Table of Contents
Impact investing is the practice of investing in positive outcomes, not merely avoiding or limiting social or environmental damage. Impact investing can target a wide range of sectors — including healthcare, transportation, energy, and agriculture — with the aim of also generating returns.
Impact investing is not new, and impact strategies can overlap with socially responsible or sustainable investing strategies. Although the success of impact investing strategies can be hard to measure, these investments continue to grow at a compound annual growth rate of 21%, with a global AUM of more than $1.1 trillion, as of October 2025.
That said, impact investing tends to be limited to large institutional investors and private foundations, though individual investors can participate by purchasing certain types of impact funds.
Key Points
• Impact investing aims to create measurable positive social, environmental, or other outcomes, while simultaneously seeking financial returns.
• Impact investing requires investor intentionality, data-driven decision-making, and the active management of both impact and financial goals.
• Unlike Socially Responsible Investing (SRI), which often focuses on avoiding harmful industries, impact investing proactively supports companies and projects designed to create positive change.
• While historically dominated by large institutional investors and foundations, individual investors can participate through vehicles like mutual funds and ETFs.
• Assessing success can be difficult, so investors often rely on voluntary frameworks, such as the United Nations Sustainable Development Goals (SDGs) or the Impact Performance Reporting Norms, to guide and evaluate their efforts.
How Does Impact Investing Work?
The term impact investing is relatively new, but the concept of investing for social good is not. The origins of impact investing stem from ethical and faith-based investment frameworks that date back hundreds of years, which eventually led to the formation of socially responsible investing (SRI) strategies as well as environmental, social, and governance (ESG) strategies in modern times.
The Origins of Impact Investing
In 2007, the Rockefeller Foundation coined the phrase impact investing with the aim of “using profit-seeking investment to generate social and environmental good.” Two years later, this led to the creation of an independent entity: the Global Impact Investing Network (GIIN), a nonprofit that conducts research on impact investing.
The concept of impact investing today has expanded to include a broad range of investors and investment vehicles. Impact investing may be practiced by individuals who invest online or through other channels, as well as private foundations, family offices, endowments, pension funds, and other institutional investors.
The growth of impact investing has been fueled by several factors, including the rise of social media and the increasing availability of data and analytics, and the push to establish widely accepted reporting standards, such as the Impact Performance Reporting Norms. These new guidelines were created by more than 350 stakeholders, and are designed to improve the transparency and accessibility of impact reporting to help make companies’ outcomes more measurable for investors.
Impact investing is also being driven by the continued awareness of businesses’ and investors’ roles in solving social and environmental problems. Individual investors can take this new knowledge and consider certain index funds that focus on various causes.
Characteristics of Impact Investments
As outlined by the Global Impact Investing Network, the following are considered characteristics of credible impact investments:
• Investor intentionality: An investor must intend to make a measurable positive impact with their investment. This requires a certain level of transparency about both financial and impact goals. The investor’s intent is one of the main differentiators between traditional investments and impact investments.
• Utilize data: Impact investments must use data and evidence to make informed decisions to achieve measurable benefits.
• Manage impact performance: Specific financial returns and impact goals must be established and managed.
• Contribute to the growth of the industry: The goal of impact investments is to further social, economic, or environmental causes. Impact investing toward these goals must be intentional and measured, not just guesswork.
Impact Investing vs. Socially Responsible Investing
Impact investing is often associated with socially responsible investing (SRI). Both SRI and impact investing seek to generate positive social or environmental impact for self-directed investors, but they differ in some ways.
SRI typically focuses on actively avoiding investments in companies involved in activities that are considered harmful to society, such as the manufacture of tobacco products or the production of weapons. SRI also typically focuses on promoting corporate policies considered socially responsible, such as environmental sustainability or gender diversity.
In contrast, impact investing focuses on making investments in companies or projects that are specifically designed to generate positive social or environmental impact.
Impact Investing vs. ESG
The main difference between impact investing and ESG (environmental, social, and governance) is that ESG strategies incorporate a range of environmental, social, and governance factors in investing decisions.
Generally speaking, ESG investing strategies are aligned with the United Nation’s 17 Sustainable Development Goals (SDGs). But ESG goals focus chiefly on business practices, operations, products: e.g., how a company does business. The SDG principles are meant to evaluate outcomes: what a company is trying to achieve, whether that’s improving water quality and sanitation, providing better education, or other targets — and whether it’s successful.
Start investing with up to $3,000 in stock.
For a limited time only, open and fund a SoFi Active Invest account and get up to $3,000 in stock.
Offer ends 8/16/26*.
Why Is Impact Investing Important?
While some investors may not believe impact investing is important, and think that the central aim of investing is to see a profit, impact investors are committed to the idea of using money to accomplish a meaningful goal.
Impact investing allows investors to put their money into companies or projects that they believe will positively impact society or the environment, while potentially providing returns. Second, impact investing can help attract more capital to social and environmental causes.
When more people invest in companies or projects that aim to make a difference, it can help to increase the amount of money and resources available to make positive change happen. Those investments, however, may not offer the best opportunities to generate returns. While there’s no way to know for sure how an investment will shake out over time, investors should familiarize themselves with the concept of opportunity costs.
Finally, impact investing can help create jobs and support businesses working to improve society or the environment. This can have a ripple effect, as these businesses often provide goods or services that benefit the community.
Recommended: Stock Market Basics for Beginners
Examples of Impact Investing
Impact investing is usually done by institutional investors, large asset managers, and private foundations. Some of the largest organizations focused on impact investing include, but are not limited to:
• The Bill & Melinda Gates Foundation: This foundation directs a $2.5 billion Gates Strategic Investment Fund. This fund makes direct equity investments, provides low-interest loans, and utilizes other impact investing tools in promoting global health and U.S. education.
