{"id":934,"date":"2020-03-19T19:31:52","date_gmt":"2020-03-19T14:01:52","guid":{"rendered":"https:\/\/blog.tickertape.in\/?p=934"},"modified":"2020-04-03T15:03:57","modified_gmt":"2020-04-03T09:33:57","slug":"impact-investing-101","status":"publish","type":"post","link":"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/","title":{"rendered":"Impact investing 101"},"content":{"rendered":"\n<p>For most of us, the main objective of investing is to earn attractive\nfinancial returns. But did you know that besides monetary returns, certain\ninvestments also yield social returns? These are called \u2018impact investments\u2019\nand parking funds in such vehicles is regarded as \u2018impact investing\u2019.<\/p>\n\n\n\n<p>Here\u2019s some background for context and a better understanding of what impact investing is.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_66_1 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Impact-investing-overview\" title=\"Impact investing overview\">Impact investing overview<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Impact-investing-meaning\" title=\"Impact investing meaning\">Impact investing meaning<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Impact-investing-types\" title=\"Impact investing types\">Impact investing types<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Salient-features-of-impact-investing\" title=\"Salient features of impact investing\">Salient features of impact investing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Impact-investing-is-a-high-worth-market\" title=\"Impact investing is a high-worth market\">Impact investing is a high-worth market<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Impact-investments-yield-returns-at-market-rate\" title=\"Impact investments yield returns at market rate\">Impact investments yield returns at market rate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Companies-offer-impact-investments-to-beat-the-competition\" title=\"Companies offer impact investments to beat the competition\">Companies offer impact investments to beat the competition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Why-should-you-consider-impact-investing\" title=\"Why should you consider impact investing?\">Why should you consider impact investing?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#To-take-social-responsibility-and-earn-financial-returns-simultaneously\" title=\"To take social responsibility and earn financial returns simultaneously\">To take social responsibility and earn financial returns simultaneously<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Achieve-private-intervention-to-solve-global-issues\" title=\"Achieve private intervention to solve global issues\">Achieve private intervention to solve global issues<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#To-encourage-impact-making-firms-and-normalise-impact-investing\" title=\"To encourage impact-making firms and normalise impact investing\">To encourage impact-making firms and normalise impact investing<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Who-can-do-impact-investing\" title=\"Who can do impact investing?\">Who can do impact investing?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Sectors-that-receive-impact-investing-funds\" title=\"Sectors that receive impact investing\nfunds\">Sectors that receive impact investing\nfunds<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Impact-investing-in-India\" title=\"Impact investing in India\">Impact investing in India<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/www.tickertape.in\/blog\/impact-investing-101\/#Returns-offered-by-impact-investing-firms-in-India\" title=\"Returns offered by impact investing firms in India\">Returns offered by impact investing firms in India<\/a><\/li><\/ul><\/nav><\/div>\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-investing-overview\"><\/span><strong>Impact investing overview<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is no secret that the world is facing numerous long-standing issues\nsuch as global poverty, hunger, poor healthcare and education facilities,\nclimate change, injustice and gender inequality. However, such issues present\nus a golden opportunity to find meaningful solutions such as impact investing to\neradicate them.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-investing-meaning\"><\/span><strong>Impact investing meaning<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Global issues are complex and not possible to be solved by an individual.\nThis is where businesses that look to make a social and environmental impact\ncome into the picture. A couple of such ventures are Swajal, Solar Labs, and\nTesla. Investing in such ventures that believe in complimenting or encouraging\nsustainable development of the planet or economy is called impact investing.<\/p>\n\n\n\n<p>The idea here is not to avoid investing in companies that negatively\nimpact the society or environment. It is more of a positive move. Impact investing meaning is to <a href=\"https:\/\/www.tickertape.in\/blog\/why-should-you-prioritise-investing\/\">invest<\/a> in\nventures that, in addition to working for a social, environment or economic\ncause, also offer financial returns. In other words, it means to support\ncompanies that strive to recreate a healthier planet. And, in turn, impact\ninvestments are expected to necessarily yield both financial and social\nreturns.