21-04-2022 15:34

Understanding social impact investing

What is social impact investing?

Social impact investing is when you as an investor choose your investments with the intention of generating measurable, beneficial social effects in addition to financial gains.

Social impact investing is a category of sustainable investments, which are investments which take environmental issues, social issues and governance issues into account. It goes further than investments which integrate a systematic reflection on ESG-related risk and opportunities as it also aims to address social challenges and goals. 

Social impact investments can for instance be investments in:

  • a bank which provides microloans to Indonesian female entrepreneurs
  • a company which rents out affordable housing
  • a platform which provides students with online tutoring

Is there an official definition of social investments?

Not yet, but the EU is developing one including economic activities providing products and services with social benefits, in the same way the EU has made a taxonomy (that means a classification system) for green investments.

Social impact investments through Nordea

At Nordea, when we invest with social impact, we support companies whose products or services contribute to allowing more people in the world to provide for themselves and achieve their greatest potential.

In real terms, this means we invest in companies with the potential to improve quality of life and develop individual capabilities. We use the UN’s Sustainable Development Goals as our starting point, in particular:

  • Sustainable Development Goal 1: No poverty (mostly through financial inclusion)
  • Sustainable Development Goal 3: Good health and well-being
  • Sustainable Development Goal 4: Quality education
  • Sustainable Development Goal 8: Decent work and economic growth (including financial services for small and medium-sized businesses)
  • Sustainable Development Goal 9: Industry, innovation and infrastructure, as essential economic infrastructure is a precondition for others goals (including cloud services for small and medium-sized businesses)
  • Sustainable Development Goal 11: Sustainable cities and communities, in particular affordable housing and waste management services.

Minimum social criteria that apply to all Nordea’s funds

All Nordea Funds – not just the ones which are ESG-branded – expect business partners and suppliers to adhere to these principles:

  • We are committed to good corporate citizenship
  • We are committed to human rights, labour rights and freedom
  • We are committed to equal opportunities and diversity
  • We are committed to caring for the wellbeing of our employees
  • We are committed to ethics, honesty and sincerity
  • We are committed to caring for the environment
  • We reject bribery and corruption.

How to get started with social impact investing

Do you want to invest socially responsible? Nordea can help you:

Buy funds with a social focus

Buying funds is an easy way to get started with investing, and when you buy funds you spread your risk. The drawback is that it costs you a fee to invest in a fund – and you might not agree with the fund’s definition of social impact.

At Nordea we currently offer three funds with a social focus: 

  • Global Social Empowerment Fund
  • Nordea Global Climate and Social Impact Fund
  • Nordea Global Gender Diversity Fund

Buy shares in individual companies

You can also handpick stock exchange listed companies which you believe contribute to solving social issues in the world and have the potential to increase in value if this is a priority to you. Finding these companies and taking a closer look at them obviously take more work, and you don’t spread your risk in the same way. Also, when you are not a professional investor, it can be much harder to judge the future economic potential of these companies.

Contact Nordea in Denmark, Norway, Finland or Sweden to learn more about our funds universe and how to get started with social impact investing.