Impact investing aims to achieve social and/or environmental goals while reaping financial rewards. This strategy is often linked to SRI or ESG investing.
Impact investing puts your investment capital to work producing positive social and/or environmental benefits. For instance, you might invest in firms or funds that emphasize fair labor practices, charitable outreach or using/producing renewable energy.
Because this strategy encompasses so many potential paths, you can choose from a range of assets and themes. Some investors focus on industries like health or clean energy, while others target emerging markets.
Impact investing often goes hand-in-hand with ESG and SRI investing. While both strategies generate positive benefits (or reduce negative ones), they take slightly different approaches.
ESG (environmental, social and governance) investing focuses on assets that actively:
For example, an ESG fund might concentrate on assets that generate or use renewable energy or champion fair labor practices.
SRI (socially responsible) investors put capital into companies that align with their values, like:
SRI investing often relies on ESG principles or an investor’s personal, political or religious values to select investments. (Such as excluding “sin stocks” and oil firms or including companies with a history of charitable outreach.)
Historically, impact investing is the realm of big investors like banks, hedge funds and private foundations. Examples include the Gates Foundation, the Soros Economic Development Fund and the Rockefeller Foundation.
But more and more, investment firms and online platforms offer individual investors the chance to make an impact. The niche has become especially popular with millennials and younger investors looking to give back to society.
Impact investing allows you to:
And you don’t have to compromise your profits. A 2020 Global Impact Investing Network survey found that nearly 90% of impact investors reported performance that met or exceeded expectations.
Like all investments, some impact assets carry more risks or fewer rewards than others. (For example, the emerging market can carry higher volatility risk.)
Additionally, some “impact funds” claim the name without living up to its stated values – which is why you should always vet your investments.
And sometimes, returns take years or decades to materialize, particularly in newer industries and markets.
Impact investors can take several paths to success, including:
Or, you can take the easy way with Q.ai’s AI-backed Investment Kits.
Every Kit puts your dollars to good use targeting a range of themes, industries and goals. Take our Clean Tech Kit, which focuses on assets that look to power a cleaner, greener future.
Best of all, you can start investing and building wealth without ever leaving your couch.
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