Making a philanthropic donation can be a heartwarming and impactful way to make a change in a world that seems to sprout new problems daily. From socioeconomic issues to environmental problems, there are many improvements that can be made. I’m sure if given the opportunity, anyone would give as much as they could to support an issue they feel strongly about – but sometimes, we can’t afford just to make such donations. Wouldn’t it be nice if you could make an impact on an issue you hold important while also keeping yourself financially sound? What if we told you this is completely possible?
Impact investing helps you do just that. Through impact investing, with the help of Alpenrose, you can make the change you want to see in the world while also making the change in your pocket increase.
The revolution has developed over many years, but the term was coined in 2007. Since then, companies are taking social stances on important issues, bringing in more investors, increasing return on investment, and more importantly, making a change.
What is It?
Impact investing is a new trend sweeping the world that allows for investors to make money while also making contributions to solving social, economic, and environmental issues. It focuses on both for-profit companies that have expressed intent in making a positive impact through their business model and nonprofits with revenue.
Over the past decade, impact investing has emerged from the simple goal to reduce negative effects of business activity on the community and environment surrounding a company. The investment can be made in both emerging and developed markets.
A variety of sectors, which you can read more about below, are being impacted by people who are hoping to make a change with their investment.
How Does it Work?
In order for the investment to be considered impact investing, it must hit certain requirements. An investor must take into consideration how committed a company is to taking a positive role in society before they choose to invest. This means the investor is intentionally making this investment because the money they are using will be directly helping a cause, or the company has taken a public stance in order to combat a certain issue.
Investors must also have expectations of a return on capital. Impact investments are supposed to at least return the capital that was invested.
Risk is a basic principle any seasoned investor is fully aware of and keeps in mind when deciding which investments are worth making. They balance risks and potential returns. Impact investment adds the extra variable or social impact. Adding this third dimension can be hard to grasp at first sight. You have to keep in mind how much financial return you expect, how much risk you are willing to accept, and how much of a social impact you are looking to make.
If you are wondering how well your investment will do, research shows there are positive trends in this type of investment. Because return on investment will vary from sector to sector, and there is no centralized data on returns because many are private, it’s hard to predict how this type of investment will fare as a whole. A 2015 study, however, found that investments with social impact in mind had similar, if not matching returns, as those that did not.
Why Choose Impact Investing?
If you choose impact investing, you will be part of a movement that combats the idea that only philanthropic donations can make an impact in social and environmental issues. It also fights the stigma that market investments should only focus on financial gain.
There are diverse markets to choose from when you choose impact investing that are viable and find social and environmental solutions to problems that you care about. There is also a variety of issues that are addressed by socially minded companies. This includes, but is not limited to, community development, small business finance, health and wellness, education, sustainability, renewable energy, climate change, natural resources, conservation, and more.
Many of the more traditional sectors, like community development, are well established that have millions of dollars already invested and have proven to be a profitable choice. Other, more progressive issues, like fair trade, are still emerging but can also have a positive impact on your wallet, as well as the world.
Young people, like millennials, who like to give back to society are specifically known to enjoy impact investing. As more younger individuals enter the investment world, we can easily predict this type of investment will be reaching more popularity and attention. As companies see this trend strengthening, more will begin taking a social stance, increasing investors willingness to have a stake in the company because they support the company’s mission.
It has already been proven that companies that commit themselves to social impact have attracted more investors, and said investors have been known to profit. Who knows what exactly will happen in the future, but it’s safe to assume it will be a good idea to keep impact investing in mind.
Where We Come In
Responding to the challenges of our generation, Alpenrose is launching a practice focusing on impact investing. Sustainable investments have become a major theme for global investors and our firm wants to be at the forefront of creating alternatives for our clients to have their investments reflect their values.
Partnering with a leading specialist in the sustainable investments space, Alpenrose will start offering portfolios that are focused on the best long-term sustainable investments that are equally dedicated to seeking solutions to some of the issues we face today. While maintaining our focus on balance sheet quality and capital efficiency, the portfolios will consist of companies and organizations that have the intent to generate a measurable, beneficial, social, and environmental impact alongside their strong financial return.