Some experts estimate the market for impact investing will grow from $228B in 2018 to $3 trillion by 2028. Many observers are wondering: Is this just a slick marketing campaign to attract women and millennial investors? Can investors actually earn market-rate returns? Do these investments actually make the world a better place?
This page offers answers to these and other questions and gives interested financial advisors resources for learning more or beginning to help clients make these investments.
What is impact investing?
Coined in 2006 by Ford Foundation, Rockefeller Foundation, and a few other pioneers, the term “impact investing” means intentionally placing capital in companies, organizations, and funds with the goal of generating a measurable, beneficial social or environmental impact alongside a financial return.
Intentionally placing capital means that impact investing goes beyond the negative screens of biblically or socially responsible investing, where one avoids placing money in “sin stocks” like gambling or companies that are known environmental polluters.
Measurement needs to play a key role in assessing impact so that we understand whether individual investments, as well as the Kingdom Impact Investing marketplace overall, lives up to expectations.
Impact from these investments covers all the areas traditionally thought of as charity from poverty alleviation to education; we discuss this further below.
Financial return must be present in an investment portfolio, although individual performance may appropriately vary between a portion of capital returned to risk-adjusted market rate returns
Kingdom impact investing has grown, in part, on the back of trends reshaping secular philanthropy and investing. In 2006 large private foundations including Rockefeller Foundation, Ford Foundation, Omidyar Network, and others met to establish the basic framework and terminology for a new way of deploying foundation capital.
Since then, impact investing has achieved a degree of fame. Ford Foundation announced recently that it is working to invest $1 billion of its endowment in line with its charitable purposes. Blackrock, Morgan Stanley, and other large fund managers have created their own “impact investing” funds or indices.
Why do donors choose kingdom impact investments?
Impact Foundation performed a study of 115 accredited investors and their decisionsto place capital in impact investments. The findings revealed the motivations behind those decisions.
Portfolio Strategy: seeking impact investment opportunities according to a defined strategy for financial return and measurable change in specified causes
Personal Relationship: investing in an individual company because of a personal relationship with the CEO or other investors
Support a Ministry: making a loan to a ministry to help it establish a revenue stream
Build This Company: investing to advance a specific business whose leadership is committed to sharing the Gospel in word and deed
Advance a Cause: investing to end sex trafficking, end poverty, create content that positively influences culture or addresses another specific cause
Want to learn more? Check out our free, 35-page booklet full of information to help you serve clients interested in impact investing. Topics include:
Setting Expectations: How Much Financial Return and Impact is Really Possible?
Faith-Driven Venture Capital
Impact Investing and Fiduciary Advice
Client Fit Analysis
Step 5 Client and Investment Matching Process
Better Philanthropy: Impact Investing with Charitable Capital
Perspectives: Craig and April Chapman’s Portfolio Strategy
How It Works: Impact Investing with Charitable Capital