What is impact investing? | Africa Report

Impact investing is a growing trend in business, but few understand its core principles. Here is everything you need to know about responsible investment.

By Craig Falck for Africa Report

Unlike traditional investing, responsible investing assesses the financial return on investment and the social and environmental impacts it brings about. The impact of the business operations and consumption of the product or service is heavily taken into account. This has become an increasingly important aspect of business in the modern world, with the environment becoming a business factor in itself. The thought-train behind the industry is that businesses are becoming more socially and community-focused, with investment for impact being of more important than ever.

Social responsibility has become a catchphrase used in business a lot these days, and that?s exactly what impact investing is all about. You won?t find an impact investor buying into a mining business or an enterprise where people or animals are exploited. Instead, they will look towards entrepreneurship and learning opportunities, where their funds can be invested to make a difference in people?s lives and that of their communities.

The practice of impact investing has grown to more than US $50 billion in recent times. This is because investors are looking for the kind of business and industry to get involved in that cares as much for the world and people as it does for profit, while at the same time building their industries to be world leaders. Some of the most popular forms of impact investing can be found in sectors such as microfinancing, community development, greener technology and environmental benefits.

Impact investing is almost identical to other types of investment models and plans; the only difference being that social responsibility is right at the top of the list of priorities. Being on the right side of the law and promoting general improvement for business, employees and the surrounding community is far more important to these investors than they were in the past. The healthier your business is on the environment and people living around you, the better your chances are of an impact investor buying into your organisation, products and services.

For more information on impact investing, see our coverage of the recent SA Impact Investing Conference in South Africa.

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