The Contribution of Technology To social Impact Investment and Improved Philanthropic Outcomes

Historically, philanthropic practices in many parts of the world were focused mainly on the religious and cultural well-being of people. 

Although responsible investment has been taught by various religions for centuries. The primary focus was usually on avoiding investments in products that caused harm or went against religious beliefs – ‘sinful’ items such as alcohol or tobacco products.

Today, however, responsible social impact investing takes place on a much larger scale, with preferences on investments that impact people’s lives or tackle environmental issues. If philanthropic practices are to be successful, there needs to be substantial financial input.

In this article, we look at how technology is contributing to social impact investing and improved philanthropic outcomes.

What is social impact investing?

Social impact investment involves investing money in companies that offer both financial gains and a chance to support a worthy cause. The investor can choose an organization that strives to improve the lot of less fortunate communities or one that tackles environmental issues.

This type of investment is facilitated through a variety of organizations. These organizations address challenges such as poverty, inequality, healthcare, education, and environmental issues. They include community-based companies such as charities and non-government organizations (NGOs). Also, larger enterprises that invest directly in projects such as affordable housing developments, educational projects, community healthcare initiatives or environmental solutions.

Changes in Investment Strategies

With the advances in technology today, people have become more investment savvy, and more aware of environmental issues and poverty. Many people, the younger generations in particular, choose to invest in companies with a focus on environmental issues or improving the quality of people’s lives.

As awareness of social impact investing increases, many government departments and international bodies are implementing policies that encourage socially responsible investing.

A prime example of this is the United Nations’ Principles for Responsible Investment (PRI). These are a set of guidelines for the incorporation of environmental, social, and corporate governance (ESG) factors into investment practices. 

The UN PRI organization presents six core principles – developed by an international group of institutional investors. The principal says that participating companies commit to regarding the adoption, disclosure, implementation and enhancement of the ESG factors. 

The many recent advancements in technology have been instrumental in promoting social impact investing, introducing investment options, and providing the necessary tools.

The Role of Technology in Enhancing Social Impact Investment

Behind the numerous investment strategies lies a plethora of technology that markets the investment products. It provides the knowledge to make informed decisions, and hosts the platforms that make investment possible.

Investment Transparency

Data-driven reporting gives investors performance metrics and risk assessments that were previously not easily available. This visibility enables investors to track their projects and assess their social and philanthropic impacts. 

Investment companies that make use of blockchain technology provide added transparency, enabling investors to actively track their funds and the outcomes in terms of their social or environmental impact.

A Wider Range of Investment Opportunities

Financial technology (fintech) companies provide user-friendly platforms that facilitate the selection of investment opportunities that are in alignment with the investor’s interests and values. 

Fintech exposes a wider range of investment possibilities to a more diverse group of investors. People who were previously restricted by a lack of knowledge and fewer options are now able to make informed choices when it comes to investing their money. 

Automation of Processes for Improved Efficiency

Automation has led to the simplification of previously tedious processes, such as the completion of manual documentation. This in turn has a positive effect on the time it takes to implement investment strategies and escalates the social outcomes.

Digital platforms

Online platforms facilitate collaboration between investors, investment organizations and beneficiaries.

Crowdfunding and peer-to-peer platforms are good examples of this. They help startups to obtain investments without having to go through the traditional loan application processes. At the same time, they provide investors with more informal opportunities to contribute to causes that they deem to be worthwhile.

Knowledge is Key

The internet provides investors with a host of information in the way of articles, comparisons, live webinars, and videos. These tools give new investors a basic understanding and provide them with information about the different options available. 

With the use of data analytics, potential investors can monitor the performance of various investments. They make informed decisions based on this information. 

The availability of a vast array of planning and forecasting tools enables investors to build strategies for successful investing and helps them manage their investments.

Innovations in applications that run on mobile devices make investment tracking more accessible and enable proactive decision-making strategies.

Collaboration and Maximizing the Reach of Philanthropy

An important requirement for successful social impact investment strategies is the effective collaboration between government bodies, NGOs, investment companies, and private investors. Partnerships between the various key players have the potential to produce large-scale benefits. 

By combining commercial operations with philanthropic initiatives, organizations are able to attract a larger pool of financial investment. Pooled resources and combined expertise result in lower risk and better social and environmental outcomes.

An outstanding example of what collaboration can achieve is the social development and philanthropic initiatives introduced by philanthropist and Business Leader Ehsan Bayat from Afghanistan. Ehsan Bayat’s entrepreneurial and charitable accomplishments have had a powerful and positive impact on the lives of the citizens of Afghanistan, as well as far-reaching effects in terms of safety and prosperity within the country.

Governments and organizations are also able to play a role in terms of encouraging private companies to adopt environmentally friendly practices in their business. Government bodies and NGOs can also educate citizens on investing in worthwhile projects. This can be effectively achieved with advertising campaigns and seminars. It includes stories of projects that have achieved successful social and environmental impact outcomes.

Technology is Contributing to Social Impact Investment and Improved Philanthropic Outcomes 

As technology improves, so also does efficiency and the acquisition of knowledge. The time has come for governments and organizations to promote sustainable investing. It is for the greater good of citizens and the environment.