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What is social impact investing and how does it benefit society?

By Finserv MARKETS - Aug 22,2019
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Everything About Social Impact Investing

In the last couple of years, there has been a growing shift within the millenial population to “work for the greater good of society”, “to contribute to the world” and to an overall desire to make the world a better place. With disposable personal incomes also on the rise, social impact investment has emerged as a fruitful avenue to channelize funds with the desire to help society at large.

Social impact investing refers to “investments made into companies, organisations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return.”

Such investment is often directed towards projects such as affordable housing, healthcare clinics and other such social-impact models that traditional businesses might ordinarily shy away from with the assumption that no revenue can be generated there. Traditional businesses that assume social impact investing will carry greater risks since they can’t be scaled adequately to create attractive returns, and are less liquid and thus, more difficult to exit. However, impact investing is gaining popularity owing to a number of reasons.

Read on to learn about 9 benefits that impact investing can add to society:

  • Global challenges can be addressed:

Just government grants cannot solve the world’s largest problems like climate change, poverty, limited access to housing, education and shelter. Private capital in the form of impact investments would go a long way towards reducing these problems.

  • Investors can also achieve market rate returns:

Global challenges are now turning into global opportunities. Those who provide solutions to today’s problems will end up emerging as tomorrow’s winners. At scale, social impact investing can provide returns comparable to other market investments. Market rate returns are also an achievable target with unit linked insurance plans, which provide for fund portfolios to include investments that will maximize market returns.

  • Social impact funds help reduce volatility of fund portfolios:

For an investor, impact investing can be a useful complement to other investments within the portfolio. Studies in the last few years have shown that social impact funds have lower volatility as compared to non-impact funds. Another way to achieve this is by investing in Bajaj Allianz ULIP plans which allow for diversifying of portfolio and minimizing the risk.

  • Social impact investments allow for an inclusive circle of progress:

Social impact investing which includes investments into social, health and environmental causes provides efficiency to meet your individual or your company’s social responsibility goals with a much higher RoI than donations or grants, which simply hand out money. Instead, with social impact funds help grow the recipient’s circle of progress – whether it’s a small farmer, a health startup or a company solving energy challenges.

  • Values and profits no longer have to compete with each other:

Through impact investing, companies can ensure value for the society they live in as well as profits for their own. As values and profits stop competing with each other through alignment with social impact investing, you can signal your commitment as a responsible investor without giving up on your returns.

  • Investment firms can diversify services:

In the socially-conscious world we live in, clients are demanding social impact investing options from investor funds. This is forcing investment firms to diversify their services and provide impact investment options.

  • Bringing the world together:

Social impact investing allows for thinkers across disciplines to gather and discuss ways to improve the world. These could be human rights activists, entrepreneurs, academicians, investors and development experts. Impact investing brings together people from diverse backgrounds who are united towards a common goal of urging social impact investment to solve challenges inherent in the society.

  • As investing culture changes, so do ways of measuring returns:

With investors willing to invest more towards social impact investing, the culture of judging returns is changing and thereby leading to an increased traction. As the culture of investing towards social impact undergoes a change, society can consider this the new normal and move collectively towards benefiting from this.

  • All of us become agents of social change through social impact investing:

Humans are interdependent for their futures. As part of the society we live in, all of us are indebted towards making the change we wish to see. We have a moral obligation to resolve the challenges we see around us. Through impact investing, we can be part of a greater challenge and become agents of social change to ensure a better tomorrow.

Social impact investing is increasing in popularity due to its high returns in terms of personal satisfaction, while offering global benefits. That said, social impact investing requires a specialised skill-set that you may not possess just yet. In case you want to explore more conventional investment options, consider a ULIP plan. Bajaj Allianz Goal Assure plan, available on Finserv MARKETS, offer great options for diversification of funds. You can buy unit linked insurance plans online to ensure a seamless online investment process that allows you to keep an eye over your investments at all times.

Bajaj Allianz Future Gain plan, available on Finserv MARKETS, have long displayed the best fund performance owing to the mix of funds which offer high ULIP returns and low risks. The Bajaj Allianz Life Goal Assure is especially structured towards fulfilling your goal-based requirements. There are no partial withdrawal charges, which allow you to withdraw funds from this investment plan at any time you require. Bajaj Allianz Life Goal Assure empowers you to achieve your goals by paying a premium as low as Rs. 3,000 a month. It has four investment portfolio strategies and eight fund options, which you can easily switch between for free!

To know more on ULIP investments in depth, you can check out these blogs:

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