Depending on the development and change in the social-cultural structures of societies throughout history, the approach and thought of economics have also changed. The main objective of the economy is to try to allocate scarce resources in the best way to meet the endless needs and desires of people. In the early periods, there was an economic approach based on the provision of more food, while in the trade period, there was an economic approach based on the trade of precious metals.approach was adopted. Later, the economic approach evolved into the industrial period, which was based on the production of material goods, depending on the developments in production possibilities. In the 1900s and especially after the second world war, the understanding of output economy, which is based on production, was adopted. In this understanding, entrepreneurs maximized their profits by using their financial resources as efficiently as possible, producing and selling more output. This understanding was reflected in the rulers of the country, and the more they produced with their resources as a country, the more successful the managers were considered to be successful. This understanding has survived to the present day, and the country's politicians have generally evaluated their performance based on the level of the Gross National Product (GNP). According to them, an increase in GNP means the enrichment of the country. But the results and indicators did not reflect this.

The understanding of output economy, excessive consumption of natural resources, pollution of the environment, lack of economic development despite economic progress, change of seasons due to pollution of the atmosphere (increase in temperature, heavy rains, storms, drought, etc.) resulted in migrations and in the impoverishment of the vast majority of the people. According to the world inequality 2021 report, 10% of the world's population owns 76% of global wealth and 52% of world income (World Inequality Database 2021). The opportunities created by technological developments such as artificial intelligence will lead to an increase in unemployment on a world scale and, as a result, an increase in inequality. These results may lead to an increase in migration towards relatively developed countries, degeneration of socio-cultural structures, and an increase in turmoil and chaos in societies. The most important reason for the increase in racism in the world is these derived results. Especially people in developed countries react to these developments and results, and these reactions have an impact on politicians. The ravages caused by the output-oriented economy are increasing the awareness of people that the risks that will endanger the future of the human generation and the urgent need to take precautions. As a result of these developments, the United Nations Environment Organization (UNEP) was established in 1972 and then, in 2015, 193 member states of the United Nations (UN), It unanimously adopted the Sustainable Development Goals (SDGs) and committed to adopting them as a global agenda to end poverty by 2030. Main goals were set, such as ending extreme poverty, combating inequality and injustice, and fixing climate change. On the other hand, the Paris Agreement, the EU Green Deal and the Glasgow 26. Multilateral developments, such as the Conference of the Parties, force countries to fulfill their commitments. These developments have led to the adoption of an economic approach based on issues such as protecting the environment, ending extreme poverty and combating inequality and injustice at the global level. This economic approach is called "impact economics". The impact economy is the evolutionary result of socio-cultural change, and represents a more comprehensive approach efficiently allocating scarce resources to effectively meet the current and future needs of society. Impact economy,together with human development with the profit of enterprises (good education, access to good health services, good nutrition, etc.) is an economic approach based on the allocation of financial resources to protect the environment. In the impact economy approach, it is important to measure the environmental and social impact it creates as well as the financial return while investing. This approach has been the basis for the emergence of impact investing.

Impact investing is an extroverted investment strategy in which investors seek to achieve a financial return while also achieving a direct positive environmental or social outcome. In this context, classical business goals such as making a profit or maximizing the income of capitalists are not considered sufficient, and it becomes an important goal to make investments that will have a positive impact on a part or the general society and support development. This approach aims to harness the power of investment to do good for society by selecting and managing investments to create positive impact (IFC, 2019).

Global Impact Investing Network (GIIN) defines impact investing as investments made with the intention of creating positive, measurable social and environmental impact along with financial returns (GIIN, 2019). Impact investments can be made below or at the level of market return in developing or developed countries, depending on the strategic goal of the investors. Impact investing can provide resources for projects that aim to solve important problem areas around the world, such as sustainable agriculture, renewable energy, microfinance, accessible and affordable education, health and the right to housing. For a sustainable development by 2030,the annual financing gap is estimated to be between US$ 5 and US$7 trillion annually, of which US$2.5 trillion is in developing countries (UNCTAD, 2014). The United Nations Addis Ababa Action Agenda states that the annual global infrastructure investment deficit is between $1 trillion and $1.5 trillion (UN, 2015).

Every investment contributes to positive and negative social and environmental impacts, both in the short and long terms. All investors shape these effects through their investment decisions. Impact investing, therefore, is an approach used by investors to harness the power of their invested capital to actively contribute to improvements in people's lives and environmental health. In order for impact investing to effectively contribute to positive social and environmental impacts, and for the approach to remain credible as more capital becomes available for impact investing, financial markets need to be aware of the expected conditions for implementation and participation in the impact investing market.It needs clarity. There are four key characteristics of impact investing.

