Impact investing: your questions answered
As impact investing evolves, more families want to make it a meaningful part of their wealth strategy. Amelia Sandbach, Schroders Family Office Service’s impact specialist, answers some of the most common questions on the sector.
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What exactly is impact investing? How does it differ from broader sustainable or ESG investing?
Impact investing means putting capital to work in a way that intentionally creates positive social or environmental outcomes, while also aiming for a financial return. These investments typically derive significant revenue from products or services that address unmet environmental or social needs – such as renewable energy, affordable housing, or access to healthcare.
A key feature is intentionality: investments are made with the explicit aim of achieving defined impact objectives.
Whereas sustainable investing focuses on reducing risks, avoiding harm and/or investing in best-in-class sustainable businesses, impact investing goes a step further – actively seeking opportunities that make a measurable difference, with results that are tracked and reported.
Do you have to accept lower returns if you want your money to make a difference?
No, not always. The view that positive impact involves sacrificing returns is becoming less accurate as the sector matures. Many impact investment options now aim for, and deliver, competitive returns while still supporting social and environmental objectives. That said, as with any investment, there are variations in risk and reward, and some projects with particularly ambitious impact goals may involve more trade-offs.
How have impact investments performed in practice?
There are many examples where impact investments have delivered strong financial results alongside meaningful outcomes. For instance, renewable energy funds have financed the expansion of clean energy while offering consistent returns. Social housing projects and green bonds have also demonstrated that it’s possible to do well by doing good, providing vital services and environmental improvements alongside financial growth. While some projects have faced challenges, a growing body of evidence shows that thoughtfully designed impact investments can deliver both meaningful outcomes and competitive returns.
What areas are you currently looking at in the impact investing space?
Key areas attracting attention include renewable energy, green bonds, affordable housing, healthcare innovation and the circular economy. There’s also growing interest in nature-based projects that help restore biodiversity and address climate challenges. It’s an exciting and broadening space.
These areas can often be mapped to families’ broader sustainability or philanthropic goals - for example, reducing carbon emissions or supporting better working practices across supply chains.
How can investors be sure that the reported social or environmental impact is real and not just marketing?
This is a crucial question. The industry has become much more rigorous around measurement and reporting, with frameworks such as the UN Sustainable Development Goals and independent verification standards providing greater accountability.
At Schroders, we map the underlying equities, bonds and alternative assets in our impact portfolios to our internal “ABC assessment,” which follows a framework developed by Impact Frontiers. This classifies investments as Avoiding harm (A), Benefiting society (B) or Contributing to solutions (C) – with impact investments falling into this last category.
We can help families define portfolio- or family-level key performance indicators (KPIs) - for example, the number of people reached through health or education initiatives - and report on these annually alongside financial performance.
What are the key steps for families to set up an impact investing programme?
For a family or family office looking to start impact investing, the journey typically involves the following:
Define your impact objectives: What social or environmental outcomes matter most to your family? What financial return expectations do you have?
Decide your approach: Will you adopt a dedicated “impact allocation” or look to integrate impact across your asset base more broadly?
Determine your process: Set clear selection criteria, monitoring and reporting frameworks (for both impact and financial metrics), and assign responsibility.
Implement and iterate: Select investments aligned with your goals, track progress, report to stakeholders and refine the strategy over time.
For further information, the Impact Investing Institute’s “Family Offices: A Roadmap to Impact” guide is an invaluable resource.
How can impact investing help engage the next generation and shape the family’s legacy?
Younger generations often care deeply about social and environmental issues. Involving them in a family’s impact strategy can act as a bridge between generations and help younger members take an active role in the stewardship of family wealth. We’ve seen this work particularly well when it’s part of a structured introduction to the topic of wealth – and how the family thinks about it.
When impact investing forms a meaningful part of a family’s portfolio, we’ve seen that it can also create a shared sense of purpose and become a defining element of the family’s long-term legacy.
How does impact investing integrate with philanthropy?
Many families have traditionally used philanthropy as a way of giving back. Today, they have the option of combining charitable giving with impact investing to create a more cohesive approach. Rather than viewing them as entirely separate activities, families are increasingly asking how their investments and grant-making can work together to drive change.
For some, that simply means identifying overlapping themes across both areas. Others adopt a more targeted strategy – for example, using philanthropy to fund programmes that test new ideas, and investment capital to help proven models scale. This joined-up approach enables families to deploy all forms of capital with greater purpose and lasting effect.
How would impact investments fit within my overall portfolio?
Impact investments can sit across different asset classes - public and private markets, equities, fixed income, alternatives – and can be woven into a family’s broader investment strategy. As with any investment, it’s important to consider them in the context of your overall goals and risk appetite. Impact investments can offer a new layer of diversification.
We see some families looking to take a “total’’ approach to impact, investing an entire portfolio in an impact strategy. Others tend to adopt an “impact carve out” - allocating a proportion of a portfolio to impact.
There’s been a lot of political debate around ESG. What does it mean for impact investing?
There has certainly been debate, particularly in the US. While this can affect sentiment in certain markets, the global momentum behind impact investing continues to grow. In many regions, regulation, innovation and investor demand are driving adoption of impact investments into wealth strategies. We expect to see:
• Continued progress towards standardised metrics and reporting.
• Broader opportunity across asset classes, particularly in private markets, infrastructure and nature-based solutions.
• Closer alignment between investment, philanthropy and social and environmental objectives.
What drew you personally to impact investing?
For me, impact investing is about empowering clients to align their capital with their values and their vision of the future. I love being able to show them how their investments can help achieve meaningful change in the world, as well as support their financial goals. I am inspired by the idea that finance can be a force for good, and it’s exciting to play a part in bridging values with action through investment.
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This article is issued by Cazenove Capital which is part of the Schroders Group and a trading name of Schroder & Co. Limited, 1 London Wall Place, London EC2Y 5AU. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Nothing in this document should be deemed to constitute the provision of financial, investment or other professional advice in any way. Past performance is not a guide to future performance. The value of an investment and the income from it may go down as well as up and investors may not get back the amount originally invested.
This document may include forward-looking statements that are based upon our current opinions, expectations and projections. We undertake no obligation to update or revise any forward-looking statements. Actual results could differ materially from those anticipated in the forward-looking statements.
All data contained within this document is sourced from Cazenove Capital unless otherwise stated.
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