The impact investing is here to stay. According to the Global Impact Investing Network (GIIN), the global market for this modality has already surpassed 1 trillion dollars until 2022. This shows that, increasingly, investors and entrepreneurs are looking to align their values with financial returns.
However, despite its rise over the years, many people are still unaware of this format. investment and there are doubts about the Differences between traditional and impact investing.. Therefore, we present below the main characteristics of each type.
Including the impact on investment analysis
The investment is, in general, the application of resources to generate future gains. The traditional form essentially evaluates the relationship risk x return of the invested capital. That is, in this mode the profit is the only intention.
On the other hand, the impact investing does not focus on profit at any cost. In addition to evaluating the financial performance, O risk and the governance of the invested organizations, also evaluates the socioenvironmental impact generated by them.
But that doesn't mean that the impact investors do not make a profit. Quite the contrary, this market has been showing increasingly competitive financial return linked to the concern of contribute to the future of the planet and with a more sustainable economy.
Transparent Investment
Another difference that must be taken into account in this comparison is the fact that, in impact investing, You know exactly what business your money is going to and how it will be used.. On the other hand, in various types of traditional investments, you lend an amount to the government, a bank or a company to use without specifying what it is promoting.
Us investments from the sitawi platform, for example, you can also have a clear measurement of results obtained from your investment and understand how your money is helping to change the world. Discover other reasons to invest on impact.
But despite the differences, there is one thing these modalities have in common: the risks. It is important to keep in mind that There is no investment without risk and a very important step to start investing is to know them. Do you already know the most common ones?
Investment risks
- Business Model Riskthe business model presented by the entrepreneur in obtaining investment evolves over time, according to several factors, such as changes in market dynamics, dependence on third parties, such as supplier conditions and prices.
- Management Risk: existing in companies of any size, it is more significant in start-up businesses. This risk becomes more sensitive when there is a change of team, replacement of leadership and the need to hire market executives.
- liquidity risk: every investment made has an expected exit, in order to liquidate the position and minimize the net present value of future flows.
- market risk: the market in which the business operates may experience variations that harm the portfolio's performance, such as the concentration of revenues in a few customers, market growth beyond expectations, determinations by regulatory bodies, new competitors, among others.
Deepen your knowledge about investments
Now that you have started learning about this universe, how about delving deeper? Access now our free e-book and learn everything about impact investing.
Are you interested in this type of investment? Enter the Sitawi Platform and invest in organizations impact on the Amazon with fixed profitability. invest now.
