Study on impact investing

Impact investing describes an investment strategy which, in addition to financial returns, also takes into account the social impact of the money invested and actively steers this impact through investment decisions. Impact investing, often referred to as mission investing, is thus a further development of sustainable investment, which is primarily concerned with avoiding certain harms.

Some foundations seek, through such an investment strategy, to align their investments with their ideological goals and thus to use not only their annual returns but their entire assets to achieve their objectives and purposes.

This leverage effect could significantly increase the reach and impact of the foundations’ work. German foundations currently have around 3 billion euros in annual income from their assets at their disposal for their work. This sum could be tripled if just 15 per cent of their investment assets were allocated in line with their objectives.

The study by the Federal Association of German Foundations, ‘Mission Investing in the German Foundation Sector’ – funded, amongst others, by the Hamburger Stiftung für Wirtschaftsethik – assesses for the first time the potential of impact investments to boost the foundation sector’s performance, describes practical examples and addresses outstanding issues and risks.