<\/p>\n\n\n\n<p>Thus, the best part about impact investing is that you contribute to a\ncause that can make a difference to millions of stakeholders, including\nyourself, and earn monetary returns as well. After all, you are a global\ncitizen and your children are to live on this planet. Wouldn\u2019t you at least\nwant to leave it in good shape for their sake?<\/p>\n\n\n\n<p>But does impact investing really work? For those wondering this, recall\nElon Musk and his business Tesla. Yes, there\u2019s your answer. Didn\u2019t he, through\nhis entity Tesla, demonstrate that sustainable development is possible and it\ncan bring attractive returns to the table? Yes!<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-investing-types\"><\/span><strong>Impact investing types<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Impact investments are of various types based on the industries:<\/p>\n\n\n\n<ul><li>Agriculture<\/li><li>Healthcare<\/li><li>Energy<\/li><li>Education<\/li><li>Financial services<\/li><\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Salient-features-of-impact-investing\"><\/span><strong>Salient features of impact investing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Impact investing is distinct from traditional investing. Here are some\nof its salient features:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-investing-is-a-high-worth-market\"><\/span><strong>Impact investing is a high-worth market<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According to the <em>Global Impact Investing Network (GIIN),<\/em> the impact investing market is currently worth\n$502bn and is growing rapidly. Further, a survey that studied 209 organizations\nshowed that the sector has around $114bn impact investing assets under\nmanagement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-investments-yield-returns-at-market-rate\"><\/span><strong>Impact investments yield returns at market rate<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According to the <em>Global Impact Investing Network,<\/em> the majority of the ~$15bn-impact investing market yields market-rate returns. It also revealed that, in 2018, over 90% of impact investors received expected returns, sometimes more.<\/p>\n\n\n\n<p>Besides, impact investing also offers stability to your portfolio. This is demonstrated by a study conducted by <em>Morgan Stanley. <\/em>The investment bank studied the performance of 10,000 <a href=\"https:\/\/www.tickertape.in\/blog\/mutual-funds\/\">mutual funds<\/a> for 7 years and concluded that, on an average, impact investing funds featured lower <a href=\"https:\/\/www.tickertape.in\/blog\/volatility\/\">volatility<\/a> than the others.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Companies-offer-impact-investments-to-beat-the-competition\"><\/span><strong>Companies offer impact investments to beat the competition<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Tough competition has certainly made today\u2019s world a challenging place for businesses. End-users, these days, demand more than just good products and services. They are becoming increasingly aware of the social and environmental problems at hand and look to be useful in solving them. Many firms are thus offering impact investments to satisfy their clients\u2019 demand and earn their trust in turn.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why-should-you-consider-impact-investing\"><\/span><strong>Why should you consider impact investing?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>There are many reasons to park your funds in impact investments, some of\nthem are:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"To-take-social-responsibility-and-earn-financial-returns-simultaneously\"><\/span><strong>To take social responsibility and earn financial returns simultaneously<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Your responsibility as a global citizen is not just taking ownership of\nthe social and environmental consequences of your actions. It is also making up\nfor the same. However, it\u2019s a no brainer that you alone can\u2019t address global\nissues. Good news? You can play your part by investing in companies working\ntowards the sustainable development of our planet. A brownie point is that impact\ninvesting delivers real financial returns as well. What better reason would\nlike?<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Achieve-private-intervention-to-solve-global-issues\"><\/span><strong>Achieve private intervention to solve global issues<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Though inevitable, public sector alone may not be capable to address\nalleviating global issues, which is why private intervention is required. The <em>World\nInvestment Report<\/em> by the <em>United Nations Conference on Trade and\nDevelopment (UNCTAD)<\/em> explains further. The report points out that\nsustainable development sectors of developing economies experience an\ninvestment gap of $2.5tn annually.<\/p>\n\n\n\n<p>To bridge this gap, it suggests \u2018Investing in the SDGs: An Action Plan\u2019.