What is social impact investing?
Generally, social impact investing means investing in projects that aim to make a positive difference for people or the environment, while also earning a financial return. We at Skaala don’t expect every initiative to turn a profit. But we do expect them to create a measurable impact, attract other partners, and have a strong team.
Social impact investing differs from philanthropy. We treat our impact initiatives as investments, not passive donations. The rigor and decision-making processes that guide our profit-oriented investments are also at work in our social ventures. With social impact investing, rather than giving grants or donations, investors expect a direct financial return or positive social outcomes achieved, which are beneficial to the society as a whole.
What makes an investment a social impact investment?
The defining feature of a social investment is intentionality. Investors deliberately allocate capital to investment strategies that aim to deliver measurable social or environmental benefits alongside financial returns. Returns may range from below-market to above-market, depending on the investor’s goals and the nature of the investment.
Social impact investing is not limited to a specific market or growth stage and can be applied across early-, growth-, and more established-market contexts. At the same time, it requires investors to rethink traditional assumptions about risk, return, and responsibility.
Why the impact investing market exists
The social impact investment market questions the belief that only governments or charities should handle social and environmental problems. It recognises that private capital can play a crucial role in tackling complex challenges when it is used with a clear purpose.
By linking financial stability with long-term goals for change, social investing can attract more money than grants alone.
Where social impact capital is invested
Social impact investments often target social or environmental issues that include clean energy, healthcare, sustainable agriculture, infrastructure, and affordable housing.
In energy and agriculture, impact investments typically focus on sustainable resource use for the long term. In healthcare and housing, the emphasis is often on access, affordability, and service quality. Investments in infrastructure often help communities that are not well served.
Undertaking social impact investing lets investors help solve big, long-term problems. Skaala prioritizes three focus areas in impact investing: education and youth well-being, entrepeneurship and freedom.
Who are social impact investors?
Social impact investing attracts investors who want their money to drive real-world outcomes without sacrificing financial results. It appeals to a wide range of investors, including fund managers, banks, pension funds, insurance companies, foundations, family offices, development finance institutions, and individual investors.
Each group has its own motivations, return expectations, liquidity needs, and approaches to measuring impact.
As most investors and asset owners aim to keep their portfolios and investment strategies diversified, investment opportunities that address social issues, environmental goals, and other pressing challenges can offer an attractive opportunity for diversification.
The principles of social impact investing
Social impact investment companies follow a few main principles. At Skaala, we use the following principles to guide how we look at and choose projects.
We prioritise prevention by seeking solutions that address the root causes of problems, not just quick fixes. This way, the impact lasts longer, and there is less need to step in again later.
We also place strong emphasis on efficiency, making sure we use money wisely to deliver real results. Knowing how much impact costs, helps us compare projects and allocate resources where they matter most.
Impact measurement is another key focus. We look for initiatives with clearly defined outcomes and impact indicators, enabling us to track progress and understand what is working in practice.
At the same time, we consider scalability, supporting solutions that can grow beyond a single location or team and reach a wider group of people.
Finally, sustainability plays an important role in our assessment. We favour initiatives with a credible path to financial independence, enabling them to keep making a difference over the long term without relying indefinitely on external support.
How does social impact investing work in practice?
In practice, social impact investing depends on the investor’s mission and strategy. Investors typically focus on specific geographies, communities, or stakeholder groups where they believe their capital can have the greatest effect.
Investments are set up to align with impact goals, so the way money is managed and results are measured support what investors want to achieve.
Examples of social impact investments
As mentioned before, social impact investments can address a wide range of social needs, depending on context and approach.
In education and youth wellbeing, impact investments often target issues like teacher shortages, unequal access to support services, and outdated learning models. At Skaala, we support initiatives that strengthen the education system while also addressing youth mental health. These efforts concentrate on improving school leadership, supporting teachers, building mental health literacy, and ensuring more equal access to preventive support through modern education models and training programmes.
In entrepreneurship, social impact investments can support research-driven and technology-intensive founders by providing programmes that help turn innovation into successful businesses. These investments aim to make companies more competitive, help them grow internationally, and transfer knowledge from the technology sector to other parts of the economy.
Social impact investing can also support the protection of freedoms and democratic rights. In this area, investments commonly focus on independent media, civic engagement, and institutions that promote open societies. Backing these projects makes society stronger and helps people have informed public discussions, especially in uncertain times.
Across all examples, the main idea is to use capital to support initiatives that aim for lasting social outcomes while building structures that can sustain themselves over time. At its core, social impact investing is about using capital intentionally to earn financial returns while contributing to stronger communities, fairer systems, and more resilient societies.