Question: What is "impact investing," and why should or shouldn’t philanthropists or investors consider doing it?

Answer: Impact investing is an investment philosophy and style that pursues positive social impact as well as positive investment returns. Like most investment philosophies, impact investing offers numerous degrees of risk and returns through a variety of strategies. Unlike more traditional philosophies, impact investing allows investors to contribute to issues in which they are interested in actively participating. Because of this, impact investing is different from socially responsible investing in the investor’s intent to actively participate in social causes.

Q: Can I achieve wealth-building results that are similar to traditional investment models while still investing in causes that are important to me?

A: Wealth can be accumulated and measured in numerous ways. Traditional calculations of wealth look at values of assets in currency terms. Impact investing calculates wealth through more qualitative measures of value. Impact investing considers investment results that measure portfolio returns as well as social and environmental returns.

Q: Why is impact investing an emerging paradigm shift in philanthropic circles?

A: Philanthropists typically yearn to make a difference in our society by allocating resources to specific social interests. Impact investing is a dynamic tool that allows for philanthropists to communicate how they’d best like their philanthropic funds invested. In the past these assets were subjected to more traditional investment strategies that only considered investment returns, and most often didn’t consider how those returns were earned or with what effects their investments had on society. With more impact investment alternatives coming to market, philanthropists are able to invest in assets that better mirror their personal philanthropic mission — causing a greater consideration for the types of assets in which they invest.

Q: Is social impact investing really becoming the next venture capital?

A: In some cases impact investing can be the next best venture capital option. Venture capital is used to seed newly established and high-growth potential businesses. There is a fallacy that only socially "bad" companies can be profitable. Sound investments can also be good for the environment and our society. Any startup companies who are first to establish products, services and processes that make a greater impact and serve a genuine need should fare well. Management (and financing) is most often the key to the success of these newly established companies.

Q: Give me some examples of causes in Hawaii that clients have invested in and gotten a strong return.

A: There are many. Alternative fuel sources, micro-loan financing, various housing developments and clean water are all great examples of strong impact investments.

Q: Likewise, what are some causes globally that have managed to achieve significant socioeconomic or environmental improvements because of social investors?

A: Global growth is an issue that requires socioeconomic and environmental planning. Causes that work towards improving the average lifestyle of a specific region, country or village tend to be some of the best infrastructural impact investments. Consider for a moment emerging and Third World countries that lack clean water supplies. Many companies who provide resources to build and improve infrastructure (pipes, pumps, transportation, etc.) fare well both socially and economically.

Q: What’s the typical financial profile of an impact investor?

A: Impact investors emphasize the importance of positive social and environmental impact. They prioritize these returns and understand the dynamic relationship between the risks associated with these goals and their market returns. Simply said, most impact investors tend to prioritize growth and prosperity for external issues and concerns, whereas traditional investor goals target internal/personal growth and prosperity.