Impact investors provide funds with the intention of creating a positive, measurable, social or environmental impact alongside a financial return. The expected range of returns for these investments is often below the market rate, or the return is measured by a different metric, e.g. social change or impact measurement. Impact investors include high net worth individuals (HNWIs), family offices, foundations, banks, pension funds, impact-focused venture capital firms, private equity firms, angel investor networks, and development finance institutions (DFIs). Some impact investors are organised in a network, such as the Global Impact Investing Network (GIIN). Impact investors can also provide a level of expertise to entrepreneurs and project owners in emerging markets, especially when it comes to making sustainable decisions. However, their expertise is likely to be limited, because they tend to be global institutions that focus on impact as well as financial gain.
For example, many of GIIN’s members are based in the developed world and therefore may not have the appropriate expertise on the ground. Furthermore, they must spend resources on examining impact, which means potentially fewer resources towards providing entrepreneurs and project owners with technical expertise. Since social and environmental impact is key for these funders, it is important to show not only how your company will work towards achieving these aims, but also how you will measure and prove the impact you want to achieve. One of the downsides of accepting impact investment is that the measuring of impact can be highly demanding.
Gender Lens Investors
Another sub-sector of impact investing is gender lens investing. Gender lens investing is the practice of investing for financial return while also considering the benefits to women, by improving economic opportunities and social wellbeing. In evaluating their investments, gender lens investors focus on how their investments advance women in leadership, increase women’s access to capital and support the development of products and services beneficial to women and girls. Furthermore, gender lens investors seek to secure gender equity in the workplace, address urgent gender justice and equality issues such as gender-based harassment and violence and improve women’s health.