Impact investing: what is it and how does it work?

Impact investing is a type of investment that is made with the intention of having a positive social or environmental impact. Impact investments can be made in both for-profit and non-profit organizations, and can take a variety of forms including equity, debt, and grants.

The goals of impact investing vary depending on who is making the investment. Some investors may be primarily motivated by financial return, while others may be more focused on achieving social or environmental impact. However, most impact investors are interested in achieving both financial return and positive impact.

There are a number of different ways that impact investments can be structured. One common approach is for investors to provide financing to social enterprises or businesses that are working to achieve positive social or environmental outcomes. Impact investments can also be made in traditional businesses that are working to implement sustainability initiatives or otherwise reduce their negative impact.

Like any type of investment, there are both risks and rewards associated with impact investing. Some of the risks include the possibility of financial loss, the failure of a business to achieve its social or environmental objectives, and the risk that a business may not be able to scale its operations in a way that is sustainable. However, the potential rewards of impact investing include both financial return and the satisfaction of knowing that one’s investment is making a positive difference in the world.