The promiscuous use of terminology is an understandable, but unfortunate by-product of the growth of sustainable investing. Agreed-upon terms have long been a struggle as the field has developed, but the growth in interest has created a bandwagon effect, with new entrants appropriating terms to identify themselves as players.
Impact investing has been one of the more misused terms. All investments have an impact, but not all investments are impact investments. Impact investments are best described as investments made into companies, organizations, and funds with the intention of generating measurable social and environmental impacts while also earning a financial return.
The value of clarity is evident in an outstanding article in the NY Times this week by Pulitzer-prize winning author Tina Rosenberg. Published March 6th and titled “Issuing Bonds to Invest in People“, it is one of the best descriptions of impact investing I have encountered. Clear, comprehensive and illuminating, it is an excellent read for both investment professionals exploring the field and their clients.