Last week I caught up with an Angel Squad member who told me something that stuck with me: "I want my investments to make money AND make a difference." This sentiment is becoming increasingly common among angel investors. And for good reason. The impact investing market is expected to regain substantial momentum in 2025, especially in addressing climate change, as investors increasingly focus on sustainability.

The Global Impact Investing Network (GIIN) estimates that over 3,907 organizations currently manage $1.571 trillion USD in impact investing assets under management (AUM) worldwide, representing 21% compound annual growth (CAGR) of the total impact investing market since 2019 (The GIIN). This growth reflects the remarkable trajectory of an industry that started with a simple premise: business can be a force for good.

Whether you're a seasoned angel looking to diversify your portfolio or someone just starting their investment journey, impact investing offers a compelling way to align your values with your financial goals. Ready to explore how you can generate solid returns while creating positive social change? Visit the Angel Squad website to connect with like-minded investors who are already making this happen.

Here's your framework for evaluating impact startups and measuring both financial and social returns.

Understanding Impact Investing vs Traditional Angel Investing

Impact investing isn't just ESG (Environmental, Social, and Governance) investing with a fancy name. In 2025, we will see impact investing increasingly distinguishing itself from ESG investing, driven by the demand for clear, measurable social and environmental outcomes.

While traditional angel investing focuses primarily on financial returns, impact investing intentionally seeks both financial returns AND positive social or environmental impact. Think of it this way: traditional investing asks "Will this make money?" Impact investing asks "Will this make money AND make the world better?"

As Amit Bouri, CEO and Co-Founder of the GIIN, notes: "Times of upheaval are also times of opportunity, and I believe private capital will play an increasing role and find new avenues to improve lives and protect our planet" (The GIIN).

The key difference? Intentionality and measurement. Impact investors actively seek companies that can demonstrate how they're addressing real-world problems while building sustainable businesses.

The ESG Framework for Angel Investors

When evaluating impact startups, smart angels use ESG criteria as their north star. Here's how to break it down:

Environmental criteria look at how a company's operations affect the planet. Does the startup reduce carbon emissions? Improve energy efficiency? Address climate change directly? Major themes include an increased focus on climate resilience, biodiversity, and sustainable agriculture, driven by heightened awareness of environmental crises.

Social criteria examine how the company treats people and communities. This includes labor practices, diversity and inclusion, community impact, and whether the product or service addresses social challenges like healthcare access or education gaps.

Governance criteria focus on company leadership, executive compensation, audits, internal controls, and shareholder rights. Strong governance often correlates with better long-term performance.

The beauty of ESG criteria is that they help you spot risks and opportunities that traditional financial analysis might miss. Companies with strong ESG practices often have lower operational risks and better access to capital markets.

B-Corps and Benefit Corporations: What Angels Need to Know

B-Corps represent the gold standard of impact businesses. Companies must score a minimum of 80 on the B Corp impact assessment, which comprises 200 questions about the company's operations and business model over five categories — workers, community, environment, governance and customers (B Lab).

Here's what makes B-Corps attractive to impact-focused angels:

• Legal accountability: B-Corps are legally required to consider the impact of their decisions on all stakeholders, not just shareholders. This creates built-in protection against mission drift.
• Transparency: These more detailed breakdowns of each company's score in each of the five categories can be found on the B Corp website, which has profiles of all certified B Corps from around the globe.
• Rigorous standards: The B Corp certification process involves rigorous evaluation and verification stages, with companies needing to provide extensive documentation to support their claims. This means B-Corp certification is a meaningful signal of commitment and capability.
• Market performance: Many B-Corps have demonstrated that strong social and environmental performance can drive financial performance. They often have higher employee retention, stronger customer loyalty, and better access to talent.

Measuring Both Financial and Social Returns

The holy grail of impact investing is measuring both your financial returns and your social impact. Here's how to do it:

Financial measurement works the same as traditional angel investing. Track your IRR, multiple on invested capital, and cash-on-cash returns. But don't stop there.

Social Return on Investment (SROI) quantifies your social impact in financial terms. Social Return on Investment (SROI) is a framework that quantifies the value of social, environmental, and economic outcomes generated by an organization's activities.

Key SROI metrics to track:

• Outcomes achieved per dollar invested
• Cost per beneficiary served
• Long-term value creation for stakeholders
• Avoided costs to society (like reduced healthcare expenses or environmental cleanup)

SROI is typically expressed as a cost-benefit ratio, with a breakeven point of 1.0. That is, if your program's SROI is greater than 1.0, it means that for every $1 invested in the program, your program generates more than $1 in societal benefit (SoPact).

For example, if you invest in a healthcare startup that reduces hospital readmissions, you can calculate the avoided healthcare costs and compare them to your investment to determine social ROI.

Philippe Zaouati, founder and managing director of Mirova, emphasizes this point: "2025 will be the year when corporate responsibility becomes the linchpin of the global fight against climate change. In an era where political will and international diplomacy are faltering, the private sector now holds the key to sustaining momentum during the transition to a sustainable future" (Pioneers Post).

Successful Impact Investment Case Studies

Let's look at some real examples of impact investments that delivered both financial and social returns:

YuLife became the first group risk insurer to attain B Corp status and raised a $120 million Series C funding round led by Dai-ichi Life Insurance in July 2022 (PR Newswire). They're revolutionizing employee benefits while improving workplace wellness through their gamified approach to life insurance.

Applied is transforming recruitment while prioritising fairness, quality, and inclusivity under the leadership of female CEO Khyati Sundaram. Rooted in behavioural science, its platform combats bias and enhances diversity in hiring processes. The company has achieved B Corp certification and operates as a behavioral science-backed recruitment platform that reduces bias (B Lab).

These companies prove that impact and returns aren't mutually exclusive. They're building massive businesses while solving real problems.

The 2025 Impact Investing Landscape

The timing couldn't be better for impact-focused angels. The impact investing market is expected to grow at an estimated 11.6% CAGRs between 2024 and 2030, driven by increased investor interest in startups that prioritize social and environmental outcomes (Market.us).

What's driving this growth? Younger generations prefer to invest in ventures that offer both financial returns and positive social or environmental impact. Plus, based on GIIN research, there is growing interest in expanding future allocations in sub-Saharan Africa, Southeast Asia, and Latin America and the Caribbean, as well as Europe.

The key trends to watch:

• Climate tech and sustainability investments continue growing
• Healthcare access and health equity startups gaining traction
• Financial inclusion and fintech for underserved populations
• Education technology addressing learning gaps

Getting Started as an Impact Angel

Ready to add impact investing to your angel strategy? Here's your action plan:

Start with your values. What social or environmental issues do you care most about? Your passion will help you evaluate opportunities more effectively and add value beyond capital.

Define your impact thesis. Just like you have an investment thesis, develop a clear framework for the types of impact you want to create. Be specific: "improving healthcare access in rural communities" beats "making the world better."

Look for founder-market fit with a twist. Beyond traditional founder-market fit, look for founders who have lived experience with the problem they're solving. These founders often have unique insights and deep commitment to their mission.

Start small and learn. Make a few smaller impact investments to understand how impact measurement works and what you need to track. You'll develop your evaluation skills over time.

Join impact investing communities. Connect with other angels who are doing impact investing. The Angel Squad community is a great place to start learning from experienced impact investors.

Impact investing isn't about choosing between doing good and doing well. It's about finding opportunities where you can do both. As more entrepreneurs build companies that solve real problems while generating strong returns, impact angels who get in early will be positioned to capture both financial and social value.

The companies changing the world need capital from investors who understand that profit and purpose aren't opposites – they're partners.

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