Impact portfolios: What are they and why do they often defy recessions?

Impact Investing: Could It Help Defy Recessions?

Research published in April 2025 by the FTAdviser suggests that impact investment portfolios could be well-positioned to defy recessions.

Read on to discover:

• What impact investing is
• How it differs from ESG investing
• Why impact firms might be more resilient during economic downturns
• Whether it could be a strategy to consider for your portfolio

What is impact investing?

Impact investing aims to generate both:

• A financial return
• A measurable positive impact on society and the environment

Often, impact investors will review a company’s corporate social responsibility (CSR) report and consider how their goals benefit wider society.

The criteria for impact investments can vary significantly. For example, a fund may invest to:

• Promote sustainability
• Provide essential health services to communities
• Support clean energy or green technology

Impact investing can involve a range of asset classes, including stocks, bonds, and mutual funds.

Impact investing vs ESG investing

Impact investing is often compared to ESG investing, where environmental, social, and governance factors are considered along side financial ones.

However, there is a key distinction:

• ESG investing integrates these considerations into financial analysis.
• Impact investing seeks to achieve a measurable positive impact— and in some cases, investors may accept slightly lower returns in exchange for this.

Why impact firms may be better positioned during recessions

Research highlighted by FTAdviser analysed more than 250 firms and found that impact firms outperformed during recessions by around 0.6% compared to expansion businesses.

While there were times when impact firms underperformed, during downturns they tended to be more resilient. The study identified three possible reasons:

1. Impact firms often operate in defensive sectors

Many impact businesses are in areas like healthcare or industrials, which may be less sensitive to economic cycles.

That said, investors should still consider diversification. Overexposure to a single sector could increase your risk, so balancing assets, sectors, and regions remains important.

2. They focus on addressing global challenges

Impact firms often tackle global issues — such as sustainability, access to healthcare, or education — which don’t disappear during recessions. This sustained demand may protect them from some economic shocks.

3. They prioritise long-term growth strategies

Because impact firms seek to create lasting positive change, they may adopt business strategies that support long-term growth, such as:

• Operating with stronger profit margins
• Expanding workforces quickly
• Deploying capital actively
• Favouring tangible assets over large cash reserves

This proactive approach could leave them better positioned to weather recessions.

Is impact investing right for you?

Impact investing can be attractive if you want your money to “do good” while pursuing long-term returns. However, it’s not suitable for everyone.

Before considering this strategy, you should assess:

• Whether it aligns with your financial goals and circumstances
• How it complements your other investments
• Your attitude to risk

As with any investment, returns cannot be guaranteed, and values can go down as well as up.

For guidance on whether impact investing could suit your portfolio, working with a financial planner.

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Get in touch about impact investing and your portfolio

If you’d like to discuss how impact investments could fit into your financial plan, please contactus.

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Important information

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

The value of your investments (and any income from them) can go down as well as up, and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances