Impact investing is an emerging trend that blends certain principles of philanthropy with traditional private equity investing, Paul Sullivan writes on The New York Times.
Sullivan says impact investing is best described by defining what it is not. The investment approach focuses on bringing change and helping the poor, but unlike philanthropy, it expects at least a return of capital.
Impact investing also differs from microlending, at least the way websites like Kiva perform the latter, Sullivan writes. He says impact investing is more sophisticated than Kiva’s model and works with minimum investments of around USD1 million.
“I came to think of impact investing as a private equity fund for social change,” Sullivan says.
The model is still in its infancy, Sullivan says, and many believe its time is yet to materialize. The slow growth of the model is primarily due to lack of awareness or basic investing information, the NYT columnist explains.