Impact-focused investments are investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. By generating profits from an innovative business model, a company can pay financial returns to investors alongside doing something good for the world.
Impact investing works by finding companies that have turned some kind of environmental protection or social progress into a business opportunity. By attracting capital and entrepreneurial talent to companies that create positive change, impact investing approaches can contribute to more sustainable economic development.
The type and stage of companies in a portfolio can also influence the extent of the impact. Investors may have the greatest impact when they help fund early-stage companies to get truly innovative ideas off the ground, or by choosing companies and projects in developing countries (where capital is scarce and expensive).
Impact investing relies on measuring the specific change that an investor’s capital has enabled. Most impact-focused investing strategies help investors focus on economic activities that address specific sustainability challenges outlined by the United Nations Sustainable Development Goals (SDGs). This is because the SDGs can help identify where private capital can make the most difference. Investors that want to make a measurable impact can use the SDGs as a guide to make decisions about where best to put their wealth to work.
Many investors would like to align their investments with their values and to use their wealth to bring about positive change. Impact investing strategies allow an investor to focus on areas where their capital can make a difference. They can also help an investor identify innovative companies that have potential to grow through addressing global sustainability challenges at scale.
As a signatory of the International Finance Corporation’s (IFC) Operating Principles for Impact Management, we also publish an annual disclosure statement that is independently verified and available on the IFC website.
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