At first glance, finance can often seem like a world far removed from everyday life and intelligible only to those in the know. But there is also a kind of finance whose primary objective is to positively influence the dynamics of society, doing its part to make the planet a little more equitable. This is the world of impact investing.

The four pillars of impact investing

Let's start with the definitions: impact investing is an investment policy through which companies, organisations and funds aim to generate both a financial return and a positive impact on society and the environment. It is therefore something very different from philanthropy: with impact investing, you are not making a non-recoverable donation, but rather aiming to earn a return in the future, at rates that may be above or below market levels.

To define the boundaries of impact investments, four pillars have been identified. The first is, precisely, financial return: over a medium-term time horizon, investors aim for a gradual increase in the value of the capital they have committed. The second is intentionality: environmental and social impact does not come about by chance, but is one of the fundamental criteria by which one subject is chosen over others. The other two pillars are impact themes and impact measurement: the areas of society on which one wishes to act are identified on a case-by-case basis, and a clear and transparent way of quantifying results is established.

Investing in the environment, education, health and beyond

In practice, who are the beneficiaries of impact investments? First and foremost, everything that revolves around the macro-theme of the environment and energy: projects for the sustainable use of natural resources, energy efficiency, the production of energy from clean sources, the circular economy, and the construction of low-environmental-impact buildings. Moving on to social sustainability, impact investments support those committed to education, employment inclusion and equal opportunities, the right to food, and healthcare. Impact investing also attracts close attention from all those entrepreneurs and startups working to develop new technological solutions to solve problems large and small across the planet: think, for example, of distance learning, smart monitoring systems to reduce energy waste, and innovative methods for waste recycling.

How much is impact investing worth worldwide

The world of sustainable and responsible investment has taken shape in recent times and, chronologically speaking, impact investing is the latest arrival. It is therefore no surprise that – according to the most recent Eurosif study, which compares it with the other six strategies for responsible investment – in 2013 it still ranked last in Europe by volume, with an estimated value of 20 billion euros. A drop in the ocean compared to, for example, the 6,853 billion euros invested using the exclusions criterion – that is, by "cutting out" sectors deemed unacceptable, such as tobacco, weapons and pornography. But one can also look at things from a different perspective, focusing not on absolute values but on growth. Viewed this way, it emerges that impact investing has come on in leaps and bounds: just two years earlier it had not even reached 9 billion euros.

How much do those who invest in the environment and social causes earn

But one cannot forget that the primary objective of any investor – whether an individual or a fund – is to pocket a financial return. According to analysis carried out by the Global Impact Investing Network, 59 per cent of "impact" investors report having achieved competitive returns relative to market rates. And in the vast majority of cases, performance is markedly better than expected, both in purely financial terms and in terms of impact. Can one say, then, that the environment, sustainability and social causes ultimately "pay"? Contrary to received wisdom, it very much seems so.