5 steps for companies to start investing in social impact

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

By the end of 2023, European institutional investors had already allocated a total of €3.7 trillion in ESG assets, and this value is projected to reach €19.6 trillion by 2026. The universe of startups focused on entrepreneurs developing businesses with social impact achieved record growth in the investment market last year. According to data from Halcyon, an American incubator, investments surpassed the US$ 1 trillion mark, driven by a wide range of investors, such as venture capital funds, angel investors, and foundations.

Theo Karla Suarez, Executive Director of ColetivA DELAS, specialist in DEI, creative economy and resource mobilization, the benefits of private social investment go beyond the positive impact on the supported causes, also contributing to building a positive corporate image, employee engagement, and closer relationships with stakeholders. The problem is that many of these organizations do not know where to start. “Companies play a fundamental role in social and environmental transformation. Investing in social impact is not just an ethical choice, but also a business strategy that adds value to the brand, strengthens relationships with stakeholders, and drives innovation and sustainability. You just need to know where to start,” she emphasizes.

For organizations wishing to initiate or enhance social responsibility initiatives, Karla Suarez lists five essential steps:

1. Creation of Private Social Investment (PSI) policies

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

2. Development of a Corporate Volunteering Program

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

3. Mobilization of 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, aiming to raise employee awareness 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 more directly. 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 performance. For this, it is crucial to identify projects that are aligned with the company's areas of interest and have the potential to generate significant positive impact. Establishing strategic partnerships with organizations already working in these areas can enhance the results. It is important to implement evaluation and monitoring mechanisms for sponsored projects to ensure the objectives are met and that the company's investments are generating the desired impact.

5. Communication

Transparency in communicating the results of social actions is fundamental to strengthening the company's credibility and amplifying the reach of the initiatives. “It is recommended that companies publish annual reports, newsletters, or even use online platforms to share the results obtained”, concludes Suarez.