How to start Impact Investment to Contribute to a Sustainable Future
You want to invest in something social, ecological, more ethical? Becoming an Impact Investor might be the right path for you!
If you don’t want your money sitting in your bank account, investing your money is always a smart approach to even increase your chances in generating more money out of your savings. By doing practically nothing instead of the investing part. The question often arises of where, or what, to invest in. Nowadays, there are several options to spend your money and support initiatives or organizations that envision a more sustainable, social world and are engaged in various sectors (e.g. renewable energy, equity, recycling, and so on).
If you want to support such projects, you might soon be calling yourself an ‘Impact Investor´.
Impact investor? What does that mean?
The term ´Impact investing´ involves investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Impact investment opportunities range from small businesses and early-stage startups that are generating social good to global climate change mitigation and adaptation projects to innovative sectors as for example sustainable agriculture, education, clean energy, water, sanitation, and more.
After clarifying what impact investment is, your awareness of certain types or possibilities to start your ´impact investment strategy´ could help.
I have you covered on that one. Here are some types and terms that give you a better understanding of how to start your journey as an impact investor:
Green Bonds
A Green Bond can also be understood as a loan or debt. A green bond is a sort of fixed-income instrument designed to raise funds for climate and environmental projects. Because these bonds are typically asset-linked and backed by the issuing entity’s balance sheet, they normally have the same credit rating as the issuer’s other debt obligations. Proceeds from green bonds are invested in clean energy projects such as solar farms, smart grid infrastructure and electric vehicle charging stations — and these types of investments have grown rapidly in recent years.
Green Mutual Funds
Mutual funds are a simple method to invest your money in a range of investments while letting someone else do the work. In general, Mutual funds have been operating since 1924, making them one of the most reliable investing vehicles available today. Nowadays, there are also eco-friendly mutual funds available. A great way for you to invest responsibly while also making a difference. Mutual funds operate by combining your money with the money of other investors.
I wrote another article about the ESG evaluation. Finding companies with a high ESG rating is one option for you to find Fund opportunities that suit your requirements.
Crowdfunding Platforms
Crowdfunding Platforms have democratized impact investment by allowing investors to back projects they support instead of only handing over money when they expect a financial return. If you’re interested in learning more about these opportunities, check out sites like:
They provide information on currently available impact investments in form of projects, start-ups or organizations. As always, be sure you do your research and risk analysis before putting your money into anything.
Investing in a Community Development Financial Institution (CDFI)
No matter whether you’re an individual with a fully packed money wallet, or a high-net-worth investor interested in impact investing opportunities, there are many sustainable investment opportunities across all asset classes. One great place to start is by investing in a Community Development Financial Institution (CDFI). There are several types of CDFIs that specialize in different geographic areas and have various lending models. These financial institutions offer products that can benefit small businesses and real estate projects through targeted grants, equity investments, and loans.
Here is a website where you can find projects and initiatives: CDFI Fund
Investing In Real Estate For A Cause
Impact investing is one of a few new terms being used today to define investment strategies that seek both financial and social returns. What’s more, impact investing doesn’t have to take up all your time or capital. Investing in real estate can be another excellent option because it offers high returns with an approachable barrier of entry.
Socially Responsible Investment (SRI) Portfolios
As a last option, you can also search for socially responsible investment (SRI) portfolios. SRI Portfolios are about investing in companies that have policies and practices that go beyond legal compliance — and that seek to benefit society as well as shareholders. In fact, SRI funds offer comparable returns to mainstream funds while holding higher levels of stocks relating to the sustainable development goals (SDGs).
Last words
Impact investment possibilities are increasing with time, which means you will have even more options to follow your principles in the future. However, while making investments, you should always consider the risk behind it. So, select your project wisely, but also consider how much the globe and economy are evolving toward being more sustainable, which means the chance of businesses going bankrupt is not too large in that perspective.
Have fun investing and choosing the right project, brand, institution or organization that´s made just for you :)
Greetings.
Lars from SusEco
