The Impact Of Traditional Financial Investing On Investing

1511 Words Nov 16th, 2015 7 Pages
Broadly defined, impact investing refers to investments "made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return". In other words, it means investing capital to generate social impact in a way that it is not charity, so the money lent is returned entirely in a given period of time. These returns may vary from the initial principal amount upward (or, potentially, downward), depending on the nature of the investment. While traditional grantmaking often overcomes market-based failures, impact investing leverages the power of markets to create change.
Sustainable impact investing is not necessarily something new, but rather just the next step in the evolution of socially responsible investing strategies. Some differences between traditional financial investing and impact investing are that traditional financial investing is simply concerned with profit maximization; on the contrary, impact investing has a dual goal of not only making a profit but also causing positive social and/or environmental improvements. This type of investing involves more of a positive, proactive and comprehensive review of a company to provide for a more robust picture of its operations and social, as well as economic impact. Acumen is different from regular capital in that it has a higher tolerance for risk, longer time horizons and prioritizes the needs of end customers over that of shareholders –…
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