Can Anyone Become an Impact Investor?

Sep 17, 2018 11:25:49 AM / by Hannah Barkan | 4 minute read

Why Impact Invest?

The power of compound interest means that long-term investing almost always makes sense. Although it involves more risk than keeping your money in the bank, investing means that you’ll be able to get higher returns year on year. In recent years, companies have made it much easier for inexperienced investors to enter the market, lowering the initial investment amount and providing risk profiles for different investing appetites.

There are many automation investment websites, and now impact investors are joining the market. Companies are diversifying as they recognize that their customers want to have a social impact while making their money do more for them. If you are comfortable taking some risk, however small or large, investing money early means you’ll reap the rewards down the line.

Ways to Impact Invest

Experienced traditional investors have an easier time finding companies to invest in via stocks and bonds that also have a positive impact on the world. For those of us who are newer to investing, there are easier ways in which we can make sure our money has the most impact possible.

Investing your pension with an ethical pension provider is a good way to start. If your company provides your pension, lobbying them to switch to a different provider, or at least offering more ethical choices is a good place to start. Figure out who your pension provider is and ask questions about their investment profile.

Large pension companies like AXA are now opening impact investment funds as part of their responsible investing missions. In the UK, Pension Bee is dedicated to the climate-conscious investing and helps set you up with a pension that does more for the planet.

Ethically focused financial companies like Triodos Bank offer a cash-ISA which is a type of investment vehicle (for more information on cash-ISAs in the UK, see here), allowing the money that you save to be used for impact investments.

To make things even more attractive, the UK government has actively tried to promote innovative financial products in the UK. This gave rise to products like the Innovative Finance ISA (IF-ISA), which allows you to do the same type of investing as detailed above, but in this unique product, investment earnings are tax-free for eligible investors. You can learn more about the IF-ISA from Energise Africa.

The Power of Crowd-Funding

Crowdfunding has exploded over the last ten years and is now firmly established as a finance tool for small and medium enterprises. It is also well established as a strong investment tool. It can be overwhelming when you start to look into crowdfunding platforms that provide a return on investment. Even if you only consider ethical investments, you can easily get lost in a world of renewable energy investments, and renewable bonds. Companies like Abundance, Windcentrale and Mosaic offer returns on investment tied to the amount of energy created by the projects.

If you want to know more about the impact your investments are having, use a crowdfunding platform like Lendahand. Through our platform, you can learn more about the social impact your investment will be making. Such as, providing clean energy to replace dirty fuels, or helping small businesses expand and provide more jobs to lift people out of poverty.

Besides your social return, financial information like the type of investment and expected returns are also provided to you. It is incredible to learn that you are creating jobs, as well as providing electricity and light for the first time to a school in remote parts of Africa. And at the same time, you're making this tremendous social impact, you’re still making a return on your investment.

Investing Directly

There are also options to make direct investments into social enterprises, and while this is riskier than some other opportunities, going through an ethical platform like Ethex is one way of mitigating some of the risks, as there has been an initial due diligence process that has been carried out. You can make equity investments, charity bond investments, or investment in a fund that will invest for you. Make sure to spend time understanding the risks, implications, and structures of each investment, to be sure that you know when you can take your money out and how much you should invest.

Impact Investing Everywhere

Soon, we may not have to decide between ‘impact investing’ and traditional investing. In the future, as it becomes even more pertinent than it is today to make smart decisions about where we put our money, more capital will go into impactful businesses that are changing our lives for the better, whether through renewable energy, combating poverty, or providing innovative solutions to difficult problems.

If you’re ready to start making an impact with your money today, don’t wait. A better future is just around the corner, thanks to people just like you.

Topics: impact investing, crowdfunding

Hannah Barkan

Written by Hannah Barkan

I am an investment analyst located in Zurich, Switzerland. I'm passionate about impact investing and want to use my knowledge to show the world the incredible impact their investments can have.

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