Impact Investing: Doing Well by Doing Good

In a world where activist groups often urge institutions to divest from harmful industries, impact investing offers a compelling, constructive alternative, one that targets positive social and environmental outcomes without sacrificing financial returns.

What Is Impact Investing?

Impact investi

ng is more than ethical good intentions, it’s a defined strategy. At its core, it involves intentionally directing capital toward businesses or funds that generate measurable social or environmental benefits alongside financial returns. Unlike philanthropy or ESG investing, impact investing demands both intentionality and measurement of outcomes.

A Brief History

Though its modern terminology surfaced in the 2000s, the ethos of impact investing spans centuries. Its roots trace back at least to biblical times, when Jewish law embedded economic responsibility into daily life. By the 18th century, Methodists and Quakers were quietly practicing what we'd now call impact investing, refusing to invest in industries like alcohol, gambling, or weapons.

The 1960s and '70s brought public mobilization: university endowments divested from defense contractors during Vietnam, and global institutions protested apartheid by redirecting capital. In 2007, the Rockefeller Foundation officially coined the term "impact investing," marking a turning point toward mainstream legitimacy.

Since then, the field has grown exponentially, from about $25 billion AUM in 2013 to over $500 billion by 2018, and continued expanding rapidly.

Why It Matters Today

Today, more than $1 trillion is allocated globally toward impact investments. Still, that figure represents only roughly 1% of total global assets under management, underscoring the vast untapped potential.

Despite early skepticism, particularly about financial performance and the risk of “greenwashing”, trust is building. In fact, surveys show 94% of impact investors report that both financial and social returns meet or exceed expectations. Robust standards like IRIS+ metrics and the Operating Principles for Impact Management now help ensure transparency and accountability.

Impact vs. Divestment: Engaging, Not Retreating

Research suggests that divestment from harmful sectors in secondary markets has minimal effect on corporate behavior. Instead, progress emerges when investors engage directly, using ownership and voting power to influence companies toward better outcomes.

Real-World Momentum

Impact investing is gaining traction not just among niche funds, but global institutions and individual investors alike. Endowments, pension funds, and family offices are launching impact portfolios that often outperform traditional benchmarks, demonstrating financial viability and social benefit.

Moreover, academic programs are reflecting this momentum. Business schools like NYU and Wharton now offer hands-on impact investing opportunities, empowering students to manage real capital while learning how returns and social good can align.

Final Thoughts

Impact investing is not merely a feel-good trend, it’s a structurally powerful, scaling movement that blends financial acumen with social responsibility. It enables us to invest with intention, measure what truly matters, and reshape the role of capital in society.

While the task ahead is immense, the tools and momentum are building. Impact investing invites us all, investors, activists, and institutions, to rethink finance as a force for collective good, not just profit.