Investing is said to be one of three keys to generating wealth (the other two are income and savings). The idea behind the process is to outpace the rate of inflation and avoid losing money. Thus investors seek opportunities where they see promise; usually already popular businesses or industries on the rise.
Recently, though, as a need for corporate social responsibility has taken center stage, many investors are using their money to make a difference–while also safeguarding their wealth. This is known as impact investing. In a previous blog, I spoke about impact investing as one of the most popular trends to look out for in the philanthropic sector. Economic experts define impact investing as money given to companies, organizations or individuals with the goal of creating positive outcomes for society as well as a return on investment.
A range of investors, from individuals to large organizations (i.e. The Gates Foundation, J.P. Morgan, and Prudential), have popularized this form of investing in recent years, funding everything from healthcare ventures to media programs for underrepresented groups.
United Way is using this concept to combat homelessness in America. As one of the oldest and largest nonprofits in the country, United Way along with its partners, are using an innovative program called Pay for Success, which entails upfront funding from investors who are reimbursed by the government if the outcome of their good cause is effective. The government benefits because the cause addresses the needs of its people without risking taxpayer money.
In Massachusetts, the program has made it possible to provide permanent housing to individuals who were dependent (or would have been) on emergency options, such as shelters. Over 410 people have already benefited from the program, and many of them have received access to healthcare.
Because of its success, the investors will receive a return, but they’ll also have something more. The confidence of having helped the less fortunate and the hope for making a difference in the future. Everyone benefits when we are all able to live happy and healthy lives.