Impact investing basically strives to make a powerful yet positive impact on society as well as the environment, along with a very convincing financial return, and it is definitely catching up. Impact investments technically provides capital to address any social or environmental issues.
The Global Impact Investing Network, a non-profit information hub which essentially observes specialist funds, says that between the years of 2017 and 2018 there was a doubling of assets aimed at social and environmental benefits, to $228 billion.
By polarity, while the UK ‘ethical funds’ sector has invariably increased fourfold in the last 10 years since the crash, as a percentage of the industry it has hardly moved, at just a mere 1.3%.
What is impact investments and who makes it?
Impact Investing is basically a type of investment made in organisations, and firms on the grounds of creating social and environmental impact with a financial return on capital.
Impact investors essentially want their investment to make a positive impact and a difference in society whilst creating financial value.
Ethical investing has always been perceived as the area of interest of active fund managers. Having said that, last year has witnessed a drastic growth in the alliance between ESG and ETF.
ESG-established exchange traded funds & products garnered growth by 26% globally in the year to October 2018, as opposed to the growth of 2.5% for the ETF market overall.
Does impact investing lead to lower returns?
But do investors have to sacrifice financial returns in pursuit of positive impact?
As a matter of fact, no, based on a study by Cambridge Associates. It was clearly established that investee firms can profit from long-term social and environmental trends.
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