Frequently Asked Questions

Impact investing means investing intentionally with the aim of generating both a financial return and a positive social or environmental impact.

This means looking not only at the impact of the company, project or fund you invest in, but also at the contribution you make as an investor. A company may, for example, contribute positively to climate, health or biodiversity, without every investment in that company automatically qualifying as an impact investment.

Impact investing therefore considers both company impact and investor impact: what change does the company create, and how does your capital or your actions as an investor contribute to that change?

The spectrum of impact investing categorizes investments based on their financial return and social/environmental impact. 

It ranges from investments that seek market-rate returns with positive impact to investments that prioritize transformative impact, potentially with lower or no financial return.

Impact investing encompasses a wide range of sectors and asset classes. Here are some common themes:

• Renewable energy: investments in solar, wind, hydropower, and other renewable energy projects.
• Microfinance: investments in microcredit institutions or organizations that provide financial services to underserved populations.
• Regenerative agriculture: investments in regenerative agriculture, agroforestry, or initiatives that promote sustainable and ethical farming practices.
• Healthcare: investments in healthcare facilities, medical technology, or pharmaceutical companies focused on improving access to high-quality healthcare.
• Impact enterprises: investments in companies that prioritize social or environmental impact alongside financial returns.
• Sustainable infrastructure: investments in sustainable transportation, water and sanitation systems, green buildings, and smart cities.
• Affordable housing: investments in housing projects that provide affordable and accessible homes for low-income communities.
• Education: investments in educational initiatives, including schools, vocational training programs, or educational technology platforms.
• Water and sanitation: investments in clean water systems, wastewater treatment facilities, and water conservation projects, especially in developing markets.
• Impact funds: investments in impact investing funds across various sectors and themes.

These are just a few examples. Impact investing is constantly evolving and offers investors opportunities to align their investments with a wide range of social and environmental objectives.

Depending on your current financial service providers, you can, for example, work together with your bank, family office, or financial advisor.

Of course, you can also find support within the PYM network by connecting with like-minded people, our ambassadors, who are happy to share their experiences. In addition, we offer online courses on the basics of impact investing.
Finally, our Trusted Partners and Network Partners can help you on your way to making more impact.

• Direct investments in social enterprises, for example in the form of shares, loans, convertible bonds, grants, donations, and other financial instruments. 
• Impact funds, such as private equity, venture capital, engagement funds, microfinance funds, and funds of funds.
• Crowdfunding in the form of shares, loans, and donations.
• Listed securities such as shares and bonds, for example through sustainable or thematic investment funds, Exchange Traded Funds (ETFs), or managed portfolios. Through thematic investing, you can deliberately invest in companies active in social or environmental themes such as climate, health, or biodiversity. Whether you also create impact as an investor depends on the contribution you make yourself. In listed markets, this investor impact can arise through active ownership: by using voting rights and engaging with companies, investors can influence corporate policies and business practices and thereby contribute to changes in the company’s impact.
• Green bonds are issued to finance projects that promote sustainability and contribute to environmental objectives.
• Social Impact Bonds (SIBs) are financial instruments that finance social programs based on achieving measurable results. Investors provide upfront capital and returns depend on the success of the program.

These products vary greatly in characteristics such as liquidity, time horizon, risks and diversification, impact potential, personal involvement, and minimum investment size.
Which product suits you best naturally depends on personal preferences and circumstances.

There is no single route to getting started with impact investing. However, there are a number of steps that can help you move from initial interest to making your first investment:

1. Learn about impact investing. Understand the basic principles and explore the different ways in which you can invest for impact.

2. Define what matters to you. Think about the social or environmental themes you want to contribute to, as well as your financial objectives.

3. Learn from other investors. Talk to people with experience in impact investing and hear how they have approached their own choices.

4. Explore suitable investment opportunities. Look at funds, companies, or other investments that fit your goals, and seek advice from specialised professionals where relevant.

5. Assess your options carefully. Consider not only financial risk and return, but also the intended impact and the contribution you can make as an investor.

6. Get started and keep learning. Build your portfolio step by step, monitor both financial and impact results, and adjust your approach as you gain experience.

At PYM, we are happy to support you at different stages of this process, for example through introductory sessions, peer-to-peer conversations, Impact Circles, and our network of specialised partners.

Would you like to know which next step may fit your situation best? You can also explore the journeys for:

With impact investments, we can address the pressing problems of our planet and align investments with our personal values, while at the same time potentially generating financial returns. 

In addition, impact investing stimulates innovation and market transformation, increases stakeholder engagement, and shapes a sustainable economy.

