Impact investing

DEFINITION of 'Impact investing'

Investing that aims to generate specific beneficial social or environmental effects in addition to financial gain. Impact investing is a subset of socially responsible investing, but while the definition of socially responsible investing encompasses avoidance of harm, impact investing actively seeks to make a positive impact – investing, for example, in non-profits that benefit the community or in clean technology enterprises.

BREAKING DOWN 'Impact investing'

Impact investing includes many different forms of capital and investment vehicles. The bulk of impact investing is done by institutional investors, but a range of socially conscious financial service companies, web-based investment platforms, and investor networks now offer individuals an opportunity to participate in it. One major venue is microfinance loans, which can provide small-business owners in emerging nations with startup or expansion capital. Women are often the beneficiaries of such loans. Impact investing need not always be profitable; investors often factor in social gains or goals.

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