A Beginner's Guide to Impact Investing for Retail Investors

A Beginner's Guide to Impact Investing for Retail Investors

What is Impact Investing?

Impact investing is an investment strategy which looks to generate both financial returns as well as positive social and environmental outcomes. Unlike traditional investing, being mostly concerned with profit, impact investing targets global issues such as poverty, climate change, and inequality.

With its roots in the socially responsible investing (SRI) movement of the 1960s and 1970s, it has evolved into a proactive approach and is growing rapidly. The impact investing industry has reached over $1.2Trillion in assets under management in 2024.¹ Today renowned institutions like Blackrock, The Bill and Melinda Gates Foundation as well as Citibank, all have dedicated impact funds.

As awareness of global issues increases and innovation focuses on solving them, more and more investments opportunities are emerging. But how can you get involved?
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Investing in What Matters to You

When starting on your impact investing journey, it is beneficial to align your investments with the United Nations Sustainable Development Goals (SDGs). These 17 global goals address issues like as, education, health, poverty, clean energy, and climate change.

Understanding these goals not only allows you to identify key areas where impact is required, but also the ones that matter to you - ensuring your capital is perpetuating the world you believe in.
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Potential Gains in the Impact Economy

As the field of impact investing matures, it is becoming evident that strong financial returns are being achieved. This is reflected by over 90% of impact investors reporting that their investments meet or exceed expectations.²

In this section we will highlight a few notable areas.

Renewables

The renewable energy sector is booming and forms the basis our future energy needs. Global investments are projected to exceed $1.7 trillion this year, as solar, wind, and hydropower increase in adoption - as a result of with installation prices dropping and demand soaring.³

Solar plants in particular are showing a solid annual return on investment (ROI). Within developed economies such as the US, one can expect a 10% ROI.⁴ In emerging economises, particularly those positioned around key solar belts, annual ROI rises up to 30%.⁵

Given our universal needs for energy, solar and the wider renewables market represent relatively predictable long-term investments.

ESG Real Estate‍

Another prominent sector, demonstrating strong returns is ESG real estate and sustainable construction. Developing both residential and commercial buildings with low footprint is growing. A Delloite study evaluated 250 real estate companies and found that ESG performance is correlated to asset returns.⁶ ESG specific real estate funds in the US, such as GIM expect yields between 12-14% annually.⁷

Imperatively, property remains as a cornerstone of worldwide investing. As our values and policies go greener, the ESG paradigm will continue to penetrate this market.‍

‍Carbon Capture

The carbon capture market, has an annual investment of $6.4 billion and continues to expand.⁸ There are variety of exciting carbon capture start-ups, such as RepAir, making innovative steps to reduce the cost barrier of direct air capture (DAC) methods. Now, they are extracting carbon from the atmosphere at 70% cheaper than traditional methods.⁹

Carbon capture as an industry presents a lucrative avenue for addressing climate change. Recently it has proven over 100x returns, with the acquisition of Carbon Engineering, a Direct-Air-Capture firm, at a valuation of US$ 1.1 Billion.¹⁰
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Current Options for Retail Investors

Currently, retail investors seeking to enter this growing market and make difference in the world have few options. Traditional impact investing options are mostly aimed towards institutional investors, requiring substantial resources as well as access to exclusive networks.

More so, options such as responsible mutual funds or exchange-traded funds (ETFs) are available, but they may lack the direct impact and transparency that many investors require. Furthering this, these choices often have high fees and minimum commitment requirements, which might be unrealistic for small investors.

There are however, an emerging set of platforms addressing these drawbacks - ReFi Hub is one of them. ReFi Hub utilises blockchain technology to facilitate efficient, transparent and user-friendly impact investing. This is done by tokenising innovative impact projects and climate assets across the globe; enabling retail investors to simply participate in this industry with as little as 1 dollar.

This approach not only democratises access, but also ensures that investments are secure and easy to manage.

Conclusion

Impact investing allows you to reach your financial goals, whilst creating a more equitable and environmentally congruent world. As awareness grows and the market matures, now is a great time get involved and utilise your capital purposefully.

Investing in businesses and initiatives that support the UN SDGs give a clear focus on what’s important to you as well as what the world needs.

Finally, utilising blockchain-powered platforms such as ReFi Hub, enable you to; start small, get exposure to a vetted impact ventures and ensure your money has an impact.

ReFI Hub launches in less than 1 month. Make sure to sign up and get access to the first investment listings.

Make your investments a force for change.