If we are truly going to “build back better” after more than 18 months of unprecedented disruption, we need to address not only economic recovery but also key social and sustainability issues. I believe impact investing — or investing in business ventures with social impact in their DNA — will be key to our success.
But as the co-founder and CEO of a nonprofit that supports impact-driven businesses, I’ve found there are five common myths about it that are important to dispel.
- ‘Impact investing can’t deliver a return on your investment.’ Having a noble mission doesn’t have to mean sacrificing your bottom line. One of the key characteristics of impact-driven companies is that they are designed to both make a profit and make progress.
- ‘There’s plenty of money in impact investing already.’ The impact investing industry has grown significantly since the term was coined in 2007, attracting an increasing number of investors of all types and from all over the world.
- ‘Impact investors reflect the diversity of the founders they support.’ A year-long study by Confluence Philanthropy found that only a small percentage of investment funds are managed by or owned by women or people of color.
- ‘Impact investing is only for big banks.’ Large banks and investment firms certainly have a role to play when it comes to impact investing. By expanding their portfolios to include more socially conscious investments, they normalize this practice among traditional audiences. However, the sizes of these institutions dictate the scale a venture has to reach before it’s attractive for investment.
- ‘Impact investing is just a trend.’ There is a reason the impact investing sector has grown in size in the past two years, and it’s because this generation’s consumers, entrepreneurs and investors are increasingly motivated by impact as well as profit. They are no longer seen as mutually exclusive, but inherently and inextricably linked.
Read the full article about impact investing myths by Kate Goodall at Forbes.
If you are looking for more articles and resources for Impact Investing, take a look at these Giving Compass selections related to impact giving and Impact Investing.
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If you are interested in Impact Investing, please see these relevant Issue Funds, Charitable Organizations or Projects where you can get involved.