What distinguishes impact investing from socially responsible investing (SRI)?

Impact investing is distinct because it aims to generate specific social and environmental benefits alongside financial returns. This dual focus sets it apart from socially responsible investing (SRI), which typically concentrates on avoiding investments in specific sectors that are deemed undesirable, such as tobacco or fossil fuels. While both approaches consider ethical implications, the fundamental difference lies in impact investing’s proactive strategy to create positive change alongside achieving acceptable financial performance.

In contrast to SRI, which may prioritize avoiding harm or engaging in negative screening, impact investing intentionally seeks to support initiatives and projects that deliver measurable outcomes related to social or environmental issues. This might include investments in renewable energy, affordable housing, or companies devoted to social welfare. Therefore, the essence of impact investing is its commitment to actively contributing to societal improvement while also achieving financial viability, embodying a more integrated and positive approach compared to the exclusionary practices typically associated with SRI.