Investing with impact Impact investing: everything you need to know about impact investing

12.04.2024 12 Reading Time

klimaVest: Pflanze auf Geld Grafik für den Impact Investing Teaser

Every euro invested can have a positive effect. More and more investors are making a conscious decision to contribute to this.


The most important facts at a glance:

  • As sustainable investments, impact investments combine financial returns and social impact with the aim of achieving social improvements
  • The impact of the investments is measurable and is made transparent by the providers based on the Sustainable Development Goals
  • The impact investment market is growing enormously: the market volume for 2022 was estimated at 12.35 billion euros.
  • Whether investments, microfinance funds or green bonds – retail investors have many opportunities to invest with impact
  • Not only good for the climate, but also for the portfolio: impact investments focus on the topics of tomorrow and are therefore a sustainable investment. 

Conventional wisdom tells us that money is power. The fact is that money fuels the economy and therefore also social developments. This means that every euro can make a difference – depending on what it is working for. 

What impact does my investment have? Once you become involved in sustainable investing, you will sooner or later come across the concept of impact investments. “Impact” means effect – it is about social and environmental added value that is financed, for example to achieve the 17 Sustainable Development Goals (SDGs) set by the United Nations for 2030. 

But, can we say with certainty when something is really sustainable? 

Impact investments occupy a special position among sustainable investments – they combine returns with a specific intention of social impact. This means that impact-oriented investments tend to have stricter criteria and a holistic approach in the sustainability spectrum. 

This guide gives you a differentiated overview of impact investments.

What is impact investing?

Impact investments are sustainable investments with the aim of combining financial returns and social impact. Investors’ money flows, for example into renewable energy, health and education projects or affordable housing. 

Every investment can have a leverage effect. For example, an investment can promote and spread environmental and social innovations – or it may not. Impact investments want to make a difference by financing future-proof solutions and making their contribution to energy transition clear. 

The challenges facing humanity in the coming decades are enormous – water scarcity, soil erosion, climate change, biodiversity loss, poverty and diseases will all require great efforts to overcome. Creating a world worth living in for all also requires education, housing and healthcare.  
With the aim of addressing these challenges, the United Nations formulated 17 Sustainable Development Goals (SDGs) to be achieved by the global community by 2030. This includes justice, no hunger, climate change mitigation, clean energy supply, decent work and peace.  

With the 17th goal “Partnerships for the goals” the UN pointed out to all stakeholders that everyone is responsible for making their contribution and cooperation is key. The financial industry and all investors are also in demand. After all, implementing concrete projects for these goals requires a lot of capital. 

The term “impact investing” was mentioned for the first time in 2007. At that time, the Rockefeller Foundation held a meeting for selected investors in Bellagio, Italy. They discussed how to better combine social and environmental performance with financial returns.¹

What does impact investing mean?

impact investing is an investment approach which balances two extremes: pure philanthropy and pure profit maximisation. The capital flows into sustainable investments with direct and proven positive social and/or environmental impacts.

What is the difference between impact investment and impact investing?

While the term “Impact Investments” focus on the products (e.g. impact funds), “impact investing” describes the activity of investing (e.g. the purchase or inclusion of a corresponding product in the company’s own portfolio).

How sustainable is impact investing?

Impact investing goes further than other sustainable investments, because projects and companies that demonstrably promote social improvement are specifically supported.

For investors engaged in impact investing, it is not sufficient to apply the principles of socially responsible investment (SRI) with environmental, social and governance criteria (ESG approach). 

Although traditional investments can also create social added value, impact investments are deliberately aimed at having a social and environmental impact. For this purpose, impact objectives are explicitly defined and the impact of the investment is measured. The non-profit organisation Global Impact Investing Network (GIIN) put it like this in 2017:

impact investments are "investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return." The Federal Impact Investing Initiative is committed to this and to good communication about the specific impact. 

Four characteristics of impact investments:

  • Intention to achieve positive social impact (intentionality)
  • Use of data for the investment strategy (evidence)
  • Management of impact performance (management)
  • Contribution to the growth of impact investments (exchange of experiences)

How is the effect of impact investing measured?​

Impact investments pursue specific environmental and social goals – and their achievement must be demonstrable, i.e. measurable.

