Starting with a specific impact objective, impact investors require their investments to produce quantifiable socio-economic or environmental benefits.
Traditionally, impact investors have focused on smaller, private allocations to social enterprises and project-type investments, for example through microfinance instruments. However, this has remained a niche activity due to liquidity constraints and limited scalability. Currently, impact investing is increasingly being taken from the margin to the mainstream, as the concept is introduced to major asset classes such as listed equities or fixed income.
Focused impact investing portfolios include companies that provide products and services with a positive impact. The impact objectives of these portfolios are often linked to resource efficiency and typically relate to the areas of climate, energy, water, health, and food. These portfolios can invest in companies in areas such as alternative energy, water treatment technologies or energy efficiency equipment. Companies providing resource efficiency solutions not only enjoy competitive advantages, but also have a greater positive social and environmental impact.
Diversified portfolios focus on companies that manage their resources more efficiently than their peers. By doing so, they also reduce their reputational risk and financial costs.