Philanthropy and Impact Investing: Making a Difference with Your Wealth
Impact investing is the practice of making investments that generate positive social and environmental outcomes while also delivering financial returns.
This broad approach includes everything from investing in companies with missions aligned with your values to avoiding businesses that contradict them. It can also extend to supporting nonprofits and projects that blend charitable funds with investment capital, making larger or higher-risk initiatives financially viable.
The core principle of impact investing is that you can align your investments with your personal and philanthropic values without sacrificing financial returns. This movement has gained traction, particularly among wealthy individuals and women, fueling significant growth in the sector.
A notable example is the Trillion Trees Project, which gained enthusiastic backing from Marc Benioff, CEO and founder of Salesforce.com, at COP26 in 2021. However, challenges arose due to overlapping initiatives among three different organizations, leading to difficulties in measuring its impact effectively. This underscores the importance of selecting the right investment vehicle to achieve both meaningful change and financial returns.
But impact investing isn’t just for billionaires. More than 40% of Millennials report engaging in impact investing, compared to only 20% of Baby Boomers. As institutional investors increasingly incorporate impact considerations into their strategies, individual investors and donors now have more opportunities than ever to participate.
Types of Impact Investing
There are several ways to invest with social or environmental impact in mind. Here are a few common approaches:
Invest in mutual funds, ETFs, or bonds that prioritize companies aligned with your values.
Avoid companies with practices you oppose, such as those involved in weapons manufacturing or tobacco production.
Make charitable donations or grants to organizations that blend philanthropic support with investment capital, helping fund higher-risk projects like the Trillion Trees Project.
Invest directly in private companies or funds with a clear social mission, such as a wind power startup or a sustainable agriculture venture.
Lend to nonprofits whose missions you want to support, such as through nonprofit loan funds.
Why Invest in This Way?
Impact investing allows you to drive meaningful change by leveraging your wealth in powerful ways:
Promote and encourage corporate practices that reflect your values, such as fair labor conditions or environmental responsibility.
Use more of your financial resources—beyond charitable donations—to support causes that matter to you.
Support sustainable solutions to societal challenges that are not solely dependent on philanthropy.
Reinvest returns from impact investments into new initiatives, amplifying your social impact over time.
Does Impact Investing Sacrifice Returns?
Contrary to popular belief, impact investing doesn’t necessarily mean lower financial returns. Numerous studies have shown that sustainable investments often match or even outperform traditional investments, proving that doing good and making money are not mutually exclusive.
How to Get Started
For those new to impact investing, the easiest entry points are ESG funds or donations to impact-driven nonprofits. More advanced strategies—such as directly investing in mission-driven companies or lending to nonprofits—require greater expertise and due diligence. High-profile investors like Marc Benioff have taken on complex impact investments, but anyone can begin by making thoughtful choices about where their money goes.
The question isn’t if you can make an impact, but how you will start.
What cause aligns with your values? Let your investments reflect your vision for a better world.
