Key Terms in Impact Investing
There are key terms used in the impact investing world.
Here is a list of the ones to know:
1. Below market rate — an impact investment made with the expectation that the financial return will be less than the market rate of a startup’s investment.
2. Charitable purpose — the investment’s purpose has a charitable contribution that aligns with the foundation’s purpose.
3. Mission-related investments — an investment for social or environmental reasons with a financial return.
4. Program-related investments — a specific type of investment made by the foundation that aligns with its mission.
5. Divest/invest movement — investors using their investments to achieve social goals.
6. Due diligence — an in-depth evaluation of an investment.
7. Environmental, social, and governance — incorporates environmental, social, and corporate governance criteria into an investment analysis.
8. Market rate — the standard financial return an investor expects.
9. Socially responsible investing — an investment strategy that seeks investments that are considered socially responsible based on the business.
It’s important to know the difference between impact investing and non-impact investing.
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