what is impact investing 
impact investing is making investments to help create beneficial social or environmental effects while also generating financial gains this investment strategy can involve different types of asset classes such as stocks bonds mutual funds or microloans the point of impact investing is to use money and investment capital for positive social results understanding impact investingthe term impact investing was first coined in 2007 but the practice was developed years earlier 1 a basic goal of impact investing is to help reduce the negative effects of business activity on the social or physical environment that s why impact investing may sometimes be considered an extension of philanthropy investors who use impact investing as a strategy consider a company s commitment to corporate social responsibility csr or the sense of duty to positively serve society as a whole before they become involved with that company the type of impact this creates varies based on the industry and the specific company within that industry some common examples include giving back to the community by helping the less fortunate or investing in sustainable energy practices to help save our planet impact investing actively seeks to create positive social and environmental outcomes through investing for example in nonprofits that benefit the community or in clean technology enterprises that benefit the environment the bulk of impact investing is done by institutional investors including hedge funds private foundations banks pension funds and other fund managers however a range of socially conscious financial service companies web based investment platforms and investor networks now offer individuals an opportunity to participate too one major venue is microfinance loans which provide small business owners in emerging nations with startup or expansion capital women are often the beneficiaries of such loans types of impact investmentsimpact investments come in many different forms of capital and investment vehicles like any other type of investment class impact investments provide investors with a range of possibilities when it comes to returns but the most important thing is that these investments offer both a financial return and are in line with the investor s conscience according to a 2020 survey by the global impact investing network giin the majority of investors who choose impact investing look for market rate returns 2the opportunity for impact investments varies and investors may choose to put their money into emerging markets em or developed economies impact investments span several industries including environmental social and governance esg refers to the practices of the company being invested in esg investors look for companies that have ethical governance prioritize the well being of workers in their supply chain or work towards positive environmental outcomes and sustainable business practices the integration of esg factors is used to enhance traditional financial analysis by identifying potential risks and opportunities beyond technical valuations while there is an overlay of social consciousness the main objective of esg valuation remains financial performance socially responsible investing sri goes a step further than esg by actively eliminating or selecting investments according to specific ethical guidelines for example sri investors may avoid investing in companies that are involved in producing or selling alcohol tobacco or firearms the underlying motive could be religion personal values or political beliefs unlike esg analysis which shapes valuations sri uses esg factors to apply negative or positive screens on the investment universe sri is often considered a type of impact investing however sri may focus more on avoidance of harm while impact investing also suggests a positive impact via its investments 