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Doing Well and Doing Good: The Basics of Impact Investing

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Do you ever wish that you could use your assets to make the world a better place—but still realize a return on your investments? Is there a cause—clean energy, sustainable agriculture, food safety, recycling—that you are passionate about and would love both to support and to benefit from? If you answered “yes” to either of these questions or have ever had similar thoughts, then you might wish to take a closer look at impact investing.

What Is It?

The impact investing industry is “powered by investors who are determined to generate social and environmental impact as well as financial returns,” according to the Global Impact Investing Network (GIIN). In other words, impact investors target their capital toward enterprises that seek to provide measurable benefits to society at large while also generating positive financial returns. Though impact investing has come to the fore in only about the last thirteen years, it is hardly an insignificant sector. According to GIIN’s latest survey, the global impact investing market is worth over $700 billion, with about $400 billion represented by US assets.

In contrast to crowdfunding sites such as KickStarter and GoFundMe, impact investing typically involves professional managers who oversee investments made by venture capitalists, institutions, and individual investors. Many impact investments are structured as private equity or debt and may feature longer payout periods than typical venture capital scenarios. Interestingly, nearly half the impact investing operations in one major database are managed by investment teams made up of at least 50% women and other traditionally under-represented groups.

How Do I Get Involved?

Investors can enter the impact investing arena in a number of ways. Some impact investors utilize a donor-advised fund (DAF), while others search for mutual funds or exchange-traded funds (ETFs) that include societally beneficial aims in their investment policies. Other investors may choose to make direct investments in companies that share aims aligning with the investor’s ethical, social, or environmental goals. ImpactAssets, since 2010 an independent impact investing support enterprise, offers both a DAF and a free database of fund managers and impact investing opportunities.

If you would like to learn more about how you can use investable assets to improve the world and improve your portfolio at the same time, Shone Wealth Management would like to help you get the answers you need. Please contact us today.

To learn more about making philanthropy a part of your family legacy, click here to read our article, Family Philanthropy: How to Create a Lasting Legacy.

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