4 Key Benefits of Impact Investing
Impact investing has become increasingly popular in recent years as more people look for ways to use their money to impact the world positively.
With impact investing, you are investing your money into a company or organization working to make a difference in the world. For example, whether through fair wages for workers or providing clean water to those in need. The idea is to invest in companies you consider to share your values while generating a solid financial return.
If you’re still deciding whether or not you want to invest in this way, here are some of the benefits of investing with a positive impact in mind.
Benefit #1: Social and Environmental Benefits
The world, as we know, faces several environmental challenges, including rapid population growth, deforestation, food production, and equitable distribution, global warming, depletion of natural resources, and the list goes on. Impact investing can provide a way to tackle these issues in some ways. This may include investing in companies that reduce carbon emissions, support communities with renewable energy projects, or find other ways to offset our country’s environmental footprint.
Learn more about impact investing by rewatching this session that explores how this new wave of investing will shape the future.
Benefit #2: Positive Financial Returns
Spending money to impact the world positively can also positively impact your personal finance, which is a double win. Through impact investing, you can do both at the same time. For example, with ethical mutual funds and exchange-traded funds (ETFs), your investment returns are tied to the performance of companies that meet a specific set of criteria, like social good or environmental goals.
Benefit #3: Alignment With Personal Values
When you invest in a company, you give that company your vote of confidence. You are saying that you believe in what that company is doing and want to see it succeed. Impact investing takes this a step further by allowing you to align your investment with your personal values.
For example, if you are passionate about environmental sustainability, you can choose to invest in companies that are working to reduce their carbon footprint. Or, if you want to support social causes, you can invest in companies that are working to improve access to education or healthcare.
Impact investing is a great way to ensure your money is going towards something you believe in. It’s a way to positively impact the world while potentially earning a financial return on your investment.
Benefit #4: Improved Portfolio Diversification
There are many impact investments, from renewable energy to affordable housing. By investing in companies and projects that are working to solve social and environmental problems, you can help make a difference while also protecting your investment portfolio from potential risks.
Impact investing can also offer diversification benefits by exposing new asset classes and sectors. For example, by investing in clean energy projects, you can gain exposure to the growing renewables sector while diversifying away from traditional fossil fuel investments.
The Bottom Line
As the world increasingly becomes conscious of its impact on the environment and the social issues facing our communities, investors are becoming more socially responsible.
People want to feel good about where their money is going and their impact on the world.
Impact investing provides a way for people to invest in a way that aligns with their personal values and positively impacts the world around them.