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Impact investing refers to investments made with the intention to generate positive, measurable social and environmental impacts alongside financial returns. These investments are directed toward companies, organizations, and funds that actively seek to address pressing global challenges such as poverty, climate change, and inequality and are often aligned with UN’s Sustainable Development Goals (SDGs). Unlike traditional philanthropy, which typically involves donations without the expectation of financial return, impact investors aim to create sustainable and scalable solutions, prioritizing both financial sustainability and purpose.
A social enterprise is a business that prioritises social and environmental objectives alongside financial performance. Unlike traditional businesses, which focus primarily on profit, social enterprises aim to address societal challenges such as poverty, inequality, and environmental degradation through their products, services, or operational practices. They reinvest a portion of their profits back into their mission, ensuring sustainable impact while maintaining financial viability.
Impact capital is financial investment aimed at generating both social or environmental benefits and financial returns. Unlike traditional capital, impact capital targets projects and enterprises that address critical challenges while also providing a return on investment. It is sometimes assumed that all impact capital is concessional, meaning offered at below-market rates or with softer terms to prioritize impact over returns. While some impact investors, particularly philanthropic foundations, or certain development finance institutions, may provide concessional capital to catalyse projects that would otherwise be too risky or unprofitable, many impact investors seek market-rate or even above-market returns. The key distinction lies in the intention and mandate of the impact capital.
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