The GIIN estimates the size of the worldwide impact investing market to be $1.164 trillion. Six years ago, it was valued at only $77 billion. Impact investing isn’t just popular – it’s powerful. And amid the global upheaval and growing social and environmental crises, impact investing is essential to accelerating solutions designed to heal our communities, planet, and each other.
Here are 5 reasons why impact investing is good business for both returns and impact:
#1. It puts a spotlight on growing sustainability issues.
Increasing awareness of social and environmental issues has inspired investors to uplift startup founders with brilliant new technologies, products, and services, strengthening social parity and propelling climate solutions.
Traditional investing in a capitalist economy prioritizes individual wealth over the interest of the common good. As awareness of economic inequality, social injustice, and climate crisis increases, investors are seeding money into projects building impact solutions. And as awareness grows, so too does the investor community. Investors from diverse backgrounds, geographies, sectors, and asset classes are collaborating more than ever before leading to greater standardization and innovation in the impact investing space.
Impact investing isn’t just popular – it’s powerful.
#2. It’s a rapidly growing market.
The size of the impact investing market is expected to snowball in the coming years as more investment opportunities serving social causes surface and align with stakeholders’ impact goals, values, and financial targets.
A 2022 Cambridge Associates biennial client survey found that 65% of its respondents actively engage in sustainable and impact investing. That is nearly double the percentage of respondents (36%) in 2018. Impact investing is gaining popularity because it demonstrates the ability to deliver substantial financial returns and attractive risk-return profiles. It’s even crossing generations. A Fidelity Charitable study conducted last year found that 61% of Millennial investors participate in impact investing, proving that infusing capital into companies prioritizing sustainability and social responsibility matters to this maturing generation.
61% of Millennial investors participate in impact investing.
#3. It’s a financially sound path to pursue.
Impact investing not only supports improving the quality of life in real-world settings, but it also nets substantial capital returns through its focus on underserved markets and creating long-term value rather than short-term gains.
Because persistent demand exists in underserved sectors where market inefficiencies exist, investors can generate comparable, if not higher, returns to traditional investments. Additionally, the emergence of new impact investing vehicles, such as impact funds, social impact bonds, and crowdfunding platforms, provide investors with new ways to access impact investments from a range of asset classes. By pinpointing high-growth sectors and emerging markets and identifying projects and companies with scalable business models that are making widespread and measurable social and environmental impacts, investors have developed solid blueprints for strong-impact investments.
#4. Something magical happens when investors partner with startups that can leverage the investor’s unique expertise.
As financial services entrepreneurs, lawyers, and regulatory finance experts, our team is well-equipped to aid startups in building solutions in fintech or software-as-a-service (SaaS) products. We offer founders in this space guidance on navigating regulatory compliance, assessing marketplace needs, and structuring solutions that customers will pay for.
Our expertise increases the likelihood of success for early-stage businesses by helping founders avoid non-obvious landmines in our specialty fields. We apply this expertise to our impact investments by aiding founders in building financial inclusion products or creating novel ways to finance the climate transition. Like a key fitting a lock, a new door of impact opens.
#5. Impact investing isn’t just a powerful trend in the world of finance.
It’s a lasting reality. With more startup founders looking to develop products solving for today’s critical challenges, impact investing offers a model to scale substantial impact in our society.
There is a fundamental shift occurring. Socially-conscious investors direct capital into companies building with environmental, social, and governance (ESG) principles and enterprises scaling impact alongside financial returns. It takes a village, a community, and a band of supporters to stand behind and hold up these courageous founders. As investors with decades of company building behind us, we must support impact leaders bravely creating pathways forward into a greener, more equitable, and ultimately more prosperous world.