The Core Characteristic of Impact Investing
The Global Impact Investing Network, which is a non-profit organization concerned with impact investing, and dedicated to “increasing its scale and effectiveness around the world”, has presented the investing world with a total of four practices that define impact investing. In this article, let us look at what they are:
- Intentionality: As we have observed time and again, the general idea behind impact investments is to create change without necessarily looking for profits. This is in a way what the GIIN calls the “intentionality” behind any investment made for impact. Thus, all impact investments must be made with an intention and desire for producing measurable social and environmental benefits. If one’s primary aim is besides solving pressing problems concerning humankind, then one is most certainly not an “impact” investor. Intentionality lies at the core of impact investing.
- Evidence and Data Based Investment: Building on the principle of Intentionality, one seeking to truly create impact must also act sincerely in one’s efforts. This includes making intelligent investments, based not on mere hunches and gut feeling, but empirical evidence and statistical data that promises change for the better. Investments must be designed such that they are useful, and able to contribute towards positive social and environmental change.
- Managing Impact Performance: In the spirit of intentional and intelligent action, one should also be vigilant of one’s investments. The focus should be on making sure that the investment is going the right way and creating only the desired impact it was designed for. For this, the GIIN suggests having feedback loops in place and practicing better communication about the performance of the investment. This shall help all the people involved with the project better assess what they must do to keep the forces for good going.
- Contributing to Industrial Growth: This is essentially to require that one keeps the industry in the loop. Impact investors must always share their strategies with the people, and strive for transparency in their processes. Making such practices the mark of impact investing not only helps people spot companies engaged in impact washing, but also helps others learn from successful (or not) investments about what they can do to create similar impact. The idea is to share one’s experience so that not only the people but the industry also benefits, and ultimately benefits all the more people with the newly gained insights.
These are the guidelines that the GIIN urges investors to follow if they wish to engage in impact investing, so that the returns generated can be the most socially positive and environmentally beneficial. For more on the GIIN, you can visit their website: https://thegiin.org