In addition to the measurability of the goals, it is necessary for management to communicate them transparently

In impact investments, impact is:

  • intended 
  • direct 
  • demonstrable 

The assessment is based on the Sustainable Development Goals (SDGs). These 17 Sustainable Development Goals were agreed by the United Nations at its 2015 General Assembly. The 169 targets describe more precisely what the global community wants to achieve by 2030. The SDGs thus also provide a guideline and a benchmark for investments with social and environmental goals. 

An investment with an impact should contribute to the achievement of at least one of these goals. Many companies now report on their effect on the various goals and their specific activities.

Key figures for impact investments

Non-financial key performance indicators are used and evaluated to assess the specific performance of an investment. Most of the offers in impact-oriented investing are still new. However, the number of public data and frameworks is now on the rise. Scientists and practitioners are constantly working to improve the impact measurement system. 

The Impact Reporting and Investment Standards (IRIS+) have been providing guidance since 2018. They were developed by GIIN, Rockefeller Foundation, B Lab and Acumen.⁴ This metrics catalogue lists standardised metrics related to the Sustainable Development Goals (SDGs). Similar impact measurement tools are the Global Impact Investing Rating System (GIIRS) Pulse and Social Return on Investment (SROI)

Examples of key figures for impact measurement:

  • Litres of water saved
  • Megawatts of green electricity produced
  • Hectares of new organic land in agriculture
  • Area of reforested forests
  • Kilograms of recycled electronic waste
  • Number of newly created jobs
  • Number of pupils in newly built schools
  • Number of mosquito nets distributed

Most of these metrics focus on output rather than outcome. Instead of the number of distributed mosquito nets (output), the number of prevented malaria cases (outcome) could also be measured. Instead of the number of newly built schools (output), the increase in the enrolment rate (outcome) could also be recorded.  

However, such data is usually difficult to gather and isolate. For example, many factors can influence how good the final grades of students are – not just the number of lessons held with qualified teaching staff. As a result, it is not always easy to verify the extent to which impact investments achieve the intended goals and reach target groups in the long term

Product providers can decide for themselves how to determine the impact. Some are guided by certain standards, others develop their own metrics and measurement tools. While some are qualitative, others use quantitative key figures. Most of them determine their impact primarily in the field of action in which they invest and for which they have set goals. Measuring impact can be very time-consuming and can eat into some of the returns. Therefore, the effort and benefit must be weighed up. 

An example: African GreenTec

How can you learn more easily and breathe fresher air? How can food be easily preserved for longer? With electricity! The social enterprise African GreenTec is bringing green electricity, lighting, refrigeration and water treatment to previously non-electrified villages in Africa.  

The direct and indirect environmental and social effects can be understood using an impact model: As of January 2021, the company reportedly supplied almost 25,000 people with electricity (SDG 7: affordable and clean energy), saved over 2,000 tonnes of CO₂ (SDG 13: climate action) and enabled more productivity for over 400 small businesses (SDG 8: decent work and economic growth).  

In addition, the provision of solar power allows children to learn even when it is dark. Diesel generators that release exhaust gases into the environment are no longer needed and unbroken cold chains save food from spoiling, which in turn reduces hunger. 

In its Impact Facts, Africa GreenTec shows how business activities contribute to almost all the goals of sustainable development – and thus ultimately even contribute to peace. 

Impact measurement standards that impact investment providers can use as a guide:

  • IRIS+ (the Global Impact Investing Network GIIN tool)
  • United Nations Principles for Responsible Investment (UNPRI)
  • Social Reporting Standard (SRS)
  • Harmonized Indicators (HIPSO)
  • Global Impact Investing Rating System (GIIRS)
  • Pulse
  • Social Return on Investment (SROI)

What characterises a “correct” measurement? In order to demonstrate the intended use of the investment, the measurement should always be based on the intended effect and the result should be measured as directly as possible at the source. 

What does ESG impact mean?

Impact investing goes one step further than the “ESG trio” (environment, social, governance). The investment strategy includes environmental and social aspects as well as good corporate governance criteria. Impact investing aims to achieve ameasurable impact on people and the environment.  

Impact investments not only consider the positive impact, but also the avoidance of negative effects. If impact investments follow the EU taxonomy, this classification provides guidance for sustainable investments. A key principle here is DNSH: do no significant harm. It states that an environmental investment must not cause significant harm. 