Intention: The impact investor intends to make a positive and measurable contribution to the solution of social and environmental problems with its investments. This sets them apart from other strategies such as ESG investing, responsible investing, and screening strategies.

Financial Returns: The impact investor does not invest for the purpose of grants, but for the expectation of receiving a return at least in the amount of his capital. Impact investing is an investment approach between traditional investing, which seeks to maximize profits, and philanthropy, which seeks to create environmental and social impact without considering financial returns.

Return Expectation Range and Asset Class: The impact investor's financial return expectation is below the market return or at the risk-adjusted market return rate. There is no limitation on the asset class.

Impact Measurement: The hallmark of impact investing is the use of evidence and impact data in investment design, the transparent and accountable measurement of social and environmental impact performance and progress, and a commitment to contribute to the growth of the industry.

 Based on general definitions, impact investing is defined as a strategy to generate financial returns in line with investors' own expectations, with the intention of creating measurable impact towards the solution of one or more of the existing sustainable development problem areas, through projects or initiatives that are financed by investors possible.

Impact measurement and impact management have two separate functions and complement each other. The OECD divides the current initiatives that support each of these functions into four broad groups:

Principles and guidance: Principles are a broad set of agreed values that bring about a common understanding of ethics. Guidance is needed to further elaborate on the principles.

Frameworks and methodologies: Frameworks provide a structure to facilitate working in accordance with the principles and guidance during the implementation phase. Methodologies draw a systematic path and establish a procedure for applying principles within a specific framework.

Standards, certifications and ratings: The standardized requirements are based on best practices agreed through an internationally accepted process. Certifications usually include a third-party verification to ensure that a company or investment meets a certain standard. Ratings are the ranking of companies or investments based on a comparative assessment of the level of achieving a certain standard.

Metrics and indicators: These are standardized numerical elements used to measure, track or compare investments; databases of standardized, defined or widely used indicators and metrics that can be applied by investors and companies.

Key Features of Impact Investing complement GIIN's definition of impact investing. Refined in collaboration with the world's leading impact investors, the four key characteristics (principles) allow for greater definition of key expectations for impact investing. These principles are as follows (GIIN, 2024);

1. Intentionally contribute to positive social and environmental impact through investment as well as financial return.

In this context, solutions and opportunities for social and environmental challenges must be consciously funded. In addition, transparent financial and impact targets need to be set and an investment thesis that is clear about these goals and the strategies to be used to achieve them.

2. Using the evidence and impact data in investment design.

The best quantitative or qualitative impact data and evidence should be used to increase the contribution to positive impact. This includes:

• To identify a social or environmental need that is consistent with empirical evidence or well-established science, as well as a need expressed by the population or environmental community that the investment seeks to serve,
• To set targets related to the contribution of the investment to the improvement of this need,
• To design investment strategies based on effective solutions in addressing the identified needs and to ensure that the potential negative effects in the context of investments are understood,
• To determine the qualitative and quantitative indicators that we will use to measure performance against our targets and
• To impact analytics over time to improve the rigor of activities.

3. Management of Impact Performance

Impact performance data should be used in decision-making processes to manage investments to achieve social and environmental goals.This includes: 

• embedding feedback loops as possible throughout the life of the investment,
• identifying risks and develop mitigation plans to achieve stated impact targets,
• trying to mitigate the negative consequences of actions and
• disclosing the actual impact ofperformancethe data to investors and invested businesses in a way that is as comparable as possible.

4. Contribute to the growth of impact investing.

Action must be taken so that more investors can make impact investments effectively. This includes: 

1. to be transparent about the degree of use of these impact investing practices,
2. to commit to using common contracts, approaches and standards to define impact objectives, strategies and performances,
3. to consider the impact performance and quality of impact management practices of potential co-investors and invested businesses in the decision-making process and

to share positive and negative learnings andthe evidence or data that are not proprietary or proprietary.

Impact investments aim to contribute to the solution of existing economic, social and environmental problems with the invested business. In this context, it is possible to classify impact investments as initiatives that aim to create value economically and socially. Impact investing can be classified based on financial return and expectation of impact.

1. Traditional Investments: These are the investments where return is targeted at the market level and there is no impact target.
2. Philanthropic investments: These are the investments in which measurable impact is the main goal and the expected return on investment made is negative.
3. Responsible investing: In these investments, we act with the principles of sustainable investment, sustainability and non-harm. Absence of negative externalities of investment is wanted and while aiming for desirable and unmeasurable positive effects, the return on investment is aimed to be at the market level.

