This section features a Q&A on what impact investing is and how it’s used as a tool to support our communities. It’s important to remember that the Impact Investing field—along with its terminology and uses—is constantly adapting and redefining itself as practitioners learn by doing. Mission Investors Exchange, the leading network for foundations committed to impact investing, will continually revisit this page as we incorporate the perspectives of our members and evolve with the field. For more impact investing 101 resources, please visit our 101 resource page.
What is impact investing?
Impact investing is a term coined in 2007 to describe a spectrum of investment practices intended to generate social and/or environmental impact alongside a financial return.
Impact investing is a way of thinking — not an asset class. The impact investor seeks to make a specific impact as a result of their investment — and they’re going to find out if they were successful. Impact investing is not an asset class or product: it comes in many shapes, sizes, structures, asset types, and purposes. Based on the current prevailing thought, their defining features are intentionality (intent to make a difference), impact measurement and management, and some degree of financial return. The idea of impact investing isn’t actually new. In fact, community development organizations and others having been doing impact investing for decades using different terms to describe their work. These terms include mission investing, social investing, community investing, and more. One unifying phrase—“impact investing”—kickstarted a new way of thinking, speaking, and organizing around finance for good. We use the term impact investing to honor the movement as a whole, while recognizing the rich history and diversity reflected in other common terms.
What or who is an impact investor?
Just about any individual or entity that seeks to invest with an intention to achieve social or environmental outcomes is an impact investor. Examples include banks, community development finance institutions, diversified financial institutions, family offices, foundations, fund managers, governments, individual investors, insurance companies, nonprofits, pension funds, and religious institutions.
How do foundations act as impact investors?
How does impact investing make a difference?
- Investing in a municipal bond to construct storm water treatment infrastructure for better resiliency to climate change.
- Providing low-interest mortgages for first time homeowners.
- Screening an investment stock portfolio to support carbon-neutral companies.
- Making a venture capital investment into a drug development company.