Impact investing is a relatively new concept, with a composite goal of positively impacting society and the environment while simultaneously making a profit. It’s categorized into three main segments: Environment, social and governance (ESG). Estimated at $46 billion in asset investment and projected to grow up to $3 trillion, as an investor you definitely want a piece of this pie. Millennials currently make up more than a third of the US workforce. They carry many negative labels, but the truth is this generation is tech-savvy, creative, adaptive and empathetic to global challenges. All of these factors shape their investment decisions.
Empathy and Transparency
Growing up in a time of great global challenges like terrorism, political tensions and extreme poverty has served to appeal to millennials’ empathy. The global financial crisis caused millennials to mistrust financial institutions and seek more transparency in investments. Coupled with a high-risk appetite and a culture embracing change more than prior generations, these bold citizens are not afraid to challenge the status quo. They believe they can change the world through the power of business.
Baby boomers are passing on and passing over their wealth in the form of inheritance to millennials. It’s estimated that by 2020, a whopping $27 million will change hands from boomer parents to millennials. This money will be re-invested in what millennials believe in and will shape the future investment landscape. So why should you care about impact investing? The following reasons should help you make up your mind.
Meet Global Challenges With Solutions
Globalization has made our world a global village. We are all intertwined. Global challenges affect all of us. Innovative sustainable solutions can help meet some of these challenges like climate change, access to healthcare and poverty alleviation. However, non-profits alone cannot create enough impact to tackle global problems. Private enterprises are better run and better organized to make significant impact.
Better Than CSR
Impact investments give a much higher ROI than corporate social responsibility projects (CSR). CSR is like giving handouts or providing a band-aid solution. It’s a temporary measure because it is not your core business. With impact investment, your bottom lines are interdependent; there are no band-aid solutions. The survival of your business depends on the composite solution. So unlike CSR, in impact investment, you give it your all.
Aligning Your Business With Your Values
It’s no secret that most of the global challenges trace their roots to business. For centuries, we have done business without always considering our community despite the values we claim to espouse. When your company values are aligned with profits, your business builds credibility, integrity and responsibility without taking away from your bottom line. Integrity is the currency of customer loyalty while responsibility creates a sense of community. Clients want to do business with you when your company shares their values.
Connecting With Clients’ Needs
When a business approach meets the clients’ social and environmental needs, it creates an emotional bond between the client and the brand. This causes reciprocation where clients feel like they also want to give back to the business and, in time, creates loyal customers. This symbiotic relationship is good for your business and brand. Your clients become brand ambassadors, your business grows and so does your impact. Manage it well and the cycle repeats itself.
Join The World Changers
Bill and Melinda Gates, along with Warren Buffett, pioneered an impact investment movement called The Giving Pledge and pledged to donate half their multi-billion dollar fortunes to sustainable impact investments. Today, The Giving Pledge has been signed by more than 150 influential people and has over $350 billion dedicated to impact investment. There are other similar initiatives like ImPact led by millennials Justin Rockefeller and Josh Cohen. These are world business leaders with incredible track records of success. You become a member of this group of futuristic thinkers and world changers when you invest in sustainable enterprise.
Impact investment is a growing investment option, primarily fueled by the generosity of the largest segment of America’s workforce: Millennials. They are also the most empathetic of all generations and are investing in sustainable enterprises. As well, they make up the largest percentage of your clients and place a significant emphasis on doing business with a conscientious company. You should care about impact investment because millennials do.
Originally appeared in The Mission