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Impact Investing: How To Invest With A Social Conscience

Make financial gain and feel like you're doing good in the world too.

27/10/2016 5:17 AM AEDT | Updated 29/10/2016 9:46 AM AEDT
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It's a good idea to invest in something you're passionate about.

Impact investing is all about making an investment that delivers positive social benefits, as well as a nice financial return. It's the concept that harnessing the private sector for social good can not only be a game changer, but it can also be used to tackle big issues like education, childcare and clean energy.

What could be better than investing in something you're passionate about that's positive and, at the same time, makes oodles of money.

Antonia Ruffell, CEO of Australian Philanthropic Services told The Huffington Post Australia , philanthropy is suddenly yesterday's news and 'impact investing' is the new buzz phrase.

"But impact investing does create a sense of confusion. Is it investment? Is it philanthropy? Or is it both? The reality is that it's a grey area. At one end of the scale there are traditional philanthropic grants that have no financial return. On the other end of the scale, purists would argue that impact investments should offer market-rate financial returns as well as a social impact," Ruffell said.

"In the middle you have slightly compromised financial returns, tempered by the knowledge that you are doing some good."

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Impact investing delivers positive social benefits on top of a healthy financial return.

Ruffell said there's a feeling that there's a lack of impact investing opportunities available in Australia. But, when you look closely, it's clear impact investments can take many forms.

"Social benefit bonds are a good example. There's the highly successful GoodStart, which raised $95 million to acquire 678 childcare centres from ABC Learning in 2009 and has paid investors back their capital plus a 12 per cent return," Ruffell said.

"The Divest Invest movement is taking hold, with increasing numbers of foundations pledging to divest from fossil fuels and invest in clean energy. Then there's ethical investment and property funds, opportunities to invest in social businesses."

The trick is not to get too caught up in semantics. Also, remind yourself that the idea is quite simple.

"The idea really is not too complicated. You make an investment and deliver social benefits and a financial return," Ruffell said.

"It doesn't really matter if you're employing an ethical screen, willingly compromising financial returns for social good, or going all out to maximise investment returns. The important thing is that philanthropists are increasingly focussing on impact and social good beyond their grantmaking alone and across all aspects of what they do."

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