Impact investing refers to funds that are sent into an organization or a company with the aim of creating measurable social, environmental benefits with a financial return. In recent years impact investing has been on the rise, and as predicted by JP Morgan and Rockefeller Foundation it will reach an estimated $1 trillion by 2020 (JP Morgan). However, despite its increasing prominence many people still do not understand impact investing in terms of definition and its durability. Additionally, the society is interested in ascertaining whether impact investing generate profits while preserving social and climatic environments.

The world is changing and with it brings challenges that do not conform to the traditional frameworks of investing, therefore, it requires a new wave of investing that is sensitive to social and environmental impacts. The chapter strongly argues that current day investors, agree on the importance of impact investing as traditional frameworks have directly or indirectly resulted in environmental degradation. All capital investments have resulted in some impact on the surroundings, and as such, it is the responsibility of the investors to make sure that investment portfolios generate optimal financial returns while they advance social and environmental value creation (Marks). The chapter succeeds in demystifying how impact investing differs from philanthropy by claiming it aims to achieve social and environmental development with a financial goal through collaborative capitalism.

Moreover, the chapter argues that, in the future, impact investing will be accepted by the growing pool of investors as the new way to conduct business. Therefore, to achieve this, some factors will have to be in play such as, an integrated performance that is not only focused on outcomes or outputs but globalization of financial impact innovation and corporate alignment (Clark, Emerson and Thornly). The market should also implement an investor’s right to know to identify the risks that are associated with specific decisions. As a result, these factors will prepare the financial world to a more impact-oriented activity.

Works Cited

Clark, Cathy, Jed Emerson and Ben Thornly. The Impact Investor: Lessons in Leadership and Strategy for Collaborative Capitalism. New York: John Wiley & Sons, 2014. Print.

JP Morgan and Rockefeller Foundation. “Impact Investments: An Emerging Asset Class,” 2010.www.jpmorganchase.com/corporate/socialfinance/document/impact_investments_nov2010.pdf

Marks, Howard. The Most Important Thing Illuminated: Uncommon Sense for the Thoughtful Investor. New York: Columbia University Press, 2011. Print.

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