Our manuscript examines the transformative impact of Impact Investing on the financial sector, where profitability is integrated with a sense of purpose, diverging from traditional investment approaches prioritizing financial gain over ethical considerations. In contrast to Environmental, Social, and Governance (ESG) investments, which address ESG risks and opportunities within existing portfolios, impact investing is focused on achieving specific social and environmental objectives through investments that directly benefit communities and the ecosystem.
The surge in impact investing can be attributed to a heightened recognition of the necessity to confront global issues like climate change and social disparity. Impact investors aim to secure competitive financial returns while adhering to their values and meeting the rising demand for investments driven by purpose. Nevertheless, they encounter distinct hurdles, such as differing interpretations of impact investing and competition for projects aligned with impact goals.
Impact investing signifies a shift away from profit-driven investment strategies, underscoring the notion that financial profits should not be prioritized at the expense of societal and environmental welfare. The concept of "Aligning Profits with Purpose" encapsulates the core principle of impact investing, indicating a significant shift towards a more sustainable and fair future. With an increasing number of investors adopting impact investing, they are contributing to reshaping economic, social, and environmental landscapes for the better.