5 Steps for a company to invest in social impact

Social impact investment is an increasingly relevant and decisive practice for companies that wish to reinforce a responsible image. According to a report by GIIN, social impact investments totaled US$1.1 trillion worldwide in 2022. Furthermore, Alfi, the Luxembourg fund industry association, estimates that the demand for investments in assets with environmental, social, and governance (ESG) purposes among European investors is expected to grow by 15.9 trillion euros — approximately US$21 trillion — by 2026.

At the end of 2023, European institutional investors had already allocated a total of 3.7 trillion euros in ESG assets, and it is expected that this amount will reach 19.6 trillion euros by 2026. The universe of startups aimed at entrepreneurs developing socially impactful businesses has achieved record growth in the investment market over the last year. According to data from Halcyon, an American incubator, investments surpassed the mark of US$1 trillion, driven by a wide range of investors, such as venture capital funds, angel investors, and foundations.

According to Karla Suarez, Executive Director of the ColetivA DELAS, specialist in DEI, creative economy, and fundraising, the benefits of private social investment go beyond the positive impact on the supported causes, also contributing to the construction of a positive corporate image, employee engagement, and closer proximity to the target audiences. The problem is that many of these organizations do not know where to start. "Companies have a fundamental role in social and environmental transformation. Investment in social impact is not only an ethical choice but also a business strategy that adds value to the brand, strengthens relationships with stakeholders, and drives innovation and sustainability. It's just a matter of knowing where to start," he highlights.

For organizations that wish to start or improve social responsibility initiatives, Karla Suarez lists five essential steps:

1. Creation of Private Social Investment (PSI) Policies

“The first step in developing an impact social strategy is the creation of a private social investment policy. It should establish clear guidelines that define the priority areas of action, such as education, the environment, or social inclusion, always aligned with the company's values and purpose,” recalls Suarez. Furthermore, the expert emphasizes that it is essential to determine a dedicated budget that covers both financial and human and material resources, to support initiatives over time. It is also important to define clear criteria for the selection of projects and partners, ensuring that these choices are in tune with the company’s mission, guaranteeing coherence and effectiveness in the implementation of programs.

2. Development of Corporate Volunteer Program

A corporate volunteer project is essential for engaging employees in the social causes supported by the company. “This program should offer various opportunities for employees to participate actively, from one-time actions to ongoing volunteer activities,” says the specialist. To foster this engagement, it is recommended that the company provide training and incentives, such as specific training sessions and recognition for volunteer work, which can come in the form of paid time off dedicated to volunteering or internal awards. 

3. Mobilizing internal audiences for social causes

To ensure the involvement of all employees in social impact initiatives, it is important to mobilize the internal audience through Campaigns focused on social impact, which aim to raise awareness among employees about the importance of the causes and encourage them to actively participate in the company's actions. Creating spaces for dialogue and participation, such as forums or discussion groups, also allows employees to suggest projects in a more direct manner. This strengthens the sense of belonging and promotes a culture of social responsibility within the company, increasing engagement and adherence to the initiatives.

4. Sponsorship of social and environmental impact projects

Sponsoring social and environmental impact projects is an effective way for the company to reinforce its social engagement. To do this, it is crucial to identify projects that are aligned with the company’s areas of interest and that have the potential to generate significant positive impact. Establishing strategic partnerships with organizations that are already active in these areas can enhance the results. It is important to implement evaluation and monitoring mechanisms for the sponsored projects, to ensure that the objectives are achieved and that the company’s investments are generating the desired impact.

5. Communication

Transparency in the communication of social action results is fundamental to strengthening the company's credibility and amplifying the reach of the initiatives. "It is advisable that companies release annual reports, newsletters, or even use online platforms to share the results obtained," Suarez finishes.