Impact Investing is a relatively new term used to describe philanthropy and charitable giving, but it implies that these projects require a return on the investment, although return requirements are much more lenient than what a typical financial investor would demand. Here’ s a good New York Times article that delves into the topic at length:
More often, impact investing is described by what it is not. It does not work in the same way as socially responsible investing, which excludes areas a person does not want to invest in — like tobacco or guns — through a simple screening process. Impact investing focuses more on bringing about change — helping the working poor in India buy a home, for instance.
While most of the money is going into areas like helping to reduce poverty and improving the climate, it is not philanthropy. Investors expect at least a return of their capital with an adjustment for inflation and, in many cases, a lot more than that.