The DNSH principle applies to all the environmental objectives of the EU taxonomy:

  • climate change mitigation
  • climate change adaptation
  • the sustainable use and protection of water and marine resources
  • the transition to a circular economy, waste prevention and recycling
  • pollution prevention and control
  • the protection of biodiversity and ecosystems

In addition, minimum social requirements apply, which result from the fundamental principles of the International Labour Organisation (ILO):

  • No forced labour
  • No child labour
  • Freedom of association and right to organisation of employees
  • Collective bargaining
  • Equal pay for male and female employees for equal work
  • Non-discrimination and equal treatment

Impact investing: a new era of investing

The market for impact investments is growing dynamically. This is demonstrated, for example, by the market study of the Federal Impact Investing Initiative and the market study of the Bertelsmann Foundation. In Germany, the market volume for 2019 was estimated at 2.9 billion euros – in 2012 it was 24 million euros, in 2015 it was 69 million euros.

While the Federal Impact Investing Initiative uses a very narrow definition of impact, other studies draw the circle wider and estimate the market to be correspondingly larger. However, all studies make it clear that, while impact investing is still niche, it is a rapidly growing segment.⁵ 

Growth is mainly driven by new players who want to promote socially viable solutions by offering investments in all asset classes and for all sustainability goals

Three SDGs in particular are popular:

  • SDG 3 Health and well-being
  • SDG 7 Affordable and clean energy
  • SDG 11 Sustainable cities and communities 

Almost a billion euros in impact investments with these priorities was invested in projects by German investors in 2020.⁶

Globally, the market appears larger due to a broader definition of impact investing: the Global Impact Investing Network (GIIN) estimates its volume at 715 billion US dollars. There are more than 1,700 known impact investing organisations.

Compared to the entire stock market, the market is small, but highly dynamic: it is considered to be the fastest-growing investment fund segment in the world.⁷ In the liberal welfare states of the Anglo-Saxon region, the impact-oriented investment strategy is spreading most quickly.

Does impact investing also mean impact for your own portfolio?

Yes, because impact investing can add strength to your portfolio that traditional investments cannot offer. The assumption that impact investments do not generate returns, rely on unsophisticated technologies or invest only for a good cause is a misconception. 

Quite often, the opposite is the case, because impact investing deals with topics of the future. When investing in the form of “renewables”, for instance, you are investing in the energy of tomorrow: in the energy that will supply our cities, our infrastructure and our daily electricity requirements. With impact investments, you can bring a little bit of the future into your portfolio, get involved right from the start and benefit from attractive return prospects. 

So if you come across impact investing, don't dismiss it as merely an altruistic investment for a good cause.

Globally, the expectation of companies to take environmental and social responsibility is increasing. Younger generations in particular increasingly value social benefits compared to focusing on profits.

In a 2018 survey of more than 10,000 millennials (those born between 1980 and 1998) from 36 countries, many of the respondents cited “job creation” (43%) and “improving society” (39%) as the two highest priorities for companies, compared to just 25% who view “profit generation” as a company’s primary goal.⁸

The millennial age group is playing a leading role in the next biggest asset transfer in the history of global finance: over the next ten years, millennials will inherit around 24 trillion US dollars from the baby boomer generation worldwide.

In Germany, this amounts to between two to four trillion euros. In a few years, the young generation will make up the lion’s share of managers and employees. And their sense of sustainability can give the market for impact-oriented investments a powerful boost. 
Impact investments proved to be particularly resilient during the coronavirus crisis, according to estimates by experts in a survey in spring 2020.⁹ On the stock market, this effect can only be achieved with “fresh” equities, shares and bonds – or when a company carries out a capital increase.

Loans can also provide specific support for social purposes. They often take the form of crowdinvesting, a type of investment in which many retail investors invest an amount for a specific project and receive a return with interest if successful. A current, call money or fixed-term deposit account geared purely to measurable impact does not yet exist, but some sustainable banks in Germany provide the money from savings accounts at least as loans to sustainability-oriented companies and projects.  

Most existing equities, equity funds or bond funds cannot be directly referred to as impact. For example, if you as an investor buy the share of a solar company, initially only one share has changed owners.

