Myth Busting: Impact Investment
Impact investing is an approach that’s gained traction (Global Impact Investing Network (GIIN) estimates the size of the worldwide impact investing market to be USD 1.164 trillion). Though with any rise-to-fame, it’s not immune to a fair share of misconceptions. If we're going to reshape our economic landscape, we need to start by challenging our assumptions about investing and making impact our mainstream.
Let's bust these myths:
- Impact investing means sacrificing financial returns
It turns out you can have your cake and eat it too — you don’t have to choose between sacrificing financial returns in favour of societal or environmental outcomes. Impact investing aims to generate positive societal or environmental impact alongside financial returns. Impact Investing is maturing, while some investments might prioritise impact over financial gain, many deliver competitive returns alongside positive impact.
- Impact investing is only for philanthropists
Another misconception is that impact investing is solely for philanthropists or individuals with a purely altruistic motive. While philanthropy has a role, impact investing has evolved to include a diverse range of investors, including institutional investors, private equity firms, and individual investors seeking to align their investments with their values while also pursuing financial goals.
- Impact investing is limited to certain sectors and asset classes
Renewable energy, microfinance, health — these sectors often dominate the impact investing conversation, but they're only a subset of the bigger picture. Impact investments span a multitude of industries — from manufacturing to agriculture, real estate, technology, and so much more. If there's potential for positive impact alongside financial return, you'll likely find impact investors there.
As Danny Almagor said, “Impact Investing is not an asset class. Impact Investing is not a strategy. It’s a philosophy, an expression of the life you want to live.”
- Impact investing lacks proper measurement
Measuring impact isn't as straightforward as calculating financial returns, but that doesn't mean it's not happening. The field is evolving rapidly, with organisations like the GIIN, B Labs and Impact Management Project developing robust frameworks for assessing and reporting impact and ensuring accountability to avoid greenwashing and superficial impact claims. It's moving beyond avoiding harm to actively measuring positive outcomes. - Impact investing is just a passing trend
Some view impact investing as a fad or niche market that lacks long-term viability, but the evidence suggests otherwise. Look at the momentum it's gained — the rise of ESG investing, the growing demand for sustainable finance, the shift in investor preferences. Impact investing isn't just a trend, it accounts for trillions in assets and is reshaping how we think about the role of capital in society.
Ready to dive deeper?
We're tackling these myths, money matters and more in our upcoming Journey to Impact program. It's time to demystify impact investing and explore what it really means to put your money to work for both profit and purpose. Join us as we challenge these misconceptions and examine the potential of investing as a tool for positive change. Because the future of finance isn't just about returns — it's about the impact we create and the world we shape.
If you want to read more on the ideas of purpose and profit, take a look at these resources:
- Investing in a Better World: How does Australian Ethical's legacy fuel their mission to create a more just and sustainable world?
- The Beautiful Portfolio Theory by Danny Almagor
- Jacqueline Novogratz on how we use the tools of capitalism