Impact Investing:Impact investing differs from venture philanthropy in that it targets positive financial returns, provided that measurable impact is achieved. The prioritization choice that investors will make between financial return and impact level will be the determinant of the impact level and financial return rate to be obtained as a result of the investment.In fact, in projects where results and change that make a difference are aimed for the solution of environmental and social problems, the place where the impact investor positions himself will make it easier for him to decide on the investment instrument and financing model he will prefer. The investor' s main motivation is social impact, and he is likely to prefer a low-interest loan or a non-repayable grant as an investment vehicle.At the other extreme, which is motivated solely by financial return, investors can be expected to invest in shares of publicly traded companies that prioritize corporate social responsibilities and have the intention of creating impact. Impact investing is a major attraction for many potential investors because it offers a hybrid option between financial concerns and philanthropy.

The determinant of impact investing is market dynamics. There are three main factors that determine the dynamics of the impact investing market.These are supply, impact, and demand.

Supply: The supply side is the source of funds and asset managers needed to realize impact investments. The source of impact capital can be listed as high-net worth individuals, institutions, governments, individual investors and foundations. Asset Managers, on the other hand, are investment advisors, fund managers, family offices, banks, insurance companies, pension funds and national welfare (wealth) funds. 

Impact; The impact side shows the financing tools of impact investments, that is, the financing form. The financing form of impact investments can be listed as Stocks, private debt, public bonds and bills, hybrid bonds/stocks, social impact bonds, real estate, interim financing. 

Demand; The demand side is made up of impact investing organizations and service providers. 

Impact Organizations are income-generating but non-profit organizations, socially responsible organizations, microfinance banks, development banks and social enterprises.

Service providers, on the other hand, can be listed as standards regulators, consultancy firms, crowdfunders, public programs, accelerators, international NGOs.

As the impact investing landscape has matured, the performance of leading impact funds has been crucial to building credibility and best practices and paving the way for future managers.The entry of popular investment firms such as the Social Impact Bond produced by the UK Social Finance Corporation, The Development Impact Bonds, Yunus Social Business and the Rockefeller Foundation's Social Achievement Bonds, into this area has given the approach more credibility and attention, creating a more comprehensive for-profit It helps to pull the capital base in this direction.In 2020, the size of the EY market was estimated as USD 715 billion by GIIN (2020) and USD 2.1 trillion by the International Finance Corporation (IFC) (2021 ). The growth in the impact investing market, which has exceeded expectations in the past 10 years, is expected to continue to increase in the coming period.

Factors such as the high level of ownership of the 2030 Agenda for Sustainable Development by all countries, the urgency of issues such as social justice and climate change, strengthening social movements and the global pandemic positively affect the development of the impact investing market. Trends such as Industry 4.0 will change the jobs and business life of the future, the FinTech revolution, the spread and importance of blockchain and big data applications, the spread of crowdfunding, and the fact that young people and women have more financial assets investment will shape the future of the market (Bouri, Mudaliar, Schiff, Bass, & H. Dithrich, 2018).

Despite the positive outlook and expectations for the impact investing market, there are a number of risks and obstacles to market development. Overcoming these risks and obstacles will help the industry reach a much better point. These risks and obstacles can be briefly explained as follows:

• It is the job of governments and public institutions to provide subsidies. This should not be the mission and goal of impact investing. When the public sector decides whether it is in the public interest to subsidize private enterprises, It is obliged to ensure that the subsidy is provided at the most affordable cost.
• It is possible for the financial industry to create a customized "impact" product and sell it to an insufficiently informed customer at a high price.
• Contributing to the solution of social and environmental problems while providing financial returns is a challenging goal. The perception of uncertainty that impact investors can generate financial returns reduces the demand of other investors for impact investing products (IFC, 2019).
• Fact that the standards for impact measurement and reporting are not generally accepted and concerns that manipulation may be possible in order to meet the "impact" target may affect market development (IFC, 2019).
• A bubble that will burst as a result of overinflation in a sector where impact investing is concentrated will cause investors to flee and suspicion about impact investing.
• Failure of impact investments to create the promised social and environmental impact will damage investors' sense of confidence.
• Investors who are directed to investments that are incompatible with their expectations and investors whose long-term expectations are not met may be expected to exit the current investment early, which may reveal the risk of failure of the investment (Monitor Institute, 2009).

