Impact investing is investing in for-profit companies to generate both financial returns and social impact. The theory is that impact investing can increase the capital available to a company, allowing it to create more positive social outcomes than would otherwise have occurred.
For impact investing to do good, it has to provide a company with more capital than it would have otherwise received. This condition is easier to meet when the investment is concessionary (sacrifices some level of financial return against the market rate) or occurs in a private market where other investors are unable or unwilling to invest.[1]
Impact investing is one form of socially responsible investing.
Further reading
Hillebrandt, Hauke & John Halstead (2018) Impact Investing Report, Founders Pledge.
Karnofsky, Holden (2009) Acumen Fund and social enterprise investment, GiveWell, November 25.
GiveWell’s shallow investigation into impact investing.
Related entries
funding high-impact for-profits | investing | markets for altruism | socially responsible investing
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Brest, Paul & Kelly Born (2013) When can impact investing create real impact?, Stanford Social Innovation Review, vol. 11, pp. 22–31.