What is Social Impact Investing?

Impact investing appeals to many potential investors because it balances commerce and compassion. Nevertheless, there is a lack of clarity for business and investors on what is Impact Investing! 

Some strategies emphasize financial return while still seeking to benefit society. Other approaches put social impact first, accepting returns that vary from below-market rate to a simple repayment of principal.

Social impact investing is an emerging that brings together governments, service providers, investors and communities to tackle a range of policy (eg. social, environmental) issues.

Impact investing refers to economic investments in companies, organizations, and funds with a clear intention to generate a measurable, beneficial social impact alongside a financial return. This investment often brings together capital and expertise from the public, private and not-for-profit sectors to achieve a social objective. 

Where investors are involved, they will usually expect their investment to be repaid and, potentially, to earn a return. This return is likely to depend on the level of social outcomes achieved.

Regardless of understanding, impact investing provides a tool for achieving social good with a wider array of assets than a traditional philanthropy.  As the societal problems become more entrenched and complex, it’s clear that government and philanthropy organisations can’t solve them on their own. 

A look at the amounts of capital bears this out: in the U.S., philanthropy is approximately $390 billion, government spending is $3.9 trillion, and capital markets (all debt and equity investments) encompass $65 trillion. On a global scale, total investments are estimated at $300 trillion. Thus, a 1% shift in global capital markets towards impact investing–or investments that work toward social good–could cover the estimated outstanding $2.5 trillion annual funding gap to achieve the United Nations’ Sustainable Development Goals (SDGs). As this example shows, harnessing capital markets can have a huge societal benefit.

Difference Between ESG And Impact Investing

While using Environment, Social and Governance (ESG) can help investors invest more responsibly, it is not the same as impact investing. Whereas ESG is a set of criteria, Impact Investing is a strategy. One of the key differences between ESG and impact investing is that impact investing is far more focused on the positive social/environmental outcome, whereas ESG usually warrants better financial returns. 

About SYNE

SYNE is an impact platform for individuals, start-ups, non-profits and enterprises. We form the backbone of sustainable enterprises and brings together the unified view of collective social impact across communities. We’re working towards a future where all our actions are resulting in sustainable impact. More details available at https://www.syne.com/company