• Boston Common Asset Management: This is a women- and employee-owned independent firm with about $4 billion in AUM. They invest in climate issues, health and community well-being, as well as human rights.
• The Omidyar Network: Created by eBay founder Pierre Omidyar, this fund bills itself as a philanthropic investment firm, which has committed over $1.5 billion to nonprofit institutions that reflect its commitment to responsible and democratic use of technology.
Types of Impact Investments
There are various impact investment areas, including but not limited to microfinance, renewable energy, sustainable agriculture, and affordable housing.
Impact investments can be made through almost any existing type of vehicle: investing in stocks, mutual funds, exchange-traded funds (ETFs), green bonds, various types of commodities, real estate, and more. In some cases, impact investing may provide some portfolio diversification.
Impact investments don’t have to be equity investments either; they come in many different investment vehicles, like bonds and alternative investments.
Recommended: Beginner’s Guide to Sustainable Investing
Evaluation Methods for Impact Investors
There are various ways to measure impact investments, but reporting standards are generally voluntary, not mandatory. As noted above, United Nations Sustainable Development Goals (SDGs) are one framework for measuring outcomes. The SDGs are a set of 17 goals that the United Nations adopted in 2015.
The SDGs include goals such as “no poverty,” “zero hunger,” and “good health and well-being.” Each SDG has a specific target to be achieved by the year 2030.
Impact investors often seek to invest in companies or projects that will help achieve one or more of the SDGs. For example, an impact investor might invest in a company working on a new technology to improve water quality, contributing to the SDG goal of ensuring access to water and sanitation for all. But not all companies adhere to these goals.
Another framework for measuring impact is the Impact Management Project (IMP). The IMP is a global initiative that seeks to develop standards for measuring and managing impact.
How to Start an Impact Investment Portfolio
Though foundations and institutional investors are the heart of the impact investing world, individual investors can also make investments in companies and funds that may positively impact society by investing directly in certain companies, or mutual funds. Here’s how to do it.
1. Decide what type of impact you would like to make. Do you want to see your money put to work developing clean energy technology, plastic-free products, fair wages, or another goal?
2. Research different types of investments, whether that’s buying stock in a company, an exchange-traded fund (ETF) with an impact investing strategy, or bonds.
3. Finally, make your investment with a brokerage, and monitor your portfolio to ensure that your investments have a positive impact.
In order to become an impact investor, it’s important to consider both the financial potential of your investment, as well as its social, environmental, or economic impact.
Some investors have a higher risk tolerance than others, and some might be willing to take a lower profit in order to maximize the potential positive impact of their investments.
The Takeaway
Impact investing involves making investments with the aim of improving certain outcomes in the world, while also generating potential returns. There is no one-size-fits-all answer to how to balance financial return and social or environmental impact, however. Impact investors must make investment decisions that are aligned with their values and objectives, and seek out companies that do likewise.
Not all impact investments are created equal. Some impact investments may have a higher financial return potential than others, but may also have a lower social or environmental impact, and vice versa. Impact investors must consider both financial return and the desired impact they hope to see when making investment decisions.
Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest®. You can trade stocks, ETFs, or options through self-directed investing with SoFi Securities, or simply automate your investments with a robo advisor from SoFi Wealth. You'll gain access to alternative investments and upcoming IPOs, and can plan for retirement with a tax-advantaged IRA. With SoFi, you can manage all your investments, all in one place.
Take a step toward reaching your financial goals with SoFi Invest.
FAQ
What is an example of impact investing?
One example of impact investing would be, say, a university endowment fund that decides to buy stock in innovative medical technology companies to fulfill its mission of supporting new products or services within the healthcare sector.
Is impact investing risky?
All investing includes the risk of loss. Impact investing can be more risky because, generally speaking, a company that is committed to making a certain impact may or may not be held to certain financial standards or reporting requirements. There is also no guarantee that the organization will generate returns.
How do impact investors make money?
Impact investors might potentially see a return on their investment if the company or entity they invest in is financially successful. The financial success of any company is not guaranteed however, and an impact-focused organization may attain its impact goals, yet not make a profit.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Before investing, carefully consider the investment objectives, risks, charges, and expenses detailed in a Fund’s prospectus. This document contains important information and must be read carefully prior to investing; you can find the current prospectus by clicking the link on the Fund’s respective page.
Alternative investments are highly risky and may not be suitable for all investors. These investments often involve leveraging, speculative practices, and the potential for complete loss of investment. They typically charge high fees, lack diversification, and can be highly illiquid and volatile. Be aware that both registered and unregistered alternative investments, including Interval Funds, are not subject to the same regulatory requirements as mutual funds, and their illiquid nature may restrict your ability to trade on your timeline. Always review the specific fee schedule for Interval Funds within their prospectus.
Options involve substantial risk of loss and the possibility an investor may lose the entire amount invested. Before starting options trading, investors should be familiar with the Characteristics and Risks of Standardized Options . TTax implications with options should be considered. Consult your tax advisor to understand any impacts to your taxes.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Exchange Traded Funds (ETFs): Before investing in Exchange Traded Funds (ETF), always read the fund's prospectus. It contains important information about the fund’s objectives, risks, and fees. You can get a prospectus from the fund company’s website or by emailing our customer service at [email protected].
Mutual Funds (MFs): Investors should read and carefully consider the information contained in the prospectus, which contains the Mutual Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or SoFi's customer service at: 1.855.456.7634. Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risks. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may have tax implications.
Investment Risk: Diversification can help reduce some investment risk, but cannot guarantee profit nor fully protect in a down market.
SOIN-Q126-110