Impact investing

what is it?

Impact investing refers to a growing category of investing in which investors want to create both financial return and a social impact. Impact investors look for companies that are profitable, intentionally address a social or environmental challenge, and are able to measure their impact.

For example, the Social Venture Circle is a network that has been facilitating investments into early stage impact ventures for over 30 years. >>Read More

Everything you need to know about impact investing

from the Global Impact Investing Network (GIIN)

Environmental, Social, and Governance Criteria (ESG)

Okay, so how do investors choose which companies to invest in? One way to do it is to assess how well a company meets environmental, social, and governance criteria. In fact, impact investing is sometimes referred to as ESG investing.

>>Read More about ESG criteria.

E

Environmental criteria refer to a company's resource management, ecological footprint, levels of pollution, etc.

S

Social criteria refer to health and safety, community relations, supply chain management, etc.

G

Governance refers to shareholder rights, transparency and accountability, code of ethics, etc.

ESG investing is based on the assumption that these factors have financial relevance. In other words, the more responsible companies are in terms of environmental, social, and governance factors, the better they will perform financially.

UN Sustainability Development Goals (SDGs)

When choosing companies to invest in, impact investors also look at whether a company targets one of the UN's 17 Sustainable Development Goals (SDGs). Read more on our UN SDG page.

measuring impact

When traditional investors want to measure their return on investment (ROI), the process is pretty straightforward. How much money do they invest and how much do they earn?

But what about impact investors who are interested in both financial and social returns? Is there a way to measure social impact?

Social Return on Investment (SROI)

One method, known as social return on investment (SROI), monetizes social, environmental and economic factors so that they can be incorporated into a cost-benefit analysis. This way, you can understand a company's social impact in financial terms.

How to calculate SROI

from Investopedia

Other Methods

While SROI is one tool for measuring impact, assigning a dollar value to social and environmental impact is not always feasible. Ultimately, measurement depends on the investor's and organization's goals, and usually requires a lot of hard work to monitor, collect data, and report.

 

more resources

IMPACT INVESTING CASE STUDIES

Impact investment case studies from the Principles for Responsible Investment (PRI), the world's leading proponent of responsible investment.

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MEET SKIPPING ROCKS LAB

Skipping Rocks Lab has developed Ooho, an edible water bubble, as part of their mission to rid the world of unnecessary packaging.

ESG RATINGS LANDSCAPE

The Rate the Raters project helps better understand the ESG ratings landscape and provide perspectives to help companies, investors and other stakeholders make sense of and derive more value from ESG ratings.

SROI

Measuring performance in the social sector is a complicated and challenging task, and there are a lot of ways that you can do it.

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