Impact Investing: 5 of the Best Ways to Start

World-wide threats from global warming, the COVID pandemic, and social inequality call for change.

However, the conversation extends beyond recycling, clean air, and electric cars. People from all backgrounds work to make the world a better place.

The priority shift has led investors to evaluate their portfolios. The desire to outperform the market while making a positive change is enticing and possible. Impact investing makes a difference.

Impact investing was first coined in 2007. As an investment strategy that focuses on corporate social responsibility, it’s considered an extension of philanthropy.

What is Impact Investing?

Impact investing can be confused with socially responsible and ESG investing. However, they’re easy to distinguish by their priorities.

What’s The Difference Between ESG Investing, Socially Responsible Investing, and Impact Investing?

The ESG investor wants to see companies that are addressing all three factors. While the socially responsible investor centers on social factors and the impact, investors pick any one cause.

Investors will find impact investments across asset classes and sectors, including healthcare, education, agriculture, technology, energy, microfinance, housing, etc. Here are different types of investments that investors may consider:

Types of Impact Investments

– Stocks. Stocks are a type of security representing ownership of a fraction of a company. Stocks are bought and sold on the stock market and private exchanges. – Exchange-Traded Funds (ETFs). ETFs are cost-effective publicly traded funds. They minimize risk by pooling multiple stocks across sectors and asset classes.

– Mutual funds. These funds are similar to ETFs. However, they use fund managers. As a result, they may have higher fees, but they trade for different prices.

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