The official definition of impact investing provided by the Global Impact Investing Network (GIIN), is “investment that is made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return.”
An impact investment should be an investment, as opposed to a grant, but it is this explicit ‘intentionality’ to use investment to generate positive outcomes in the real world which sets it apart.
The second key part of the GIIN’s definition is a commitment from impact investors to measure and report the social and/or environmental impact created. Historically, impact investing has generally been in private equity and illiquid investments in sectors such as microfinance, health and education.
It is a growing area for both pension funds, private banks and wealth managers, but has not been readily available for individual, retail and private client investors because of the level of specialisation. However, the concept of investing to create positive outcomes is steadily growing in popularity.
For individuals and their advisers who want to make sustainable and impactful investments, there are now more fund products available that are designed to provide a positive outcome and a competitive financial return. This opens up new opportunities for advisers to understand their clients’ motivations and interests. Knowing that their adviser is shaping their portfolios to deliver financial returns alongside positive environmental and social impacts, can help build stronger and longer lasting relationships.