What is impact investing?
Impact investing is a growing field of investment that is helping to finance solutions to many of society’s most pressing challenges.
Impact investments are investments made into organisations, projects or funds with the intention of generating measurable social and environmental outcomes, alongside a financial return. Impact investments are different from grants because a financial return is expected, and different from mainstream finance because measurable social and environmental benefits are expected.
Impact investing is a response to the growing awareness that the challenges facing society are too large and complex to be solved by government, philanthropy and not for profit organisations alone. Impact investing expands the total pool of funds we have available for social and environmental purposes; it encourages innovative approaches to solving old problems and brings greater accountability for the outcomes achieved.
How are impact investments being used?
In Australia and internationally, impact investments are providing finance and deliver greater outcomes for not for profit organisations, businesses, social enterprises and programs spanning a wide range of areas including aged care, the arts, community development, health, employment, housing, renewable energy, sustainable agriculture and international development.
Who can make impact investments?
Many types of investors are participating in impact investing including public and private foundations; family offices; banks and other institutional investors such as superannuation funds and insurance companies; governments; fund managers; community finance organisations; and individual investors.
Impact investors typically have different priorities and varying appetites for risk and return (both social and financial). A common feature of impact investments is collaboration between different kinds of investors and the forms of capital they control.
How are impact investments made?
Impact investments can be made directly into an organisation or via a managed impact investment fund. They typically come in the form of a loan (debt) or a private stake in an entity (equity), and they span different asset classes.
There are 3 main areas where impact investments are used:
- To scale a business or social enterprise
- To access real assets (eg. property or infrastructure)
- To finance program delivery
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