Investing with the intention to generate positive, measurable social and/or environmental impact alongside a financial return. Impact investing aims to contribute to or catalyse positive effects (e.g., improvements in people’s lives and the environment) while achieving a financial return. Impact investing can be pursued across a range of asset classes, including fixed income, real assets, private equity, and listed equity investments. It is different to philanthropy in that it pursues a financial return in addition to a positive, measurable impact. Impact investors have discretion over the rate of return they target.

Balancing financial returns with positive impact

‍Impact investing pursues two distinct objectives:

(1) an improvement in social and/or environmental conditions and

(2) a financial return on capital invested.Impact investing requires a “theory of change”—that is, a credible explanation of the investor’s contributory and/or catalytic role, as distinct from the investee’s impact.

Impact investing aims to contribute to or catalyse real-world environmental and/or social improvements, by providing necessary financing and/or by gaining access to other mechanisms of investor influence.

Real world impact

‍Impact investing requires accounting for whether—and to what extent—intended environmental or social improvements actually occur.

Examples of metrics used to track positive impact include the following:

• Renewable electricity capacity added (MWh)
• An increase in water treated, saved, or provided (megaliters)
• An increase in affordable housing units (number of units)

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