An impact asset is a financial instrument or holding specifically utilized within the field of impact investing, aimed at generating measurable social and environmental benefits alongside a financial return.
Impact investing represents a distinct approach to allocating capital. Instead of focusing solely on financial gains, investors deploying capital into impact assets seek to achieve positive, tangible outcomes for society or the environment. These outcomes are intended and measured, differentiating impact investing from traditional investments or philanthropy.
According to the context of impact investing, these investments occur across various established financial structures. This means impact assets aren't necessarily a completely new type of asset, but rather existing asset types used with a specific impact intention.
Where Impact Assets Can Be Found
Impact investing, and therefore the deployment of impact assets, takes place across diverse asset classes. The reference highlights several key areas where impact capital is actively deployed:
- Private Equity/Venture Capital: Investing in companies or funds focused on generating both growth and positive impact.
- Debt: Providing loans or purchasing bonds issued by organizations or projects with clear social or environmental goals.
- Fixed Income: This broad category includes various debt instruments, such as green bonds, social impact bonds, or other debt vehicles financing impactful initiatives.
These asset classes can be targeted for impact investments in both emerging and developed markets, demonstrating the global reach of this investment approach.
Financial Returns and Impact Assets
A key characteristic of impact assets within impact investing is the expectation of financial returns. Unlike pure philanthropy, impact investors generally anticipate a return on their investment. The reference notes that depending on the investor's goals, these investments can "target a range of returns from below-market to above-market rates." This flexibility allows investors with different financial objectives to participate in impact investing.
In summary, an impact asset is a financial vehicle – such as a share in an impact fund, a bond financing renewable energy, or debt provided to a social enterprise – chosen and managed with the explicit dual goal of achieving both positive, measurable impact and a financial return.
