While envisioning impact investing to one day become the mainstream, it is important to understand the various attributes of impact investors themselves.
1) Alignment of values and principles
Principles and values, that guide and inform investors’ decisions in all areas of life, are strongly correlated with the engagement with impact investing. Typically impact investors have clarity on the sort of alignment between their values and their investment choices in the form of purpose, parameter, process and performance.
2) Aspiration/ambition to make a difference
While naturally greedy and fearful, humans inherently seek and give meaning to their lives. Indeed, all forms of capital, allocated by investors and managed by capital managers, can support sustainable and thriving communities that we all want to live in.
Most if not all impact investors have the intention to make a positive social or environmental impact through their investments. Often blessed with resources, people with financial resources are in a pivotal position to make a difference in the world.
3) Awareness of the way people earn, spend, save, donate and invest
While wealth inequality is a topic for another day, most are not particularly aware or plan the way they earn, spend, save, donate and invest. For corporates, we can study their financial statements to identify each of these categories. However, for individuals, it ranges from nothing, to a simple spreadsheet, to a professional family office.
Impact investors fundamentally understand what they earn and own, and what that money is doing in the world. Thus, they typically understand the flow of capital, accounting for every dollar and driving them towards impact.
4) Approval that profit and purpose are not mutually exclusive
From finance-first impact investing to social-first impact investing, from impact investing to environmental, social and governance (ESG) investing, capital owners and managers invest across a wide spectrum of investment opportunities.
Not being bogged down with evolving terminologies in investing, impact investors acknowledge and understand the relationship between returns, impact and risks across different asset classes, despite differentiating degrees of expectations. Not only do they balance the myriad of interests of multiple stakeholders, they balance various aspects of each investment, believing that fundamentally, profit and purpose go hand-in-hand.
5) Acceptance of both positive and negative impact of each investment
There are no investments that are neutral – all investments have positive and negative impacts, whether directly or indirectly, intentionally or unintentionally. Impact investors radically accept this truth and determine their investments’ net effect on people and the planet, and aim towards minimising negative impact and maximising positive impact in one way or another.
While we have generalised the different attributes in this short article, we are aware that we are writing from our biased perspective of perhaps our biggest influence: ourselves as impact investors. Ultimately, impact investors are of similar motivations and mindsets, with different approaches and practices.