 You have not yet created any environmental added value. The situation is similar for index funds such as ETFs. The impact on the real economy is negligible if there is only movement in the financial economy. In the case of an impact investment, on the other hand, your capital goes into a specific project, e.g. for solar energy, thus changing the share of green electricity in the grid.  

Traditionally, impact-oriented investment is primarily focused on impact funds and impact bonds, as these investments are spread directly between several impact-oriented projects and companies. These are often dedicated to a specific topic, such as forests, health, education, renewable energies or microfinance loans.

How impact investment differs from traditional approaches

Means to an end?

The philosophy of sensible investment can be compared to the philosophy of good food. Both serve as a means to an end, but it does not have to be one-sided.
If eating were only about maximising calorie intake, the goal would be achieved by simply taking in nutrition, and survival would be assured.

But food also satisfies other objectives, such as socialising when eating together, awakening the different senses or discovering new recipes, flavours and cultures. Particularly in recent decades, varied nutrition has become an important element for a healthy lifestyle and an expression of personality and identity. 

Having the lowest possible environmental impact is also the goal of some diets. The previously dominant idea that investing should only serve the purpose of financial returns seems to be rather short-sighted in this comparison. Considering food only as a means of taking in calories would be equivalent to short-sighted degradation. And investing can also do much more.

The difference between impact investments and ESG criteria

Impact investments incorporate ESG criteria into their investment strategy, but goes beyond: the investment is linked to clearly measurable environmental and/or social goals, with transparent reporting goals on their achievement. Falling between the extremes of pure profit orientation and pure philanthropy, impact-oriented investment aims to strike a balance between environmental and social objectives and returns. Until the 1970s, social impact and financial profits were separate categories of economic activity – then opportunities began to emerge in between, such as SRI, ESG and impact investment. 

Socially Responsible Investments (SRIs) are profit-driven, but exclude problematic practices that have a negative impact on society and the environment. This includes, for example, companies that provide weapons and armaments, alcohol, tobacco or gambling, which use forced labour, child labour or animal experimentation and so-called “villain countries”, i.e. countries that act repressively.  

ESG investments include environmental, social and governance aspects in the portfolio construction analysis. An example would be, for instance, a company’s contribution to climate change mitigation, good working conditions and the prevention of corruption. The ESG indicators provide information, but have no direct effect on a more sustainable orientation of companies in the core business. 

Impact investments integrate ESG criteria into their investment strategy, but go even further. The investment is linked to clearly measurable environmental and/or social objectives, the achievement of which is reported on in a transparent manner. An impact fund meets certain framework conditions of the EU taxonomy and the EU Disclosure Regulation (Art. 9) for sustainable investments.  

Social investments have a positive environmental or social impact, but are not geared towards returns and contribute to capital preservation.

Impact investments combine environmental protection and returns

Over 66% of investors would invest in a fund that offers environmental impact and attractive returns – but only 22% think that such an investment solution exists on the market.¹⁰ That’s no coincidence as, to date, there have been relatively few offers combining impact and returns, and that also cater to investors’ level of risk appetite. 

Experienced impact investors
are very satisfied with the return on their investment. In 2023, the Global Impact Investing Network (GIIN) conducted a survey of 294 – mostly institutional – impact investors. 74% of respondents expected a market-related rate of return on their investments.  

A total of 14% expected their return to be below but close to the market and 12% believed their return would be below the market, so they could essentially preserve their capital. Were their expectations met? Over 88% of investors reported that they met or exceeded their expectations.¹⁰ In Germany too, expectations were in line with financial returns among three quarters of investors.¹¹

The old logic was: environmental or social “return” and financial returns cancel each other out. There is a trade-off: if one grows, the other sinks. This assumption is outdated today.

Although the cost of the additional work reduces returns through the selection, management, measurement and communication of impact-oriented investments, the financial returns are also an important objective in impact investment, but go hand-in-hand with the environmental and social impact.

How does impact investing generate returns?

The capital in impact investments goes into specific projects for sustainable development. As a result, investors’ returns are not dependent on how the price performs on the stock market, as with other securities, but rather on the success of the underlying business plan.  

This can be thoroughly examined by investors or fund managers (due diligence). Factors such as social or environmental objectives, the team’s experience and the market outlook play a role here. 

