The Core Tenants of Impact Investing

November 15, 2023

At CommonGood Capital, we believe Impact investing is about aligning your capital with your values. While making a profit is important, making a difference in the world with your investments is equally valued. In looking at the heart of impact investing, there are four key principles that make up the practice: being intentional, making financial gains, measuring impact, and focusing on sustainability.

Being Intentional
Being intentional in impact investing means consciously choosing to invest in projects and companies that have clear stated goals to create positive social and environmental impacts. It’s about making investments that align with an investors values while addressing real-world issues such as the lack of affordable housing, the need for energy renewables, and removing barriers that make it harder for others to participate in the global economy.

Being intentional is about investing with a purpose and making a meaningful difference, ensuring investments not only make financial sense but also have a positive impact in the process.

Making A Profit
Just like in all investments, financial sustainability is crucial for the success and growth of impact investments. Contrary to what some might think, impact investing is not just about doing good – it’s also about doing well financially. Impact investors want to achieve as much positive change as possible, and as such must aim to generate as competitive of returns as possible.

Financially successful impact investments attract more investors, and thus more investors increase capital flow into projects that drive positive change. It’s a win-win relationship.

Measuring Impact
Measurement and impact reporting allow you to evaluate the effectiveness of your investments and compare different opportunities. Scorecards like this keep track of the social or environmental impact your investments are making. Reporting is vital to not only ensuring the investment continues to align with the values of the investor, but also to do so while maintaining a profit.

Clear and consistent impact reporting helps inform decisions and improve strategies, and maintain accountable for the intention of the investment. It’s also a way to show future impact investors the positive difference they can make with their capital.

Sustainability is investing with the cherry on top. It means going beyond typical investments and making a unique, repeatable contribution that will multiply its effect over time. By focusing on sustainability, impact investors aim to drive long-term innovation, transform entrenched industries, and work towards a more inclusive future for all.

Impact investing is about being purposeful with the capital you manage and aligning them with the values of investors, aiming to generate profit while also making a positive difference, tracking and protecting the impact they are making, and ensuring that their investments go the extra mile to create a better world. It’s doing well and doing good at the same time.

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