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In investment development it is not only about profit and business. but also to support the moral values of investors. This is evidenced by the increasing development of Islamic investment over the past few decades and Investment impact.
Understanding the Investment Impact
Impact investing is an investment strategy or approach that is not only financially profitable. but also consider the impact of the company or related business on the environment and society.
in other words Value investors’ investment impact not only measures a company’s performance based on its finances and management. It also measures the impact of a company’s business on society and the environment. social responsibility (CSR) Developed by the company or select the company’s stocks included in the SRI-Khati index, etc.
Although basically This activity has been at the level of individual investors for decades, but the term Impact Investment only emerged in 2007 when some institutional investors began to strive to develop it.
Impact investment example
Impact Investment or Impact Investment can be done at different levels. From individual investors to institutional investors and can be channeled in various forms and tools
But typically, these investment funds are directed to basic life programs such as health, education, agriculture or renewable energy.
If you want to invest using this idea Here are some of the implications for investing in investment instruments that retail investors can access and try:
1. Some stocks
Investing in stocks doesn’t just mean you’re looking for profit. Because nowadays every company has a need. social responsibility (CSR). social responsibility (CSR) is a corporate activity geared towards charitable activities. in order for the Company’s activities to have an impact on society and the environment. CSR allocation and action reports are often found in annual reports (annual report) company.
You can also choose some stocks included in environmental and religious indices, such as the ESG Leader Index, the SRI-Khati Index, or the ESG Leader Index. stock index Islam, reasons according to the page InvestopediaThis impact investment includes supporting religious values.
2. State Sukuk
Joint health letters or state grants can be included in impact investments. because in general The funds collected in this instrument will be used by the government for community projects such as building campuses, roads, mosques, etc. There are even toilet products that use the funds to help victims of natural disasters.
different from general obligationsGenerally, the allocation of the state sanitary fund is made available to the public. Because the investment model in this instrument requires the issuer (in this case, the state) owned underlying asset (reference assets) that investors need to know
3. Pension Fund, Mutual Fund
Provident Fund Mutual funds are A type of mutual fund that allocates a portion of the profits for community activities. Community activities here may vary. from environmental conservation providing scholarships to underprivileged communities, etc.
This mutual fund differs from conventional mutual funds as a result of cooperation between investment managers and certain institutions, such as campuses or non-governmental organizations (NGOs).
4. P2P Lending
In many cases, MSMEs, smallholder farmers and others find it difficult to obtain bank loans. due to inability to meet the requirements to apply for a loan from these financial institutions This is where P2P lending becomes a solution provider.
Although it has the same intermediary function as a bank. But loan terms in P2P lending are generally easier, so anyone can apply for a loan. But the loan interest of this institution is higher than that of banks as well.
This institution is a suitable place for those who wish to invest while developing small and medium enterprises. or helping farmers and ranchers. However, the disadvantage is that the risk of investing in this institution is also higher. Not only because the terms of the loan are simple. But there are still fundamental problems such as low financial literacy of borrowers. or the borrower’s business, which depends heavily on nature
In addition to the above tools You can also donate or invest through donor institutions such as the Soros Economic Development Fund, Gates Foundation, or venture capital firms (VCs), considering VCs are investment firms that provide startup funding. through these institutions Your money will be directly allocated to companies, NGOs or communities in need.
Differences in Impact Investing, ESG and SRI
There are similar concepts between Investing for Impact, Environment, Society and Governance (ESG) and Socially Responsible Investment (SRI)Conceptually, ESG investment is an investment approach that uses environmental, social and management impact factors as one of the considerations for choosing a company.
Socially Responsible Investment (SRI) On the other hand, there is a slightly more stringent investment approach than ESG. Investors are not only concerned with the environment and society. but also other values such as religion, political beliefs and other social values
affect investment in turn, including Not only focusing on environment and social values. This investment concept highlights how a company’s business can have a positive impact on society. and not only profit
IMPACT Investment Challenge
Are you interested in investing in this style? So, one of the challenges you will face is the possibility of a change in investment philosophy and focus. especially in long-term investments This is because trends in community social impact also vary by location and over time.
For example, in the 1960s, substantial investments were allocated to strengthen the social capacity of minorities and empower women. However, in the last few decades Investment focus has shifted to more environmentally friendly business development, for example.
Another challenge with this form of investment. Especially if you want to invest through donor institutions as mentioned above, unlike P2P Lending, sukuk or shares, the mechanism for allocation and profit sharing from investing through this institution may not be as clear as whether you are buying stocks or sukuk.
It is also possible that the mechanisms between one institution and another are also different. Therefore, it is best to contact the institution first to inquire about these matters before starting to invest. because in the end Investing is different from charity.
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