Impact Investing 2.0: Not Just for Do-Gooders Anymore

Abstract

Impact investing is a rapidly evolving field - depending upon the type of investor you ask they will give a variety of definitions and expectations. Much of the field has derived from philanthropic roots, however the latest developments are driven from an investment perspective. The historically assumed trade-off between financial return and social benefit is no longer a given. Astute investors realize that incorporating sustainability and ESG factors into their analysis will often enhance long-term returns. Many of these impact-oriented trends are overlooked or undervalued by traditional investors, leaving an investment opportunity for those ahead of the curve.Before discussing these financial applications to impact investing, the article provides an overview of impact investing and its two disparate evolutionary paths, along with differing return and impact expectations. Impact investing 2.0 stems from the field’s investment side and its primary characteristic is that the drivers of the impact are integrated into creating an above market return, attracting all types of investors.