Typical impact investments are, for example, microloans aimed at making a social impact. At more than 30 percent, they make up the lion’s share of impact-oriented investments. People in poorer regions receive microloans to finance their businesses. This gives especially women – for example in India and Bangladesh – the opportunity to sell something in their village, such as light or a vehicle charging station, by financing a solar storage system.  

The repayment ethics of these women and their communities is the highest in the financial sector worldwide. Since there is no access to the banking system or the interest rates of local lenders are often in the double-digit range per day, the fairer terms offered by microlenders are popular with borrowers. Muhammad Yunus, an economics professor, was awarded the Nobel Peace Prize for the seemingly paradoxical but successful concept of lending money to the poorest people. 

In recent years, impact-oriented investments in infrastructure projects, such as renewable energy, have been growing. As tangible assets, they generate a comparatively secure and attractive return. Depending on the concept, money can also be earned by offering affordable housing, education and health projects and organic agriculture.

These impact investments are suitable for retail investors

Impact investing offers for retail investors were still few and far between a few years ago. Until now, foundations, financial institutions, development finance organisations, family offices (private asset management companies) and pension funds have invested primarily in more risk-intensive but newer social enterprises.

More and more providers are now also opening up to retail investors who want to combine sustainability, impact and returns. Various financial instruments are used here as vehicles for impact-oriented investing. 

Typical impact investments for retail investors may include:

Private equity

Traditionally, most impact investments for retail investors are outside the regulated financial market. The Federal Financial Supervisory Authority (BaFin) imposes fewer requirements here. For environmentally-oriented start-ups or social enterprises, it is attractive to procure money on this “grey” capital market relatively easily, because the complex and expensive information brochures for investors, which BaFin requires, are significantly less here. BaFin only examines whether the information on the financial products is complete and consistent, but not its accuracy or economic viability. 

The personal connection between companies and investors e.g. in crowdinvesting is beneficial for new companies because their community can provide them with capital, experience, contacts and recommendations. The investment opportunities are diverse, from direct investments or corporate participations or citizen shares to participation rights and subordinated loans to registered bonds.  

Investing here means investing in venture capital - and a total loss is not unlikely. More than 80 percent of start-ups fail within three years – however this figure is highly industry-dependent. Establishments of restaurants and small businesses are considered particularly vulnerable, while those serving megatrends such as housing, IT, sustainability or infrastructure development have better chances.

Social impact funds and open-end impact funds

There are a few intermediaries that bring together impact investors and social enterprises. As a venture capital company, they offer European Social Entrepreneurship Funds (EuSEF), which are subject to the EU Regulation and therefore require, for example, a minimum investment sum of 100,000 euros, in practice usually more than 500,000 euros.  

Social impact investing is therefore only afforded by family offices that manage the assets of wealthy families. Mutual funds are rather unlikely due to the bureaucratic burden. The return prospects of social impact funds vary widely; in some cases, they are only interested in capital preservation. When it comes to open-end impact investing funds, it is important to take a close look.  

Just because a fund for equities, bonds or a mix of shares and bonds bears the word “impact” in its name does not yet mean that this effect is really measured and that the investment can make a direct contribution. Sometimes these are funds that invest according to ESG criteria and, for example, are active in a specific area that can be assigned to the SDGs – for example, “education” or “clean water”. Pay attention to how the provider communicates specific improvements, for example, to reduce water consumption.

Microfinance funds

In low-income countries, even the smallest loans can make a big difference. After all, those earning a low income often have no or few options to access financial services – and if they do, the conditions are horrendous. The aim of microfinance is therefore to improve the chances of economic progress through small loans, especially in emerging and developing countries. Borrowers usually start up a business with it or expand their independence. 

The money in microfinance funds is channelled through local microfinance institutions. They lend small amounts to sections of the population whose creditworthiness is usually insufficient for banks. The impact is measured using indicators such as loan amount or proportion of male and female borrowers. There are also charlatans in the microfinance market, which is why this form of investment is faced with the general accusation of charging excessive interest rates (20–30%).  

This could lead to an additional poverty trap for low-income earners. 

If you are considering an investment here, it is best to ask what the interest rate policy of the local contractual partners is and what approaches they use to prevent a debt spiral for borrowers. For you as an investor, the fluctuations in the funds are low and a provider comparison is worthwhile in terms of returns and a look at the performance of recent years – at 2% p.a.13, it is already quite good.


