Are you considering becoming an investor? If yes, this article is a must-read because we are going to talk about impact investing.
Investors have many investment options, from traditional to digital-generating assets. The returns vary depending on the niche, volatility, market trends, economic conditions, and other related factors.
Over time, most investors have become aware of their important role in sustaining worthy causes, including environmental matters. With the rising environmental problems such as pollution and climate change, many investors venture into impact investing.
What Is Impact Investing?
Impact investing refers to investments that focus on generating environmental and social benefits on top of financial returns. Impact investors support environmental programs and endeavors such as green buildings, renewable energy, and electric vehicles.
Interested investors can seek the help of impact investing advisors to get expert advice and make good decisions. The most common impact investments investors can invest in include the companies that provide:
- Environmentally-focused technologies like analytics, drones, etc.
- Environmentally-friendly services
- Eco-friendly packagings like eco bags and boxes
- Sustainable energy such as solar and wind energy
- Waste-free end products
- Zero emissions and harmful chemical byproducts
Environmental Benefits Of Impact Investing
So, what are the benefits of Impact investing? We will mention the environmental benefits of impact investing below.
1. It Helps Reduce Carbon Footprint
The carbon footprint is the negative result of greenhouse emissions. Carbon dioxide, methane, and other greenhouse gases result from traditional energy, food consumption, transportation, and factory emissions.
According to a trusted source, the United States is the largest carbon dioxide emitter, with an estimated 416,738 metric tons of carbon emissions in 2020. China lands the second carbon dioxide-producing country globally, followed by The Russian Federation, Germany, and The United Kingdom.
Impact investing can help reduce carbon footprint by supporting sustainable projects and companies. For instance, an impact investor can invest in stocks that support seasonal and local products, eco-friendly packaging, or solar energy.
In addition, impact investors can invest in environmentally-friendly technologies to help reduce carbon dioxide in the atmosphere. Good examples include carbon reduction technology for new cars, carbon mineralization, and new biofuels.
2. It Helps Reduce Water Pollution
Water pollution is a common problem in underdeveloped and developing countries. Many people settle close to rivers, lakes, and other bodies of water where they illegally build homes. As a result, tons of garbage accumulate in these areas, polluting the water.
Illegal mining operations, irresponsible manufacturing, and other ill business practices can cause water pollution. Toxic chemicals leak into water streams and underground, affecting water quality and the community around the area.
Impact investing can help address problems in water pollution. For instance, impact investing in affordable housing can help people from illegally settling in coastal areas and nearby bodies of water to avoid water pollution.
Many companies offer tech solutions to help clean water. Impact investors can invest in companies that develop water cleaning technologies to help reduce water pollution. A good example includes agricultural irrigation technology that involves cleaning water for farm use. This technology diverts used freshwater to farms for crop irrigation, saving water consumption and reducing water pollution.
3. Impact Investing Helps Reduce Deforestation
Because of the rising demand for wood products, many companies like furniture stores, construction firms, and manufacturing companies cut down trees and turn them into furniture items, lumber, plywood, etc. Moreover, many forests have become highly vulnerable to deforestation due to commercialization or urbanization.
Impact investing is an excellent way to help reduce deforestation. For instance, impact investors can support companies that allocate a percentage of their profits to tree-planting efforts to help reduce deforestation.
Satellite imaging investments can help safeguard forests by allowing conservationists to monitor and study land changes to identify deforestation accurately. In that way, private and government authorities can act quickly to mitigate the problem.
Impact investors can also support tech companies that provide drone technology for reforestation. Drone technology can help conservationists observe forest conditions. This technology supports automated planting methods without hiring many people to monitor forest activities.
4. It Helps Implement Proper Waste Management
Waste management problems arise because of a lack of consumer education, discipline, and environmental law reinforcement. Due to poor waste management, landfills quickly accumulate rubbish, leaking harmful toxins and substances into the ground and water.
Impact investing can help in the strict implementation of proper waste management. With sustainable product packaging, less plastic and non-biodegradable trash ends up in landfills. For instance, impact investors can support companies that promote recycling, reusing, and reducing byproducts and waste materials. That way, they can help reduce the amount of waste that ends up in landfills while earning profits.
Many appliance manufacturers and gadget brands have recycling projects for electronic waste. Moreover, food companies also support food waste reduction programs by incentivizing customers who consume all the food on their plates. Impact investors can support these companies to motivate entrepreneurs to find more waste management solutions while earning higher revenues.
5. Impact Investing Helps Protect Wildlife
Animals are important in balancing the ecosystem. Humans source food, medicine, clothing, and other products from animals. But many wildlife creatures such as certain species of rhinos, fish, hamsters, and birds are becoming extinct because of illegal hunting and deforestation.
Impact investing can help safeguard animals. Investors can support companies that offer wildlife-friendly products and services. Moreover, impact investors can help fund research and development efforts to understand better the emerging needs of animals in the modern, digital era.
Impact investors can also invest in companies with wildlife conservation projects. Examples include e-commerce businesses and retailer brands that give a percentage of their earnings to wildlife protection programs.
In addition, impact investors can also support companies that promote ‘adopt a pet’ programs. Doing so can help prevent mass killings of stray dogs, cats, and other abandoned and unclaimed animals in animal centers. They can also finance animal-related businesses such as animal care centers, veterinary clinics, zoos, etc.
One of the most lucrative investments is impact investing, which aims to generate environmental benefits on top of financial returns. Impact investing is a great way to help protect the environment while gaining profits.
While implementing environmental projects and practices can be challenging for many companies, many strive to do it because they attract more impact investors to grow their businesses.