Though certainly not a new concept, impact investing has grown in popularity as individuals and organizations focus on investments that create a positive impact in the world while still providing healthy returns. These investors are finding that doing good does not necessitate a loss in profits.
As the importance of this type of investing grows, these trends will influence and shape the impact investment landscape.
1. Interconnected Philanthropy
Philanthropy doesn’t exist in a vacuum. The same technologies that connect people socially across the world can also facilitate positive change. People can connect with one another to have a greater impact than they would alone. Micro-philanthropy and crowdfunding networks all demonstrate the potential that connected individuals have to create change. Local philanthropy networks, such as the PEERS network co-founded by Bill Malloy III, provide the same connectedness but on a targeted geographic scale.
2. Healthcare
Healthcare is of growing importance for impact investors. Their focus is not just on providing a better quality of care but also on making healthcare more accessible to people. Telemedicine and personalized medicine are keys areas that are expected to attract the attention of investors as technology enables great strides in healthcare. Investors are increasingly targeting companies that need telehealth providers to expand their virtual care offerings. This shift not only boosts innovation in digital health but also drives accessibility and cost-effectiveness in the healthcare industry.
3. Sustainable Development Goals
With 2030 not far away, governments are focused on meeting the Sustainable Development Goals set out by the UN. Technological investment will be necessary to make this achievement possible. Many investors are looking beyond the Sustainable Development Goals at what is next in climate solutions.
4. Social Inequality
Social inequality is a significant priority for many organizations as people demand solutions to affect the growing opportunity and income gap. With consumers increasingly seeing corporations as perpetrators of this inequality, corporations are a primary focus for addressing social inequality. Businesses that establish genuine initiatives to address social inequality are key targets for impact investors.
5. Diversity
Impact investors are looking to make investments that promote diversity and inclusion. Corporations are expected to promote diversity internally with fair hiring practices, diverse boardrooms, and inclusive policies. They are also expected to promote inclusion in the products and services they provide, as well as their corporate giving. Consumers are calling for enterprise-wide diversity.
6. Authenticity
Inauthentic or insufficient philanthropy is unacceptable for organizations going forward. Businesses cannot just pay lip service to causes; they must back it up with internal and external action. Consumers are quick to call out organizations that call for change without providing measurable action toward that change.
7. Young Investors and Entrepreneurs
As the workforce grows younger and up-in-coming entrepreneurs emerge, the business landscape is seeing a shift to realign with the values of the next generations, which tend to have a greater focus on solving global issues. Climate change and social inequality are key issues for this younger group.
Young investors are an important driving force in the rise of impact investment. They are more connected than ever, and they seek innovative, technology-driven solutions to the world’s most pressing issues.
8. Infrastructure
People increasingly recognize that failing or nonexistent infrastructure perpetuates much of the equality that is seen in the world. Additionally, insufficient infrastructure often prevents the implementation of innovative solutions to the most urgent global issues. Infrastructure investment is greatly needed, but this type of investment has historically faced criticism for unethical or unsustainable practices. Impact investors are pushing for more ethical, environment-conscious infrastructure development.
9. Financial Inclusion
Another barrier to social equality that is driving impact investment is the lack of access to financial services for many people. Many organizations are focusing on ways to serve those populations that need ethical, fair, and high-quality services that can help people improve their lives.
10. Corporate Activism
Corporate activism is nothing new, but corporations are seeking to affect policy in ways they never have. Organizations face pressure from consumers to use their influence to impact policy and provide solutions for inequality, climate change, and other issues. Businesses are expected to take a stand against unpopular policies.
As people call for greater responsibility from corporations and industries, impact investing is a way to reward those organizations that seek to make measurable changes in the world. Profit and philanthropy are no longer seen as mutually exclusive, as investors find that they can make positive financial returns while still having a positive impact.
