This study provides an overview of impact investment and skills creation in innovation, covering the main features of impact investment, the historical development of the phenomenon, and how it can be linked to the skills creation process. The study examines the emergence of impact investing and explains its principles and defining features. It maps some existing initiatives at European and local levels, presents examples of good and innovative practices in investments with social impact, and explores what practices and instruments for impact investment in innovation skills have been and/or could be applied in the Western Balkans. While the discussion and awareness about impact investment in the region appear to be highly limited, there is a need for developing new (financial and capacity-building) instruments to promote and spur impact investment so as to ensure sustainability in the skills creation and retention process, ultimately resulting in reducing the brain drain and supporting the creation of high value-added jobs.