Impact investments can be risky due to new business models, markets, services, and products. Many impact enterprises are still small and in an early stage, which is riskier for both impact and conventional investments. 

There are also several factors that can reduce the risk of impact investments: 

• Impact enterprises can often count on a lot of goodwill from stakeholders and have access to grants, concessionary capital, and patient investors.
• The founders and team members are motivated by impact and not just by profit.
• Impact enterprises can benefit from the general trend towards a more sustainable economy, influenced by new laws and regulations and the increased awareness of consumers and employees.

Here are a few examples to increase the impact of your investments:

• With direct investments, you can provide extra support to the social enterprise with your knowledge, time, and network. 
• Pay attention to the additionality of your investment: does your investment really make a difference?
• Can your investment unlock other investments, for example by being one of the first to invest, matching other investments, accepting more risk than others, or activating your network? This is also known as catalytic investing.
• In listed investments, you can influence companies through voting and engagement. By actively using your voting rights and engaging with companies as a shareholder, you can contribute to changes in their policies, strategy, and business practices.
• You can share your experiences with impact investing with others and motivate them to get started themselves.
• Investing in scalable solutions that have the potential to bring about systemic change.

Additionality refers to the difference an investment actually makes compared with what would have happened without that investment.

In impact investing, this means considering whether your capital, knowledge, network, or involvement as an investor enables something that otherwise would not have happened, would have happened later, or would have happened on a smaller scale. Examples include financing a company that struggles to attract other capital, accepting additional risk, or helping to bring in other investors.

To assess additionality, investors look at the so-called counterfactual scenario: what would most likely have happened if the investment had not been made? The greater the difference between that scenario and what becomes possible as a result of the investment, the greater the additionality.

Blended finance is the strategic combination of different forms of capital to attract additional commercial financing for social or environmental goals.

Public, philanthropic, or other impact-oriented investors can, for example, provide grants, guarantees, concessional loans, or risk-bearing capital to improve the risk-return profile of an investment. This can make projects or companies investable for commercial investors who might otherwise not participate. 

The aim of blended finance is therefore to use capital strategically to mobilise other investors and make more financing available for positive impact.

Committed capital is the total amount of capital that investors have committed to invest in a Private Equity fund, typically over the lifetime of the fund, which can span several years.

However, investors do not provide the full committed amount upfront. Instead, they contribute capital as requested by the fund manager (Capital calls), based on the investment opportunities and capital needs of the fund.

Sustainable investing is an investment approach in which environmental, social, and governance (ESG) factors are considered alongside financial factors when making investment decisions.

An investor may, for example, exclude companies because of certain activities, select companies that perform relatively well on ESG criteria, or invest in sustainability-related themes. In this way, sustainable investing can help create a portfolio that better aligns with specific sustainability goals and values.

The main difference with impact investing lies in the objective and the role of the investor. In impact investing, there is an explicit intention to generate positive social or environmental impact, while also considering the contribution the investor makes to achieving that impact.

The Sustainable Development Goals (SDGs) are a set of 17 global goals established by the United Nations in 2015 to guide international efforts towards a more sustainable and just future. 

The SDGs are designed to address urgent social, economic, and environmental challenges and to promote sustainable development worldwide. 

The 17 Sustainable Development Goals are as follows:

1. No poverty 
2. Zero hunger
3. Good health and well-being
4. Quality education
5. Gender equality
6. Clean water and sanitation
7. Affordable and clean energy
8. Decent work and economic growth
9. Industry, innovation, and infrastructure
10. Reduced inequalities
11. Sustainable cities and communities
12. Responsible consumption and production
13. Climate action
14. Life below water
15. Life on land
16. Peace, justice, and strong institutions
17. Partnerships for the goals

These goals cover a wide range of topics, from eradicating poverty and hunger to promoting gender equality, clean energy, sustainable cities, climate action, and more. 

The SDGs serve as a universal call to action, urging governments, businesses, civil society organizations, and individuals to work together to achieve these objectives by 2030.
Unfortunately, SDG 18 “No exploitation of animals” is missing from the official list, but fortunately, there is a lot of attention to this topic within the impact community.

Engagement funds are investment funds that are actively involved with the companies in which they invest. They use their influence as shareholders to increase impact and align investments with long-term value creation.

For example, if an engagement fund buys shares in a company that emits a lot of greenhouse gases, they will enter into dialogue with the company’s management to try to convince them to make their operations more sustainable. 

In this way, engagement funds not only achieve financial returns; they also contribute to positive change in the way these companies operate. Their investments are a means to exert influence and contribute to a better world. 

ESG stands for Environmental, Social, and Governance. These are factors used to assess the sustainability and ethical performance of a company or investment.