The European Long-Term Investment Fund (ELTIF) is an investment vehicle that has existed since 2015. With it, the EU aims to promote long-term European investment in the real economy, including capitalising on retail investors who have not had an opportunity to invest in infrastructure projects to date.

Cross-border challenges in particular, such as climate change and the energy transition, require solutions that steer capital into the right direction – i.e. into projects that are as concrete as possible. As a result, ELTIFs are designed in such a way that up to 70 percent of the capital flows into tangible assets and infrastructure. The asset classes include renewable energies such as wind power, solar power, infrastructure (especially for transport, telecommunications, energy and waste disposal), but also shares in companies (private equity) and loans (private debt).  

Although ELTIFs do not focus on impact per se, the approach offers a great opportunity for retail investors to also invest their capital in green and social infrastructure projects such as solar parks that have a measurable impact.

Green bonds

Green bonds finance certain projects such as the construction of energy-efficient houses or photovoltaic systems. The structure, risk and return are similar to those of traditional bonds: investors receive interest back during the term and at the end of their capital investment. The range of providers of green bonds extends from banks and corporations to municipalities and governments.  

The Green Bond Principles (GBP) of the International Capital Markets Association are intended to ensure transparency in the market. The guidance on disclosure aims to facilitate the assessment and comparison of the process of product selection, use of bond volume, management and reporting. The Frankfurt Stock Exchange has its own segment for green bonds that meet the GBP which lists 260 offers.¹⁴

The green bond market is dynamic and is currently growing strongly. However, the use of proceeds is not bindingly regulated and previous guidelines exist on a voluntary basis. In order to keep your risk low, you should therefore carefully check the credit ratings of the providers. 

Social bonds and social impact bonds

The investment form of social bonds and social impact bonds is still relatively new and their definitions are likewise diverse. Basically, investors’ capital flows into loans that are intended to create social added value. This includes, for example: public supply projects in the area of affordable housing, health, integration, inclusion and education. Private banks also offer bond programmes as tradeable social bonds to retail investors, e.g. with an investment sum of 1,000 euros or more.  

On the other hand, social impact bonds (SIBs) or social impact loans (SILs) are cross-sectoral policy and financing instruments for the social economy. Three partners collaborate here: social service providers, private impact-oriented investors (usually foundations) and the government. Investors finance a proven social measure ("intervention") carried out by the social service provider and, if successful (social impact), receive their capital back and a return from the government.  

Income is only generated if the public treasury was able to save public money through the social measure. In October 2020, the EU also issued the first European social bonds, but these are not available to retail investors. For non-institutional retail investors, this form of investment is still largely untapped overall.

Why most impact investments are not publicly traded

Impact-oriented investments are not linked to certain financial instruments. Conversely, there are no financial instruments explicitly geared towards impact. Impact investment providers design their product to best suit their sustainability objectives. In most cases, impact capital flows into private bonds, publicly traded bonds and equity in the form of private equity.¹⁵

Existing companies or new social start-ups rarely issue their own shares for their green or social areas of business. Instead, individual projects can be financed by debt capital, e.g. a project-linked green bond for the purchase of an electric fleet or a bond for the construction of schools. Overall, around one third of impact-oriented trading is public, largely as green bonds. 

Impact investing in practice: how an impact fund works

In order to achieve a social impact, impact investments support specific projects by means of capital. The aim can be to create social added value or pursue environmental objectives.

How does impact investing work?

In impact investing, investors’ money flows through intermediaries such as fund issuers or as a direct investment in companies and projects. In addition to financial returns, they have set themselves the goal of achieving a sustainability-oriented impact.

Since climate change is one of the greatest societal challenges of the century, an impact fund can make a corresponding difference here – for example by financing renewable energies. Project developers use the invested capital to build new power plants, such as photovoltaic systems or wind farms.

As renewable energies have a feed-in priority by law, the grid gives preference to electricity from renewable sources. As a result, every kilowatt-hour of renewable electricity produced by the fund displaces fossil electricity from the grid. 