\nSDG here stands for Sustainable Development Goals and focuses on the critical\nrole that the private sector plays in attaining positive environmental, social,\nand economic results in developing countries. Private sector is known to have\ngood governance, effective business practices, and ample investment, which, the\nreport says, are critical to achieving the SDGs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"To-encourage-impact-making-firms-and-normalise-impact-investing\"><\/span><strong>To encourage impact-making firms and normalise impact investing<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Impact investing has paved the way for us to make a difference by\nsupporting ventures striving hard to build a healthier planet. Once investors\ncome to believe and trust such impact-making entities, how people perceive\nimpact investing will change. This, in turn, will help in normalising impact\ninvesting.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Who-can-do-impact-investing\"><\/span><strong>Who can do impact investing?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Initially, impact investment was a niche market that mostly attracted big financiers such as venture capitalists and investment banks. Fortunately, the scene has gotten different and better today. Impact investments are gaining popularity among individual investors and big foundations too and thus finding a place in their portfolios.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Sectors-that-receive-impact-investing-funds\"><\/span><strong>Sectors that receive impact investing\nfunds<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As mentioned, the scope of impact investing is beyond attaining a\nhealthier planet. It also addresses other pressing issues like housing \u2014 a\nsector that receives the major of impact investments to the tune of $25bn.<\/p>\n\n\n\n<p>Here\u2019s an illustration of the impact\ninvesting sectors and the quantum of investments these receive: <\/p>\n\n\n\n<iframe loading=\"lazy\" width=\"600\" height=\"400\" src=\"https:\/\/live.amcharts.com\/E3ZDh\/embed\/\" frameborder=\"0\"><\/iframe>\n\n\n\n<p>This chart depicts the parts of the world that receive impact investments:<\/p>\n\n\n\n<iframe loading=\"lazy\" width=\"600\" height=\"400\" src=\"https:\/\/live.amcharts.com\/UzNGU\/embed\/\" frameborder=\"0\"><\/iframe>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Impact-investing-in-India\"><\/span><strong>Impact investing in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Speaking of scenes back home, it is forecasted that impact investing industry in India has the\npotential to grow to $8bn in 2025. Since 2010, India has received a total of\n$5.2bn worth of impact investments. Further, the most popular impact investing sectors are financial inclusion\nand clean energy.<\/p>\n\n\n\n<p>Take a look at the trajectory of the growth of impact investing in India:<\/p>\n\n\n\n<iframe loading=\"lazy\" width=\"600\" height=\"400\" src=\"https:\/\/live.amcharts.com\/zJhNz\/embed\/\" frameborder=\"0\"><\/iframe>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Returns-offered-by-impact-investing-firms-in-India\"><\/span><strong>Returns offered by impact investing firms in India<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Pleasantly, impact investments in India have successfully met the\nmonetary expectations of investors. When studied, 48 exits from 2010 to 2015\nshowed that, on average, impact investments in India yielded an internal rate\nof return (IRR) of 10%.<\/p>\n\n\n\n<p>More than half of impact investment deals, 58% to be specific, yielded\nthe average expected market rate of 7% and some even exceeded the figure.\nWhat\u2019s more, the top one-third of such deals generated an average IRR of 34%!\nThese numbers prove that businesses involved in impacting the world are capable\nof generating lucrative returns, in addition to making a good social change.<\/p>\n\n\n\n<p>However, impact investing industry has its own set of challenges such as\nno or little transparency, ambiguous metrics for performance measurement, lack\nof funds and innovation, and poor governance and reporting. If these impact investing challenges are dealt with, the\nmarket can attract many more investors and function to its full potential.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Impact investments yield social returns in addition to monetary returns. Read more about it here<\/p>\n","protected":false},"author":27,"featured_media":972,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[8,1722],"tags":[],"acf":[],"modified_by":"Aradhana Gotur","jetpack_featured_media_url":"https:\/\/www.tickertape.in\/blog\/wp-content\/uploads\/2020\/03\/Impact-investing-1.png?wsr","_links":{"self":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/934"}],"collection":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/users\/27"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/comments?post=934"}],"version-history":[{"count":3,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/934\/revisions"}],"predecessor-version":[{"id":941,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/posts\/934\/revisions\/941"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media\/972"}],"wp:attachment":[{"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/media?parent=934"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/categories?post=934"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tickertape.in\/blog\/wp-json\/wp\/v2\/tags?post=934"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}