Negative effects of well-intentioned investments to achieve measurable impact may also occur. For example, overly aggressive practices by microfinance institutions aimed at improving the well-being of low-income earners who cannot access traditional financial services may push low-income earners into a debt spiral. This also applies to renewable energy and various agricultural areas

Inequality of opportunity, income inequality, access to education, housing problem and environmental pollution are common problem areas of developing countries. In order to solve these problems, the importance of entrepreneurship and innovation, especially social entrepreneurship, is increasing. In this context, many initiatives are emerging in many developing countries to produce innovative solutions to economic, social and environmental problems. The impact investor of these startups may choose one of the investment instruments according to variables such as risk appetite, return expectation, level of desire to make an impact and return on investment. It will be compatible with the structure of theorganization that will receive the investment.

A mix of debt, partnership, and equity or debt-like instruments can also be used in financing. Here, if there is a match between the needs of the startup and the preferences of the investor, risk, opportunity, return and maturity options can be optimized. It is possible to group the instruments that can be used for impact investing under two main headings as debt instruments and risk/capital instruments. 

Debt Instruments are instruments such as bonds, green bonds, social bonds, bonds, loans and project bonds used to support social enterprises, large infrastructure projects, SMEs, micro-entrepreneurs and projects for education, health and cultural development impact investing. It is possible to evaluate it within the scope of debt instruments.In addition, the guarantees provided for intermediary financial institutions that provide loans to such initiatives are only possible with access to finance. 

Risk/capital instruments, Impact investors can choose to own rights in the company by purchasing the shares of publicly offered companies (that meet the necessary conditions), or they can become partners in the founding capital of start-up organizations as risk entrepreneurs. These can be listed as stocks, Exchange Traded Funds, Guarantees and Impact funds.The funder actors of the sustainable finance market are grant providers, individual investors, funders (mutual funds), pension funds and insurances, Public wealth funds, funds originating from venture philanthropy, foundations, financial institutions (banks, credit cooperatives, credit unions) and crowdfunding organizations.

Venture capital has a historical starting point and a tendency to develop based on this beginning. Georges Doriot,considered the Father of Venture Capital, founded the "American Research and Development Company" in 1946 to invest in companies that commercialized technologies developed during World War II. The company first invested $200,000 in a company that had a claim to use X-ray technology for cancer treatment. When the company went public in 1955, it returned $1,800,000. This development has led to a massive drive towards venture capital. Venture capital has been adopted and spread in countries where the technology-based industrialization strategy has been adopted, especially in the USA.

Risk capital, in general; it is a financial method that is dynamic, creative and innovative, which allows operators at all stages whose financial power is not sufficient to realize their investment ideas, provides business and management expertise support when necessary, and provides capital transfer in return for shares.

The concept of "Private Equity" and the concept of venture capital can be used synonymously, although there are differences between them. Private equity funds are pools of capital to be invested in companies that offer an opportunity for a high rate of return. Here, venture capital is used to cover both investments in ideas and start-ups in the early stages, as well as acquisitions, restructurings, and growth and expansion investments in companies that pursue a growth strategy, usually 3-10 years old.Venture capital is a type of private equity and a type of financing for start-up companies and small businesses with long-term growth potential. Venture capital typically comes from investors, investment banks, and financial institutions. Risk capital can also be provided as technical or managerial expertise. The following inferences from venture capital can be listed;

• Venture capital is a type of private equity and a type of financing for startup companies and small businesses with long-term growth potential.
• Venture capitalists provide support through funding, technological expertise, or management experience.
• Risk firms raise money from limited partners to invest in promising startups or even larger venture funds.

Venture capital provides funding to startups and small companies that investors believe to have great growth potential. Financing usually comes in the form of business (private) equity. Ownership positions are sold to several investors through independent limited partnerships.Venture capital tends to focus on emerging companies, while Working capital tends to fund established companies that are looking for an infusion of equity. Venture capital is an important resource for raising money, especially when startups do not have access to capital markets, bank loans, or other debt instruments.

 Venture capital is a type of private equity investment that involves investing in early-stage businesses that require capital. In return, the investor will receive an equity stake in the business in the form of shares. Private equity investments are equity investments that are not traded on public stock exchanges. Institutional and individual investors often invest in private equity through limited partnership agreements, which allow investors to invest in a variety of venture capital projects while retaining limited liability (of the initial investment). Venture capital funds are managed similarly to private equity funds, where the portfolio of companies they invest in typically falls within a particular industry specialization.A venture capital fund is usually structured in the form of a partnership, where the venture capital firm (and its managers) serve as general partners and investors as limited partners. Organizations that offer venture capital invest in a company until it reaches a significant position and then exit the same position. 

Financial venture capital can be presented as: 

• Venture capital companies,
• Investment banks and other financial institutions,
• High-net-worth individuals (Angel investors), etc.

