Impact investment

Impact investing refers to investments "made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside (or in lieu of) a financial return."

Institutional investors, notably North American and European development finance institutions, pension funds and endowments have played a leading role in the development of impact investing holistically, across all asset classes, with an initial focus on private equity, venture capital and green infrastructure. Under Pope Francis, the Catholic Church has witnessed an increased interest in impact investing.

"Impact investments can be made in emerging and developed markets, and target a range of returns from below-market to above-market rates, depending upon the circumstances." Impact investing tends to have roots in either social issues or environmental issues, and has been contrasted with microfinance. Impact investors actively seek to place capital in businesses, nonprofits, and funds that can harness the positive power of enterprise. Impact investing occurs across asset classes; for example, private equity/venture capital, debt, and fixed income.

Historically, regulation—and to a lesser extent, philanthropy—was an attempt to minimize the negative social consequences of business activities.[needs reference] However, a history of individual investors using socially responsible investing to express their values exists, and such investing behavior is usually defined by the avoidance of investments in specific companies or activities with negative effects. In the 1990s, Jed Emerson advocated the blended value approach; that is, for foundations' endowments to be invested in alignment with the mission of the foundation, rather than to maximize financial return, which had been the prior accepted strategy.

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