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The Spectrum of Private Capital
While traditional investments focus primarily on financial returns, ESG investing fundamentally aims to do both well and good, thereby achieving a double-bottom line.
This approach was inspired by the United Nations' Principles for Responsible Investment (UNPRI), initiated in 2005.
However, while ESG investing incorporates ethical considerations into investment decisions, its focus is not necessarily on creating additional impact.
ESG investments might avoid harm or support general good practices, but they don't always aim for or measure specific, additional impacts.
This is where the concept of additionality sets impact investing apart from ESG by emphasizing the direct, tangible impacts of investments.
It ensures the impact investing goes beyond passive screening or risk mitigation, actively contributing to positive change.
On the other side of the spectrum of private capital, there is philanthropy.
Philanthropy remains a vital and active component within the impact investing ecosystem; continuing to fulfill essential roles, particularly in areas where return on investment may not be immediately evident or measureable.
Related Report
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The Business of Impact Investing in 2023
Impact investing is a form of investing that believes that every dollar invested can make a difference, while producing a profit. Over the past 20 years, impact investing has undergone a remarkable evolution, driven by a confluence of societal, economic, and technological factors. These influences have propelled impact investing into a crucial mechanism for addressing societal needs, traditionally the domain of public funding. In 2022, the impact investing market sat at US$1,146 billion, growing at a healthy compounded annual growth rate (CAGR) of 29% over the last four years. This special report features interviews with thought leaders in the impact investing space, and offers an insightful perspective on the current and future state of impact investing, its challenges and opportunities, and highlights case studies of investors, social enterprises, and the impact they are having on the world.
