Achieving social impact and financial returns with impact investing

THE term "impact investing" was coined by the Rockefeller Foundation around 2008. Its presence on the Internet - as a proxy for public awareness - has grown from zero to over 72 million "hits" in eight years since (Google Trends, September 2014). Impact investing is a frequently featured topic of conversation at forums or conferences on philanthropy today. Indeed, at the G8 Social Impact Investing Conference in London on June 6, 2013, British Prime Minister David Cameron delivered a keynote address about the power of impact investing to "tackle the most difficult social problems . . . that have frustrated (even) governments . . ."

At the outset, it may be useful for investors to differentiate impact investing from other forms of investing already available to those who wish to "do good" through investing, such as ethical investing and environment, social and governance (ESG) investing.

Ethical investing (also called socially responsible investing) has been around since the early 1990s, and its most common form is negative screening of industries deemed socially undesirable by an investor, such as tobacco, arms or casinos. Unlike ethical investing, impact investing is about positively doing good rather than "doing no harm".