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Why Social Impact Investing Is Important to End the Cycle of Poverty

Refuge InvestmentsOctober 15

Why Social Impact Investing Is Important to End the Cycle of Poverty

As of 2019, around 34 million Americans lived at or below the poverty line. Many people think of poverty in purely financial terms. The poverty line for a family of four in 2019 meant living on less than $25,750 a year.

Of course, it’s not only a question of money. The cycle of poverty extends into other areas. That’s why social impact investing is so important.

Real estate social impact investing in particular shows some real promise in helping to break that cycle. Before jumping into why social impact investing matters, let’s take a brief look at the cycle of poverty itself.

What Is the Cycle of Poverty?

The cycle of poverty is a theory about how poverty transmits across generations. No one root cause explains it. Instead, a number of factors drive it, such as:

– Unemployment
– Underemployment
– Breakdown of family units
– Poor educational opportunities
– Low community expectations 
– Governmental neglect
– Persecution 
– Trauma
– Substance abuse

Many of these factors reinforce one another. Underemployment and broken family units mean living where rent is cheap. That, in turn, reflects older neighborhoods, further lowering taxes collected and limits educational opportunities.

As kids grow up in this environment, it normalizes the poverty experience. Kids don’t expect a college education or a full-time job. When they reach adulthood, they will likely follow the behaviors they know.

Social Impact Investing

The core idea behind real estate social impact investing is that profit isn’t the only goal. Instead, the investment involves on-site property improvements, as well as community-oriented services like credit repair and debt elimination classes and job fairs. The business benefits of impact investing are many, such as:

– Improved resident retention
– Better employment options
– Better personal finance management among residents
– Safer living spaces

While this approach doesn’t see profit as the only meaningful outcome, it does create profit for investors. Happy residents who see themselves as part of a community stay and pay rent. This lets investors get a stable return on their investment.

Why It Matters?

The history of poverty prevention by government bodies is often littered by failures, half-measures, or abandoned programs. Political winds shift and priorities change. When those priorities change, funds dry up.

The cycle of poverty builds over generations. It takes time and sustained investment in the process to break that cycle. Social impact investing provides the ideal vehicle for sustained attention to the issue.

The educational options help parents and kids develop sound financial instincts. The job fairs help parents find better, full-time jobs. The kids see their parents embarking on a better path and, hopefully, emulate them.

Impact Investing Can Help Break the Cycle

Social impact investing can help break the cycle of poverty.

Basic quality of life improvements at the properties makes residents like living there more. Community events and educational options create new opportunities for employment and financial security. These, in turn, support parents as they model different patterns of behavior.

This provides future generations with a different way of viewing the world. It’s a view that includes full-time employment, nicer accommodations, and even some conscious self-improvement.

Refuge Investments specializes in real estate social impact investing. For questions or more information about investment opportunities, reach out to us today!


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