej Kohli books, you’ll learn a bit more about setting KPIs for both.
It Should Be Part of a Bigger Picture
While impact investing can be effective in changing the way that people live their lives, it isn’t the only solution for social issues. Some investors believe that this kind of investment will solve all of their problems, but this is not true at all. Other initiatives that target these kinds of social and environmental issues need to continue to operate, otherwise things won’t go to plan.
It Might Fail
Finally, you should know that impact investing isn’t always something that is successful. There must be measurable results and these need to provide returns. If the goals are not achieved on both sides of the investment, the project has failed. This is more common than you might think and so this needs to be considered carefully before any kind of investment is made. Just like any other investment, impact investments come with large risks.
Impact investing is becoming increasingly popular as more investors recognise the kind of impact that they can make. Sure, impact investing isn’t always profitable for the investor and they might not reach their goals, but it is something that is certainly worth trying. Many people mistake impact investing for philanthropy but there are some clear differences. Hopefully, over time, more investors will recognise the kind of change they can make with this kind of investment.