5 Reasons Why Social Impact Investment Matters

For some people, investing brings up more negative connotations than it does pleasant ones. Images of plump old men having little to no care for life of ordinary folk are rife, and, to be fair, ostentatious displays of wealth do still exist. The good news is this is far from the norm. Social impact investing has rapidly grown in popularity in the past couple of years, swiftly breaking the stereotypes associated with old-school, so-called ‘greedy’ investing...

But what exactly is social impact investing, and why does it matter?

  1. Investing isn’t just about financial gains. Investments don’t have to be passive or self-serving. While the core concept of investment centers around making a profit, we’re seeing new tendencies that have nothing to do with what what most of us think of when we think about investing. Socially conscious investors put their money in businesses that have a positive impact in their community or a cause they feel passionately about. It’s important to note that social investments are not the same as charitable giving, and that there’s a return on investment that most investors expect to see - but instead of financial reward, they look to make a ‘return’ in social betterment.
  2. Social responsibility means more than one thing. Socially responsible investment can include categories like environmental investing, social investing and governance investing. Environmental investment is focused on sustainability and the greater environmental impact, social investment relates to human rights and giving back to the community, while governance is all about the levels of company's’ political contributions and executive compensations. In the past three years, more than 900 investment funds met the environmental, social, and governance criteria.
  3. Millennials want their investments to matter. The millennial generation is largely credited for shifting the focus on social impact investments. For starters, millennials tend to be happier at work if they know that the company they work for makes money that is used for something wholesome. They prefer to invest in companies that bring about change for the better, and, thanks to the power of technology and social media, they are more aware of the issues facing our world today than any previous generation.
  4. Social impact investing is the future. The social impact investing market is estimated to be worth a trillion US dollars by 2020. The reason this trend is so staggering is because investing in socially conscious causes is essentially investing in a better future for our children. Social impact investing is becoming the norm amongst young people wanting to bring about a positive change to the world, who feel that their happiness correlates more closely to making a difference than it does from making monetary gains.
  5. The bigger picture matters. Even if you had all the money in the world, what would any of it matter if the planet was on the brink of destruction? Sometimes, seeing the bigger picture is more important than worrying about your in the moment,  personal financial gains. That’s not to say that social impact investing has nothing to do with making a profit -- some of the most impactful enterprises are also the ones that make the most money. Thanks to the power of the internet, we’re now in a better position to trace the impact our investments than we’ve ever been before. In turn, this means that the companies that want to make a difference have added pressure to follow up on their promises, increasing the appeal of social investment.

Photo by Evan Kirby on Unsplash.