When you think about investing, you may only envision the return you expect to earn. But did you ever think about where your money goes and what it actually purchases? Historically, your traditional investments are deposited with a broker to (hopefully) earn a positive return but the actual intent of your investment dollars may not be defined. Unlike traditional investment approaches that focus primarily on financial returns, impact investing aims to generate positive social and environmental impacts alongside financial gains. Impact investing can be a straightforward principle: investments can yield returns while serving a greater good but how do these investments work in real-world scenarios, and what can they achieve for communities?
Impact investing, as defined by the Global Impact Investing Network (GIIN), is investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. This definition sets the stage for differentiating impact investing from traditional investment approaches, which primarily focus on financial returns without necessarily considering the broader impact on society or the environment.
Traditional investments often prioritize maximum financial gains, sometimes at the expense of environmental sustainability and social welfare. In contrast, impact investing explicitly aims to solve social or environmental problems while also achieving financial returns. This dual-purpose approach can be very appealing as it aligns investor values with broader global needs.
Impact investments play a significant role in fostering community development. By directing capital to businesses and projects that are designed to benefit the community, these investments help stimulate economic growth and improve the quality of life in underserved or underdeveloped areas. For instance, investing in local real estate projects supports job creation and can lead to improved local services and infrastructure.
Impact investing also aligns closely with the United Nations Sustainable Development Goals (SDGs). These goals are a universal call to action to end poverty, protect the planet, and ensure that all people enjoy peace and prosperity by 2030. Impact investments can be strategically directed towards projects that address specific SDGs, such as affordable and clean energy, decent work and economic growth, and reduced inequalities.
Worthy Bonds offers an excellent example of how impact investing can support community and economic development. By offering bonds with a 7.0% APY, Worthy Bonds allows individuals to invest in residential real estate development in communities across America while earning a strong yield. This model not only provides financial returns to investors but also contributes to the economic health of communities by supporting its growth. Impact investing through Worthy bonds exemplifies Worthy’s core belief of “Where you invest your money matters.”
Getting started with impact investing can seem daunting, especially for non-accredited (“retail”) investors who might have limited access to certain investment opportunities. However, platforms like Worthy have made it easier for everyday investors to engage in impact investing. Here are some steps to get started:
Educate Yourself: Learn about different types of impact investments and what makes them successful.
Set Your Goals: Determine what you hope to achieve through your investments, both financially and in terms of impact.
Start Small: Platforms like Worthy allow you to start with a modest investment (as little as $10), minimizing risk as you learn the ropes.
By following these steps, non-accredited investors can participate in impact investing and contribute to meaningful change within their communities and beyond. This approach not only democratizes investment opportunities but also empowers individuals to align their financial activities with their values.
Impact investing represents a powerful tool for achieving both financial returns and positive social and environmental outcomes. Whether through community-focused platforms like Worthy or other impact investment vehicles, individuals at all levels of society can participate in shaping a more sustainable and equitable world.