[1] At its core, impact investing is about an alignment of an investor's beliefs and values with the allocation of capital to address social and/or environmental issues.
Impact investors actively seek to place capital in businesses, nonprofits, and funds in industries such as renewable energy,[2] housing, healthcare, education, microfinance, and sustainable agriculture.
[5] Impact investing occurs across asset classes; for example, private equity/venture capital, debt, and fixed income.
Impact investments can be made in either emerging or developed markets, and depending on the goals of the investors, can "target a range of returns from below-market to above-market rates".
[12][needs update] Such capital may be deployed using a range of investment instruments, including equity, debt, real assets, loan guarantees, and others.
[12] The growth of impact investing is partly attributed to the criticism of traditional forms of philanthropy and international development, which have been characterized as unsustainable and driven by the goals—or whims—of the corresponding donors.
Although some social enterprises are nonprofits, impact investing typically involves for-profit, social- or environmental-mission-driven businesses.
[18] India is emerging as a major geography for impact investors according to consulting firm, McKinsey, with over $1.1 billion already invested as of 2016.
[23] Impact investing can help organizations become self-sufficient by enabling them to carry out their projects and initiatives without having to rely heavily on donations and state subsidies.
World Pensions Council and other US and European experts have welcome this course of action, insisting nonetheless that: Governments and international institutions need to do more if they truly seek to 'unlock' private sector capital in a meaningful way.
They have to ask themselves the following questions: what are the concrete legal, regulatory, financial and fiduciary concerns facing pension fund board members?
[25] They include any type of investment that is intended and designed to generate both a measurable social or environmental benefit and a financial return.
Exchange-traded funds like the SPDR Gender Diversity ETF from State Street are publicly traded and hence available to anyone with a stock brokerage account.
MyC4, founded in 2006, allowed retail investors to loan to small businesses in African countries via local intermediaries, though the service permanently closed in 2019.
[40] Demand is rising with major banks offering gender lens bonds including NAG, Goldman Sachs, Merrill Lynch and many others.