What is impact investing?

Sustainable investment approaches are increasingly being assessed on the basis of their direct impact in terms of ethical, social, environmental and governance issues. They are thus evolving into more than mere investment styles and products. Whilst, for example, the application of exclusion criteria has an indirect effect via a company’s cost of capital, impact investing achieves direct positive environmental or social outcomes. Ideally, these effects can be measured and reported to investors, for example by recording the number of microloan borrowers and the nature of the projects supported. The range of impact themes on offer – which are reflected in their direct impacts – is now very diverse and is enjoying growing popularity on both the supply and demand sides.