Impact investing is about using markets and money for social good. Impact investing is built on the belief that financial tools and private capital can play a powerful role in solving the massive global challenges of our day, and that capital markets should work for good as well as profit. This vision is realized through investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.
Every month, PCV will give you a roundup of what’s new in the field, what conversations are taking place, and how you can get involved. Here are some highlights from October:
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Big News For Pension Funds and Impact Investing[/custom_headline]
The U.S. Department of Labor (DOL) has released new guidance on Economically Targeted Investments (ETIs) that may unlock additional capital for impact investing. The guidance clarifies that fiduciaries of ERISA-governed pension funds may consider social and environmental goals as tie-breakers when choosing between investment alternatives that are otherwise equal with respect to return and risk. The guidance also states that environmental, social, and governance issues may have a direct relationship to the economic value of the plan’s investment and thus these issues “are not merely collateral considerations or tie-breakers, but rather are proper components of the fiduciary’s primary analysis of the economic merits of competing investment choices.”
As co-sponsors of the Accelerating Impact Investing Initiative (AI3), we commend Secretary of Labor Perez and the DOL for issuing this guidance and clarifying that investing for impact is consistent with fiduciary duty. Read the announcement.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Finding The Right Impact Opportunities[/custom_headline]
Can early stage risk capital be an effective tool for investors to achieve financial returns and social impact in emerging markets? A new report from Omidyar surfaces existing opportunities available to investors today and offers insight into which of those opportunities is best for particular portfolios. Early stage risk capital focuses on companies developing products and services for people who earn roughly $2 to $8 per day, and fall between the very bottom of the economic pyramid (where many impact investors currently focus) and the existing middle class. This means they have greater purchasing power and a steadier income, but still greatly benefit from products and services that improve their lives. Read the report.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Scaling U.S. Community Investing[/custom_headline]
The Carsey School of Public Policy — in partnership with the GIIN — have just released an in-depth landscape study of the U.S. community investing field. Their review includes a detailed analysis of the major types of community investing products, parameters that different investors use to evaluate investment opportunities, and the barriers and opportunities to increasing investment. The hope is this research will open the door to more direct conversations between investors and community investing product managers to enable the development of products that meet both their needs and the needs of marginalized communities that U.S. community investing intends to serve. Read the report.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]State Economic Development Investments Are Short-Changing Small Business[/custom_headline]
Governors and state legislators routinely praise small businesses for their contributions to economic growth and job creation, but states actually give big businesses the dominant share of their economic development incentive awards. An analysis from Good Jobs First of more than 4,200 economic development incentive awards in 14 states finds that large companies receive: 70 percent of the deals and 90 percent of the dollars. Read the report.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]The State And Potential Of Gender-Lens Investing[/custom_headline]
A growing number of impact investors are seeking women-centered opportunities, with the Global Impact Investing Network’s (GIIN) annual survey revealing that a third of all respondents sought investments promoting gender equality and women’s empowerment. But do these opportunities avoid tokenism and “pink-washing”? Do they meaningfully promote gender equity and empower women? To begin exploring these questions, the Wallace Global Fund partnered with the Criterion Institute on a survey of the current state of the field of gender lens investing. Read the report.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Doing Good Is An Investment Strategy[/custom_headline]
Research from Wharton has found that impact funds that reported seeking market-rate return demonstrated that they can achieve results comparable to market indices. The Wharton study marks one of the most rigorous and data-driven approaches to addressing this gap—employing a research methodology consistent with market analysis in other industries. Read the report.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]What Do Social Entrepreneurs Need From Impact Investing?[/custom_headline]
Impact investment can play a crucial role in launching and sustaining social enterprises, but it’s clear that basic education on the landscape of impact investment among emerging social entrepreneurs is needed. In a white paper from the U.S. Global Development Lab at USAID, we see how Echoing Green’s applicant data showed that most entrepreneurs have tried or are trying to get impact investments. Additionally, emerging social entrepreneurs report needing distinct types of investment-readiness support to grow and attract funding. Read the white paper.