James Hyndman

How can impact investing help you grow as a leader?

The notion of capitalism is changing. It is no longer based solely on the premise of gaining profit – rather, professionals are looking for capital that interacts with the world in a whole new way. As a result, impact investing is becoming more and more popular. This is the purchase of shares in organisations that intend to make a positive impact in the world around us, as well as generate profit. Examples of this include investments in renewable energy, sustainable agriculture, conservation, affordable housing, healthcare, education or even microfinance.

It’s an emerging trend in financial services – but it can also shape business leadership.

Renewable energy is a huge area for impact investments.Renewable energy is a huge area for impact investments.

Impact Investing Makes Financial Sense

While profit is not the only goal of impact investment, long-term financial stability is still important for any company – and something that the impact strategy delivers. This is clear if we take a look at the statistics released by the Global Impact Investing Network (GIIN).

Some 19 per cent of impact investors surveyed by the GIIN stated that their investments were outperforming relative to their financial expectations, whereas 70 per cent said their financial returns were in line with what they’d expected.

Strong leadership needs sound financial decisions.

Additionally, the social and environmental impacts that these investments are making continue to rise. Over a quarter (27 per cent) said the impact was outperforming relative to their expectations, and a further 72 per cent mentioned that the effects of their investments was in line with their initial forecast.

Strong leadership needs sound financial decisions. The clear goals and proven profitability of impact investing shows that business leaders can make bold, forward-thinking decisions without sacrificing financial goals – conservatism isn’t always the answer.

Impact investments have so far proved profitable.Impact investments have so far proved profitable.

It’ll Also Help You To Clearly Define Long-Term Goals

Clarity in planning is key for business leadership, and the message of impact investing provides an excellent example to follow. Under the impact model, businesses take into account the social, environmental and moral responsibilities of every involved party.

It produces decisions based on positive outcomes in the long-term for everyone, rather than short-term profitability. In some cases, this will mean immediate financial gain is minimised in favour of a good result for suppliers or manufacturers.

This is an important model for any business leader. Looking beyond today’s bottom line and into how everyone can thrive five, ten, twenty years from now proves your best interests are everyone’s interests.

Impact Investing Teaches Accountability 

Leaders have to take responsibility for their actions, both positive and negative. In the age of social media kickback and instant reputational damage, the leader who assumes accountability for their business will come out better than those that divert and downplay.

This is a lesson impact investors adhere to on a strict basis. Fronting up to social and environmental responsibilities enhances both external and internal relations for a business – even those who are not incorporating impact investing into their financial strategy can learn a lot about accountability from the strategy.

The lessons of impact investment can be applied to any business – high performing investments, clear goals and ethics, and both eyes on the future are facets of every successful company.