But how is the impact proven? The “measurement” of sustainability naturally depends on the respective investment. Renewable energy production is about protecting the climate and avoiding greenhouse gases harmful to the climate. The indicator “CO₂ emissions per kilowatt-hour” is therefore appropriate here. For production to be considered clean, the indicator should not exceed 100 grams of CO₂ per kWh.¹⁶  

Since renewable plants also emit greenhouse gases when providing the raw materials required for production and in the construction phase, these CO₂ emissions must be subtracted from the calculation. Overall, however, an investment in renewable energies in Germany avoids significantly more CO₂ than is emitted: avoidance is approx. 882 g CO2/kWh, emissions approx. 72 g CO2/kWh.¹⁷

The UNFCCC's combined margin approach can be used for the calculation. The framework is a globally recognised standard of the Clean Development Mechanism (CDM) for calculating emission avoidance from climate protection projects. The avoidance factor consists of two components:  

  1. the emissions per kilowatt-hour of existing power plants, the operation of which will be most severely affected (reduced) by the project (i.e. h. fossil-fuelled power plants) and
  2. the emissions per kilowatt-hour of the expected power plants, the construction and future operation of which would be negatively affected by the project (i.e. most efficient fossil-fuelled power plants).

To compare: in Germany, an average of 523 grams of CO₂ are emitted as direct emissions from the combustion of fossil fuels. The impact investment, on the other hand, sets itself a “100 gram target” to support the decarbonisation of the electricity mix. 

At the same time, the impact-investing fund should guarantee that no environmental or social harm will be caused by the investment. The “do no significant harm” principle includes, for example, unsustainable water use, environmental pollution, forced labour and discrimination.

Investors thus contribute to CO₂-neutral electricity consumption, as their capital contributes to the transformation of the energy supply system and thus also to protecting the climate.  

It is important that impact investment offers clearly communicate how they create added value for society. The benefit of a wind farm, for example, is that it increases the proportion of green electricity in the electricity grid and paves the way to a zero-emission energy economy.

How to become an impact investor

If money is power, then your investment can make a difference! No matter where your capital is: it is working – but the question is for whom and for what – you can influence that. If you are interested in impact investing, you should proceed systematically. 

  1. Inform yourself about the market for sustainable investments.
  2. Pay attention to the fundamentals of sustainable investment.
  3. Think about which values and topics are important to you, e.g. also based on ESG criteria.
  4. Ask questions, especially the following:
    What does the investment have to do with the “real” world?
    Where does the capital go?
    What impact does the investment have?
    How is the impact measured and how is it reported?
  5. Proceed with the necessary caution as with traditional investments and ensure adequate diversification in your portfolio. Only invest part of your assets in impact investments.
  6. Discuss with experts and like-minded people. While impact investing is still niche, addressing global challenges requires more demand and supply for impact-driven investing.

Finally, here’s a health tip: reading impact reports on sustainable investments helps you to know how a liveable future can be shaped. This not only makes tomorrow brighter, but also your mood. Good luck with impact-oriented investment! 

¹ Jackson, E.T. (2012): Accelerating impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry. New York, NY: The Rockefeller Foundation. 
² Global Impact Investing Network (2020): What You Need to Know About Impact Investing.  
³ Global Impact Investing Network (2019): Core Characteristics of Impact Investing. Retrieved from
⁴ GIIN (2021): History. From IRIS to IRIS+. 
⁵ Bertelsmann Stiftung foundation (2020): Impact Investment in Germany 2020.
⁶ Federal Impact Investing Initiative (2020): Impact investing in Germany 2020. Market study., p. 31. 
⁷ GIIN (2020): How big is the impact investment market?; Impact Investing in Germany 2020 – a dynamic growth market -
⁸ Deloitte (2018): Deloitte Millennial Survey.
⁹ Federal Impact Investing Initiative (2020): Impact investing in Germany 2020. Market study., p. 50. 
¹¹ Global Impact Investing Network (GIIN) (2018): Annual Impact Investor Survey 2018 
¹² Bertelsmann (2020): Impact investment in Germany
¹³ Comparison of various microfinance funds at
¹⁴ Frankfurt Stock Exchange (2021): Segment for green bonds
¹⁵ Hand, D., Sunderji, S., Pardo, N. (2023) GIINsight 2023: Impact Investor Demographics. The Global Impact Investing Network (GIIN). New York.
¹⁶ EU (2020): TEG final report on the EU taxonomy.
¹⁷ German Environment Agency 2019, Fraunhofer ISE 2020