• Environmental: The impact of business activities on the natural environment. This can include issues such as greenhouse gas emissions, energy efficiency, water management, and the use of natural resources.
  
  
• Social: The way a company interacts with people, both externally (society) and internally (employees). This includes labor rights, diversity and inclusion, and human rights. 
  
  
• Governance: The way a company is governed. This includes business ethics, corruption, tax evasion, and the independence of the board. 

Greenwashing is the practice where a company presents itself as environmentally friendly or sustainable, while in reality it does not live up to those claims. The goal is to mislead consumers and investors. 

Impact funds are investment vehicles that pool capital from multiple investors with the specific aim of generating not only financial returns but also positive social and environmental effects. 

These funds invest in companies, projects, or organizations that meet predefined impact objectives. They offer individuals, institutions, and other investors a way to collectively contribute to addressing urgent social and environmental issues while also pursuing financial gain.

Impact funds can focus on specific impact themes, sectors, or regions, allowing investors to direct their investments toward areas that are close to their hearts.
The funds typically employ rigorous methods for impact measurement and reporting to track and disclose the social and environmental outcomes of their investments.

Catalytic capital is capital that is deliberately used to make positive impact or additional investment possible that would otherwise be difficult to achieve. It can help fill financing gaps, support new or higher-risk solutions, or create the conditions for other investors to participate.

Catalytic investors may do this by accepting more risk, investing for a longer period, providing more flexible terms or accepting a lower financial return than conventional investors. When capital is provided on financial terms that are more favourable than those available in the market, this is referred to as concessional capital.

For example, an investor might provide early-stage or first-loss capital to a fund or project. By taking on part of the risk, the investor can help prove the model or improve the risk-return profile for other investors, thereby unlocking additional capital.

Examples of providers of catalytic capital include:

• Foundations: Foundations are an important source of catalytic capital, as they are often willing to invest in early-stage or high-risk projects that can have significant social or environmental impact.
• Public development institutions: These institutions are usually funded by governments and focus on stimulating economic development and improving social conditions. They can provide catalytic capital in the form of grants, loans, or equity investments.
• Family offices and high-net-worth individuals: Family offices and high-net-worth individuals are increasingly investing in impact-oriented companies and projects. They can provide catalytic capital in the form of direct investments or through impact investment funds.
• Corporations and corporate foundations: Corporations are increasingly investing in projects with social impact, either directly or through their corporate foundations. They can provide catalytic capital in the form of grants, loans, or equity investments.

Negative screening is an investment strategy in which certain publicly listed companies or sectors are excluded from an investment portfolio based on specific ESG criteria (Environment, Social, Governance). 

For example, an investor may decide not to invest in companies involved in the production of weapons, or companies that perform poorly in the area of human rights. 

It is one of the oldest and simplest forms of sustainable investing and ensures that investors can avoid having their investment used for practices they consider unethical or harmful.

Positive screening is the process of selecting publicly listed companies or investments based on specific positive ESG criteria (Environment, Social, Governance) or sustainability performance.

In contrast to negative screening, where certain companies or sectors are excluded, positive screening focuses on identifying companies that demonstrate leadership in ESG criteria. 

The concept behind positive screening is that it not only helps to manage risks, but also contributes to positive impact by rewarding companies that perform well in terms of sustainability.

Private Equity impact funds are investment vehicles aimed at generating both financial returns and a positive social or environmental impact. These funds invest in private, non-listed companies that focus on addressing significant social or environmental issues. 

Just like engagement funds, private equity funds are also actively involved with the companies in which they invest. They work closely with management to ensure that business performance improves, but also to measure and influence the positive impact. 

They attract capital through capital calls, where investors provide committed capital. This is the commitment they make to invest a certain amount. Distributions take place when the fund sells the investments (hopefully at a profit).

An impact enterprise is a company that combines business principles and entrepreneurship with social and/or environmental objectives.

The goal of an impact enterprise is not only to make a profit, but also to bring about positive change in society. Examples include a café that provides employment for people with disabilities, or a company that offers affordable solar energy in developing countries.

Thematic investing is an investment strategy in which investments are selected around specific social, environmental, or economic themes that matter to the investor. Examples include clean energy, health, gender equality, biodiversity, or water.

For many investors, thematic investing is a way to align their portfolio more consciously with their values and with long-term developments they believe in. The UN Sustainable Development Goals (SDGs) can also serve as a framework.

The main difference with impact investing lies in the role of the investor. In thematic investing, the focus is on selecting a particular theme or type of company. Impact investing also explicitly considers the positive impact being pursued and the contribution the investor makes to achieving that impact.