Venture capital firms create venture capital funds, which is a pool of money raised from other investors, companies, or funds. These firms also invest from their own funds to show loyalty to their customers. Venture capitalists are people who invest in promising early-stage companies. A venture capitalist can be a single investor or a group of investors who come together through investment firms.For example, venture capital is established in Turkey in the form of a venture capital fund or venture capital partnership.

Venture capital can be classified in different ways. Risk capital can be classified according to the stage at which it is invested.

Pre-seed/accelerator-stage capital: The pre-seed stage is the capital provided to an entrepreneur to help them develop an idea. Many entrepreneurs interested in securing venture capital funding will engage in business incubators (accelerators), which provide a variety of services and resources for entrepreneurs to connect with venture firms and networks that will help them develop their business ideas and products.

Seed-stage capital:Seed-stage capital is capital provided to help an entrepreneur (or aspiring entrepreneur ) turn their idea into an early-stage product. Seed-stage capital typically funds research and development (R&D) of new products and services, as well as research into possible markets.

Early-stage capital (Start-Up capital): Early-stage capital is the venture capital provided to establish the first business and basic production. Early-stage capital supports product development, marketing, commercial production and sales.

Expansion funding: Expansion capital is the funds that a company needs to expand its operations. The funds can be used to enter new markets, create new products, invest in new equipment and technology, or even acquire a new company. 

Bridge funding: It is the capital that has promoted its products in the market, reached a certain market share and is intended to provide the funds needed by the business in the process of going public.

Some of the characteristics of venture capital include:

• Not for large-scale industries – Venture capital is offered specifically to small and medium-sized enterprises.
• Invests in high-risk/high-return businesses– Companies that are eligible for venture capital are usually those that offer high returns but also high risk.
• Offered to commercialize ideas – Those who prefer venture capital often seek investment to commercialize their idea about a product or service.
• Abandoning investment to raise capital – Venture capital firms or other investors may stop investing in a company after it has shown a promising turnover. Cutting off investment can be carried out not to make a profit, but to provide more capital.

Long-term investment– Venture capital is a long-term investment where returns can be realized after 5 to 10 years.

Venture capital, which does not have enough cash flow to borrow money It provides financing to new businesses. This arrangement is mutually It can be beneficial, because businesses are able to start their activities they get the capital they need, and investors get the capital they need. They invest equity in promising companies. Venture capitalists are often skilled staff and advisors mentoring and networking them to help them find services. A strong venture capital backing, more It can be used for investment.

However, a business that accepts venture capital support may lose creative control over his future direction. Risk A large share of the company's equity capital of investors they are likely to demand, and in the request of the company management they can be found. A lot of venture capital is only available for fast, high-yielding It tries to get a return and pushes for a quick exit from the company Can. As a result, venture capital has a number of startups Along with providing advantages; it also provides a number of disadvantages too.

Advantages of Venture Capital

• Launching operations for early-stage companies provides capital for,
• It helps him gain business expertise. Risk capital, as well as financial support to the entrepreneur providing guidance and consultancy, financial management and in important decision-making processes such as human resource management can give support.
• Secure companies' venture capital financing doesn't need cash flow or assets to receive it. In other words, entrepreneurs or business owners do not have to repay the invested risk capital. Even if the company fails, it will not be responsible for reimbursement.
• It helps to make valuable connections. Expertise and through their network of venture capital providers, business It can help build connections for its owners. This It can be very helpful in terms of marketing and promotion.
• Helps raise additional capital. Venture capital Investors need to invest in one more company to increase its valuation. They try to provide excess capital. To do this, they can bring in other investors at a later stage.
• Helps in upgrading technology. Risk capital can help small businesses to stay competitive to acquire new technology that can help, or can provide the necessary funding for them to integrate.

Disadvantages of Venture Capital

• Reduction of the ownership share. Venture capital from a share of ownership in the business of entrepreneurs they are to give up. Most of the time, a company will be able to take advantage of the initial forecasts It may be that it needs higher additional funding. In such cases, the owners can pay their majority shares in the company and they may lose their decision-making authority.
• Giving rise to a conflict of interest. Investors in a start-up own a controlling stake, but also they hold a seat among the members of the board of directors. As a result, between owners and investors conflict of interest may arise, which can lead to decision-making block. As investors demand immediate returns while companies find themselves losing creative control they can find it.
• They are under pressure. Venture capitalcan put pressure on companies to come out investments instead of efforts to grow in longer terms.
• Securing venture capital can be time-consuming. Venture capital investors conduct due diligence and evaluate the feasibility of a start-up before investing or continuing to invest. This may cause the financing process to be delayed.

Leveraging venture capital can be challenging. To reach to a risk capital company or to an investor can be difficult for those who don't have a net.