Key Term

What is Impact Investing?

Definition

Impact investing refers to investments made with the intention of generating positive, measurable social or environmental benefits alongside financial returns. In charitable giving, it represents a strategy where donors and foundations invest their capital in companies, organizations, or funds that align with their philanthropic mission while expecting some degree of financial return, ranging from below-market to market-rate returns.

Significance

Impact investing has revolutionized the charitable giving landscape by bridging the gap between traditional philanthropy and commercial investing. It enables donors to multiply their charitable impact by recycling their capital while supporting sustainable solutions to social problems. This approach has become increasingly important as organizations seek to create lasting change through sustainable business models rather than relying solely on grants and donations. Impact investing also attracts new capital to charitable causes by appealing to donors who want to see their money generate both social good and financial returns, ultimately expanding the total pool of resources available for charitable purposes.