Impact Investment is a relatively new term used to describe investments made in many asset classes, sectors and regions. These are investments made in emerging or developed markets, with the intention of generating a measurable positive, social and/or environmental impact with an attractive financial return.
An impact investment provides capital that finances solutions to our society's challenges in various sectors, such as: housing, health and education, sustainable agriculture, renewable energy, environmental conservation, access to credit, etc. These solutions are generated by what we call impact business.
Impact Investment is defined by the following characteristics:
INTENTIONALITY: The investor's intention to generate social and/or environmental impact through their investments is essential.
INVESTMENT WITH RETURN: Impact investments must generate a financial return on invested capital or, at the very least, a return on principal.
RETURN SPECTRUM AND ASSET CLASSES: Impact investments seek to generate financial returns in a spectrum that can go from below market to competitive rates with the traditional market (with adjusted risk) using assets such as fixed income, venture capital and private equity¹.
GIIN (Global Impact Investing Network) published the article Core Characteristics of Impact Investing, which complements this definition and seeks to provide even more clarity on the subject.
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The Impact Investing Market
The current size of the global impact investing market is estimated to be $502 billion. That is, despite being a market on the rise, it still represents only a fraction of the traditional investment market. Remembering that philanthropy and/or social responsibility activities are not accounted for/categorized as “impact investments”.
But what about in Brazil? Learn more about the national impact investment market!
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