This investment strategy aims to deliver financial returns while championing the social and environmental issues you care about—and also ensure your money doesn’t support what goes against your beliefs.
Impact investing offers a refreshing sense of agency at a time when huge global challenges—climate change and housing affordability, to name just two—seem insurmountable. Not surprisingly, impact investing especially resonates with Gen Z and Millennials, who have inherited these and other problems that were decades in the making.
In this column, I’ll break down how to identify profitable and impactful investing opportunities, along with common pitfalls to avoid. You’ll also learn practical steps to kick-start your impact investment journey, and I’ll share resources that can help you align your financial choices with your values. Read on to learn how to make money and make a difference.
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What is impact investing?
Impact investing means investing in projects or companies that generate positive social or environmental impacts while providing financial returns. As Joseph Curry, Certified Financial Planner and CEO of Retirement Planning Simplified in Peterborough, explains, “Investing is about putting your money to work so that you can participate in the future cash flows of those investments, getting further ahead financially. Impact investing incorporates that idea—making money—but also aligns it with your values in the hopes that your money can have an impact beyond just giving you financial returns.”
The Canadian impact investing landscape has grown significantly in recent years. According to the Responsible Investment Association (RIA), the impact investing market grew to an estimated $20.3 billion by the end of 2019, almost a 50% jump from the 2017 estimate of $14.8 billion—and nearly five times the 2013 estimate of $4.1 billion.
Younger generations are behind the boom—nationally and across North America. According to research from the Fidelity Charitable Organization, 40% of Millennials report engaging in impact investing, compared to only 20% of Baby Boomers.
On a global scale, impact investments are profitable. The 2020 Global Impact Investing Network survey found that over 88% of impact investors reported that their investments met or exceeded their financial expectations.
Examples of impact investing
One of the most prominent examples of an impact investor is the Bill & Melinda Gates Foundation, founded by tech entrepreneur Bill Gates. With a whopping $67-million endowment (all figures in U.S. dollars), the foundation engages in philanthropy and has a strategic investment fund. This fund manages $2.5 billion and invests in initiatives that further the foundation’s mission of improving health, education and gender equality. The fund selects organizations and projects that benefit the world’s most vulnerable individuals, who are often overlooked by traditional investors.
