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Investing for Impact: A Brief Guide for the Perplexed

Posted by Travis Allen & Anne Bucciarelli on 19 October 2015

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This is a really great piece on impact investing courtesy of AB Global. A link to the full article is below.

"Discussions about investment strategies that take values or ethical principles into account can be confusing. Several different terms are used, often interchangeably; in fact, they may be converging. The most common terms we hear are socially responsible investing (SRI); environmental, social, and governance (ESG) principles; and impact investing.

SRI strategies usually employ screens to identify companies to include or exclude, based on the manager’s or the investor’s ideas about their social impacts.

ESG strategies are similar but tend to focus on certain areas of concern:

•Environmental factors, including climate change, hazardous-waste disposal, nuclear energy, and natural-resource depletion;

•Social factors, including human and labor rights, consumer protection, and diversity; and

•Corporate-governance factors, including management structure, executive compensation, and shareholder rights.

Some, but not all, ESG-oriented institutional investors are signatories to the United Nations-supported Principles for Responsible investment (PRI).

Impact investing goes further: It seeks to invest (usually privately) in organizations having a positive impact in a particular area, perhaps to revive a blighted neighborhood.

Investors often feel empowered by impact investing, but they should recognize the risks. These investments can be as risky as venture capital. Such investments may be best made with capital that exceeds your target financial capital (the amount of money you need to fund you long-term spending)."

To read the full article, click here.