Week 9: 10 Tips for Impact Investing

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Hello everyone,

One of the major hurdles of impact investing is the delay in outcomes sustainable investments often require. When we develop a short-term mindset, it is hard to choose impact investing as often the financial returns take longer to happen.

However, capital is crucial and needed to be redirected into more impactful projects. Nowadays, there is also an increasing concern about the non-financial outcomes of investments. This can be tricky as it is much harder to measure ecological or social impacts as well as not yet clear and widely adopted frameworks have been adopted that also allow the true assessment of this non-financial performance and comparison between companies.

Despite being tricky, there has been a shift of investments towards more impactful ones. Below we provide 10 tips for impact investing.

1. Make sure you define goals and priorities: what are the social or environmental outcomes you hope to achieve through your investments?
2. Due diligence: Research, research, and research potential investments to ensure they align with your impact goals. Tip: look for a credible track record of delivering those results.
3. Diversify your portfolio: Spread your investments across a range of sectors, geographies, and stages of development to manage risk and increase the potential for impact. A simple rule to reduce risk on every portfolio.
4. Double materiality: consider both financial and impact returns! In the short run, impact investments usually show a trade-off between financial returns and impact outcomes. In the long run, those can go hand-to-hand. We suggest you assess both and find the balance that works best for you.
5. “Be present” in investee companies: participate actively in the companies you invest in to help drive positive impact and monitor progress.
6. Collaboration: Work with other investors, organizations, and experts to pool resources and knowledge, and maximize impact.
7. Be patient: As mentioned before, impact investments can take time to deliver results, so make sure you develop this long-term expectation and be prepared to hold investments for the long term.
8. Monitor and measure impact: Regularly track and assess the impact of your investments to ensure they are delivering the results you hope for.
9. Stay informed: Regulations, frameworks, and reporting directives keep being developed. Stay up to date on developments in the impact investing space to identify new opportunities and potential challenges. Also, to make sure the data reported is credible.
10. Evaluate and adjust your strategy: Regularly review and reflect on your impact investing strategy to ensure it is meeting your goals and making the impact you desire. Review if that is not the case!