Introduction

Impact investment, which provides financial assistance for social and environmental projects, has emerged as a hot topic on the world arena, with the potential to outperform traditional aid by tenfold over the next decade. However, the area is approaching a tipping point: will impact investment empower millions of people worldwide, or will it repeat the flaws that have plagued both aid and finance? In this post, we propose basic yet effective guiding principles for impact investing. The principles can be applied using a variety of impact management systems, and they are intended to be suitable for a wide range of organisations and funds. The principles may be implemented using a range of tools, techniques, and measuring systems. In the second part of this post, we offer some tips to help you be the change you want to see in the world, as Gandhi said.

What is impact investing?

According to the Global Impact Investment Network (GIIN), impact investing is the act of making investments in companies, organisations, and funds that will have a measurable, beneficial social or environmental impact while also generating a financial return. It represents a dynamic and new approach to finance, combining the twin objectives of generating financial returns and tackling major social and environmental issues (www.wallstreetoasis.com).

In contrast to typical investment models that prioritise profits over everything else, impact investing acts as a catalyst for change, encouraging investors to examine the long-term implications of their financial decisions. This investment strategy has gained traction as individuals, institutions, and organisations become more aware of the critical need to address global concerns while also pursuing financial objectives. The Global Impact Investing Network (GIIN) puts the global value of impact investments at more than $1.57 trillion, with large institutional investors such as fund managers and insurance firms increasingly entering the market. Between 2019 and 2024, the sector expanded by an average of 21% per year.

According to the “Market Research Future” website, Dhapte Aarti (2025) anticipated the impact investing market size to be $1525.96 billion (USD) in 2024. The impact investing market industry is predicted to increase from 1751.23 (USD Billion) in 2025 to 6046.80 (USD Billion) in 2034. The Impact Investing Market CAGR (growth rate) is anticipated to be around 14.8% between 2025 and 2034.

At its core, this investing strategy aims to effect real and verifiable changes in environmental sustainability, social equality, and governance. In addition to avoiding harm, impact investing attempts to drive solutions and improvements actively in these fields, setting it apart from some traditional investment methods.

Guiding principles for impact investment

In this section, we propose three guiding principles (sometimes known as a “transform framework”) to assist investors in defining and differentiating impact investments. They provide an overall architecture for best practices in impact management systems and necessitate openness through verification reports, which contributes to the advancement of the impact investing industry (Simon, 2017).

(a) Involve communities in design, governance, and ownership.

Engage communities in the design, governance, and ownership of projects that will have an impact on their lives. Local participation in development projects is always preceded by a community engagement process. Thus, community involvement and participation allow people to have their voices heard in the development and delivery of services.

Indigenous communities in Southeast Asia, for example, are reclaiming and managing their land for sustainable farming through participatory techniques after years of exploitation. With external investment and training, they have created eco-friendly agricultural cooperatives that provide both food security and a consistent source of income, independent of outside assistance. This form of economic self-sufficiency, based on participatory planning, enables local communities to break free from cycles of dependency on external forces like the government or international donors. Instead, they’re developing systems that represent their values and future goals.

(b) Create more value than you extract.

Impact investors should be able to demonstrate how their capital generates unique value outside of traditional markets. Impact investors must play “a contributory or catalytic role in generating an improvement over the status quo.” Impact investors can offer value by accepting lower financial returns or higher risks than mainstream investors. They must, however, exercise caution when and how they use sacrifice tactics.

(c) Ensure a fair balance of risk and return for investors, entrepreneurs, and communities.

Investors must grasp the risk-return relationship. It is a fundamental idea that affects investing decisions and outcomes. When evaluating investing options, it is critical to assess the risks and expected returns. A wise investor carefully assesses the dangers of an investment against the potential returns.

Although these concepts seem undeniable, they are frequently absent from impact investing arrangements.

In our view, properly adopting these principles necessitates a purposeful effort that includes continual contemplation on how you, generally unintentionally and without malice, recreate unequal power relations and extractive investment structures from the traditional finance world.

Caveats:

Evaluate your role in systemic change through reflection, reading, and discernment. Allow yourself to pause and consider the systemic changes your investments can bring about to contribute to a more equal and just form of capitalism. Many in the impact industry come from traditional finance backgrounds, which can unintentionally perpetuate inequality and unfairness between investors and beneficiaries. Begin small, starting with what you know: Investing does not require large budgets or complex tactics. Individuals managing small portfolios benefit from micro investing since it allows for small, consistent investments, often as little as a few euros.

-Network with other similar projects: We cannot effect positive change without community. Beyond financial transactions, impact investing thrives on collaboration, shared knowledge, and a collaborative commitment to making a significant social and environmental difference. One of the most effective tools in an impact investor’s toolkit is their network, which is a supportive group of like-minded individuals, organisations, and resources that can help them amplify their efforts and generate more change.

-Seek for impact investing networks, forums, and communities where you may meet other investors, entrepreneurs, and experts who share your desire to effect positive change. Platforms such as social media groups, online forums, and impact investment conferences provide excellent opportunities to network, share insights, and collaborate on impact initiatives.

Conclusion

In a 2020 speech to the Economy of Francesco, Pope Francis emphasised the importance of facing pressing challenges such as climate change, mass displacement, and rising inequality. He stated, “The future will thus prove an exciting time that summons us to acknowledge the urgency and the beauty of the challenges lying before us.” This moment serves as a reminder that we are not bound to economic frameworks that focus solely on profit and the advancement of advantageous public policies, which are indifferent to their human, social, and environmental repercussions. – Pope Francisco

While not all organisations are ready to boldly enter the complex world of impact investing, we can all reflect on how each individual decision we make, such as where we allocate capital, what rate we charge, what terms we set, and whose voices we invite to the decision-making table, shapes our financial and economic systems.

References

Dhapte, A. (June 2025). Report on the size, share, and trends of the impact investing market for 2034. Retrieved from https://www.marketresearchfuture.com/reports/impact-investing-market-22940

Hand, D., Ulanow, M., Pan, H., & Xiao, K. (October 2024). Global Impact Investing Network Report: “Sizing the Impact Investing Market 2024.”

Pope Francis (November 2020). International Online Event: “The Economy of Francesco—Young People, A Commitment, The Future.” Basilica of Saint Francis of Assisi.

Simon M. (2017). Real Impact: The New Economics of Social Change. Bold Type Books.