At the most basic level, impact investments are those that aim to generate a financial return as well as a social benefit. Because of the dual benefit, many refer to them as double bottom line investments. The promise of a financial return helps to leverage capital in ways that are beyond the scope of traditional grants.
The term “impact investment” was coined in 2007 when a group of investors met at the Rockefeller Foundation’s Bellagio Center to discuss a new form of financial investment that could achieve a social or environmental impact. Antony Bugg-Levine, who worked for the Rockefeller Foundation at the time of the meeting, is often credited with coining the term.
Impact investments can be made in a wide range of sectors, including agriculture, community development and affordable housing, health, financial services, and the environment. They are used by a wide variety of organizations and institutions, including foundations, community development financial institutions, high-tech start-ups, next-generation donors, and venture philanthropists.
Chart: What is an impact investment?
Source: Greene, Sean. A Short Guide to Impact Investing. Washington, DC: The Case Foundation, September 2014.