What is impact investing?

Impact investing is defined as investments made with the intention of generating positive social and environmental impact alongside a financial return. This means that investors actively seek opportunities that not only provide potential monetary gains but also contribute to addressing societal challenges, such as poverty alleviation, education, healthcare access, and environmental sustainability. The core philosophy behind impact investing is that financial performance and positive societal outcomes can coexist and be mutually reinforcing.

The focus on generating measurable impact sets it apart from traditional investing strategies that primarily prioritize financial returns, which is indicated in the first choice. The second option highlights investing in companies with large market shares, which does not necessarily imply any commitment to social or environmental outcomes. Lastly, the fourth choice suggests investing without regard for social implications, which directly contradicts the purpose of impact investing. Therefore, the emphasis on dual objectives—both financial and positive societal contribution—clearly defines what impact investing encompasses.