Social Impact Investing | Why is a $ Return So Important?

A lot of impact investors feel they are somehow being selfish if they focus too much on their financial return, but we don’t think it’s selfish at all. In fact, at the Impact Angel Group, we think it’s exactly the opposite. Impact investors should be equally concerned about creating a significant impact AND achieving a financial return, and here’s why:

Photo by Happy Money

  1. A failing business isn’t very impactful. If you support a business with a high likelihood of financial success, you’re also supporting a business with a high likelihood of sustainable impact.
  2. Handouts are not productive: It’s been proven time and time again that people place more value on things they have to pay for. If you give entrepreneurs free money, they’ll be less likely to use it efficiently.
  3. You can reinvest your returns. Achieving a high rate of return will allow you to invest in more social impact companies and bring more capital to the table.
  4. Social impact needs successful exits. Unfortunately, there are fewer investors interested in making a social impact than achieving a financial return. To really make social impact investing mainstream, we have to lure mainstream investors and let’s face it — it’s far easier to lure investors with dollar signs than bleeding hearts.
  5. It doesn’t have to be an impact last investment to achieve a return. Even if it’s a loan with extremely low interest, it is still a return. If the company delivers that return, it simply means the company is still in existence and has become financially self-sustaining. And lastly…..
  6. Impact Investing is not philanthropy. There are millions of charities looking for much needed and tax deductible donations, and there will always be a time and a place for that. The point of impact investing is to support solutions to complex global problems that don’t require and more importantly, don’t compete, with philanthropic donations.
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