Impact Investing: High(er) Risk, High Reward

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Philanthropist's Field Guide

Impact Investing: High(er) Risk, High Reward

For philanthropists interested in pursuing a social change agenda in ways that could also generate a financial return, impact investing is an attractive option. Most high-capacity impact investors consider this activity to be a supplement rather than a replacement to their charitable contributions. 

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What is impact investing?

Impact investing is the act of financing an organization or fund that aims to provide a social or environmental impact in addition to a financial return, which can range from below-market to market-rate. Impact investing's legal and regulatory framework remains largely untested, so individuals who participate in this practice are often more risk-tolerant than the traditional philanthropist. 

How should I approach impact investing?

Because different financial institutions support this option to varying extents, consulting with your wealth manager to determine how you can best incorporate this method into your larger investment portfolio is highly recommended. You may even consider working with a niche advisor who can provide specialized assistance as a supplement to the existing financial support you receive from your wealth manager. 

How much risk is involved with impact investing?

The field is still in the process of developing a regulatory framework. Engaging in this practice now would include you among the early adopters. If this aligns with your appetite for risk, you can start impact investment immediately.

Additional Resources:

  • New to impact investing? Review the Case Foundation’s primer.  

  • This publication from Investing for Good provides guidelines on the various steps of impact investment, from identifying and vetting an opportunity to deal-making and evaluating impact. 

  • The Toniic Impact Portfolio Tool is an Excel-based resource for you to classify investment types and their potential for impact so you can build your impact investing portfolio. 

  • On the hunt for viable impact investment opportunities? This database, created by Impactbase, tracks funds and products that are searchable based on asset class, geography, impact objective, investment stage, minimum investment size, and more.

Published September 23, 2020