In: Finance
Could you please explain this quote for me?
“Although impact investing is clearly focused on producing desirable solutions to social and environmental problems- what we call being outcomes driven- it should not be considered an end itself in most cases, but simply a means, alongside other means that may be more efficacious.”
Impact investing is not a solution to all the problems of the society. Impact investing is applicable only when there is a clear market- based solution to a problem, that is there is a clear solution to a social problem.
For example, to provide vaccines to poor population, a market-based solution is required to provide more resources to end users where limited or no subsidy is required. For this alone Government measures are not sufficient, it requires impact investing.
Impact investing provide the required solution to the society problems also known as "outcome driven". For example, the main purpose of the pension fund is to provide secured benefits to the beneficiaries which requires a proper risk-return tradeoff. There are other contribution funds available in the market for retirement, but the best solution is the Pension fund. Therefore, defining the problem and providing a clear solution is a pre-requisite for Impact investing. Micro finance and community finance is the most popular form of Impact investment.