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Three years after Amit Bouri’s birth in Northern California, his parents divorced. His mother returned to school to study accounting. She and her son would be on public assistance for the next six years, until she finished her degree and started her career.

Bouri’s social conscience, and his awareness of the value of a social safety net, date back to those days. Now, the former strategic consultant runs the Global Impact Investing Network, an organization of investors seeking to achieve social and environmental impact as well as competitive returns. It’s a fast-growing segment: TPG, the big private-equity firm, recently raised $2 billion for an impact fund.

We chatted with Bouri, 40, about the landscape for impact investing. Here are some excerpts from our conversation.

Barron’s: What exactly are impact investments?

Bouri: They’re investments made in funds, companies, or projects with the intention of generating a positive social or environmental impact alongside a financial return. The investments can be in any range of sectors and across asset classes, around the world. They range from very stable, low-risk cash-management strategies all the way to alternative-asset classes, including private equity and venture capital. Some are emergent and experimental, some are mature and proven. There are different risk tolerances among impact investors.

Most impact funds don’t invest in public markets.

There’s a long tradition of responsible investing in public markets, initially focused on screening out harmful things. That’s evolved into strategies looking at the environment, social, and governance [ESG] elements of companies—say, whether a manufacturer considers its carbon footprint, board diversity, or employee diversity. That’s driven by a focus on managing risk that can come from environmental or social factors.

Manager’s Bio Name:Amit BouriAge40Title:CEO, co-founder, Global Impact Investing Network; Strategy consultant, Monitor Institute and Bain & Co.; Corporate philanthropy departments, Gap and Johnson & JohnsonEducation:B.A., Swarthmore College; M.B.A., Northwestern University Kellogg School of Management; M.P.A., Harvard University Kennedy School of GovernmentHobbies:Design, film, food, learning acoustic guitar.

But increasingly, we see an appetite for opportunities to not only manage risk, but invest directly in solutions to social and environmental problems, for starters. Many larger investors are investing in both impact and ESG funds. They’re very complementary. Our vision is investors considering their impact across their entire portfolio.

What kinds of returns are we talking about?

Based on the research in our most recent annual survey, over 90% of impact investors are either meeting or exceeding their financial-return expectations. Impact investing is viable and attractive. It’s not an act of charity or philanthropy, but rather a strategy that belongs in an individual or a firm’s investment portfolio.

We’ve studied three different financial performance benchmarks: One, private equity and venture capital; two, real assets; three, private debt. Across those categories, risk-adjusted rates of return are achievable for impact investments.

Actual? Or simply achievable?

The vast majority of impact investors are focused on achieving market rates of return. As the pipeline grows and matures, the opportunities will only increase. I do want to note that some opportunities are financially sustainable but may not deliver market rates of return. Some investors that are more focused on capital preservation may seek those opportunities.

How do firms measure impact?

Measurement is really critical. Firms are performance-driven, and they want to understand impact performance and financial performance. There’s a long history of financial-performance measurement that has evolved and grown more sophisticated. Impact measurement capabilities are still evolving. It’s building an entirely new discipline. One of the most widely adopted metrics measures greenhouse-gas emissions. For investors who are focused on climate change—who are investing in renewable energy projects, for example—looking at a product’s greenhouse-gas emissions can help quantify the impact they’re having on the transition to a low-carbon-energy infrastructure.

There are different metrics by sector for sustainable forestry, affordable housing, and microfinance. Most investors aren’t familiar with them. We have a program to develop IRIS, a catalog of generally accepted metrics for measuring social, environmental, and financial performance, which are available free of charge to anyone, to establish common definitions for impact measurements. The vast majority of impact investors are using IRIS metrics in some form.

What were other key findings of your survey?

This market is strongly oriented around growth. It’s expanding into new sectors and new geographies, and most impact investors are increasing allocations. We’ve also seen engagement from mainstream firms: Eighty-four percent report that they’re making more impact investments. The total impact-investment assets under management is $228 billion. Of the 81 respondents who’ve participated in the past five years, aggregate compound growth is 13% year over year. Of these respondents, 47% are from the U.S. and Canada. About 20% of the assets are allocated into the U.S. and Canada. Among the sectors attracting significant interest are financial services, including microfinance, and energy, especially renewable energy, both large projects as well as energy access.

So many big firms like TPG, Bain Capital, and KKR have created impact funds lately. Why?

Large institutional investors, as well as individual clients, are seeking opportunities to put their capital to work to build a more sustainable world. They’re responding to client demand. Recently I visited Hong Kong, Denmark, the Netherlands, and the U.K. All signs point to increased allocations. That’s a leading indicator for more growth in the market as they scale up allocations and deploy capital.

There’s the convergence of a few factors. One, more and more people are aware of impact investing. They see a real opportunity to invest in sustainable solutions to social and environmental problems. It’s being combined with the increasing evidence-based performance data, so impact investing has increased credibility. And as more credible investors enter the market, there’s a network effect, meaning other investors follow. And some external factors are also prominent. The Paris Climate Accord of 2015 was very successful in gathering private-sector interest in managing climate risk and opportunities to invest in a sustainable energy economy.

Finally, the adoption of the U.N. Sustainable Development Goals drove a lot of interest among CIOs and CEOs of major institutional investors and asset managers. The endowments, pension funds, and insurance companies need to look at returns across decades to pay long-term obligations. And there’s an increasing recognition among them that if you’re looking at long-term financial performance, you also need to consider the social and the environmental impact of your investment portfolio. That will be a powerful driver of impact investing over the coming years.

How does a retail investor access an impact fund?

That’s evolving. One avenue is to work with a wealth manager or financial adviser. Increasingly the major wealth managers are putting more impact opportunities on their platforms. There are a host of independent platforms and strategies for retail investors, ranging from mutual funds to specialized notes. We’re keeping an eye on emerging firms like Swell Investing. There are other products like Calvert Community Investment Notes, the Enterprise Community Loan fund, the RSF Social Finance Social Investment fund. In Europe, Triodos Investment Management is active. There’s a whole range of community banks and sustainable banks that offer services like checking, savings, and money-market accounts, where your assets will be lent to low-income communities and/or to green businesses. So even people who have very modest financial holdings can be active as impact investors through very basic financial products.

In a generation, impact investing will be widespread, and it will be business as usual to think about impact across your investment portfolio, from the largest institutions to everyday individuals who want to ensure they have the money to retire—but also to invest in the world they want to retire in.

Thanks, Amit.

Write to Leslie P. Norton at leslie.norton@barrons.com