Impact investing is a term that is being thrown around globally, as a notion that one needs to become responsible through all waves of life. For many years, however, the idea of being philanthropic and the world of investments were seen as two separate disciplines.
As noted by Rockefeller Foundation, “one champions social change, the other financial gain.” The very idea that the two approaches could be integrated in the same transaction – in essence, delivering a financial return, whilst also doing good – struck most philanthropists and investors as being far-fetched.
Thankfully, this is no longer the case, and the rise of the responsible investor is upon us, both here in the UAE and across all other continents. A recent UBS report noted that UAE investors are very active in philanthropy, with 92 percent saying they believe it is their responsibility to give back and that making an impact is more significant than having money.
What impact investing seeks is to generate deals with a focus on social and environmental benefits which is forever growing in popularity. A question many investors continue to ask is “if impact investing is good for me?” The social awareness is evident. We are becoming global citizens, and we feel accountable; however, in terms of investment prosperity, the question of it being a viable strategy is still questioned. Impact investing can seem daunting, because it requires 1) financial acumen and 2) philanthropic issue expertise – a rare combination.
Irrespective of this thought, the field seems to offer great potential. Virtually, any philanthropic issue has an impact investment opportunity associated with it, and virtually every asset class used in a traditional investment portfolio has an impact equivalent. Essentially there is an impact “wrapper” across the majority of asset classes; however, we need to delve deeper than this, and ensure investors are aware of deeper indicators of measuring their impact.