What Is Impact Investing—and How Does It Better the World?

We'll start with the story of Kasha.

Based in Rwanda and Kenya, Kasha is an e-commerce company that makes health and personal care products accessible to women in East Africa. Kasha is fueled by a mission for good. Its founders want to overcome the women’s health stigma and empower women—particularly in low-income regions—and help them receive the personal items they need to thrive.

 This altruistic ethos often defines the parameters for a charity or non-profit. But Kasha's founders decided differently. They established Kasha as a for-profit businesses, which positions the company to grow sustainably, without a reliance on grants and donations.

 It also allows the business to return money to its shareholders.

Investing in Kasha, or a like-minded company that is using the tools of business as a force for good, is the essence of impact investing. In its most elemental terms, impact investing is investing funds "with the intention to generate positive, measurable social and environmental impact alongside a financial return," as defined by the Global Impact Investing Network. The impact investing market opens the means to address the most critical issues in the world today. Issues such as women's empowerment, environmental health, renewable energy, affordable healthcare, housing, education, and sustainable agriculture.

Like traditional investing, impact investing delivers on its financial returns (particularly when investing in more traditional asset classes that are screened for social criteria). The most recent Global Impact Investing Network survey reports that at least 90 percent of impact investments are in-line or outperforming expectations.

All of this unveils a heartening truth: It is possible to do good and make money doing it. That speaks to why impact investing has been rising in popularity over the past several years. The Global Impact Investing Network most recently estimated there to be $502 billion in impact investing assets. This is more than double the assets measured the year prior. Impact investing pushes the boundaries of the potential available funds that can go toward making a positive impact—beyond even the estimated $428 billion that Americans donated to non-profits in 2018. This proves that impact investing unlocks the power of currency to do good to create real change. It offers the opportunity to invest in a solution to a social or environmental problem that will become self-sustainable (such as the case with Kasha).

 Like most any altruistic endeavor, self-reflection emerges from impact investing. It begs you to ask: What are your values? What impact do you want a company to make? What social causes matter to you? Who do you want to benefit from your investment? It's also essential to look on the other side of the coin: Who are the people at the companies in which you're investing, and how do they match your values? Determining the social returns you, the investor, would like to see calls for an alignment and consideration of what's important to you.

The growing popularity of impact investing coincides with larger cultural shifts toward having more purpose and meaning in life. Research shows that leading a life of purpose and engaging in social issues can have a positive impact on one's health. It's also reported to heavily sway the career choices of younger generations.

 Giving back is no longer compartmentalized to volunteer work or charitable donations. And making an impact with your money is no longer accessible to only a select few. Impact investing exemplifies this. It's a marker of clarity that proves that in every fiber of our being there's an opportunity to do good.

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At The Conscious Investor, it is our goal to shed light on topics that we find interesting, inspirational, and educational. Therefore, this article is strictly for inspirational and informational purposes only. It is in no way intended to substitute for professional investment advice, professional financial advice, or general counsel. To the extent that an article features the insight, opinions, or advice of an expert or company, the expressed views are those of the cited person or company and do not necessarily represent The Conscious Investor and its employees or affiliates.