Impact investing is about using markets and money for social good. Impact investing is built on the belief that 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 July:
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Billions Of Potential New Dollars For Underserved Communities[/custom_headline]
Despite the increasing size and sophistication of community financial institutions like PCV — as well as the broader impact investing industry — accessing capital from institutional investors like insurance companies remains difficult.
Yet with over a trillion dollars in annual revenues, the U.S. insurance industry represents a vast, largely untapped source of capital for impact investors. The California Organized Investment Network (COIN), a government entity within California’s Department of Insurance, plays a critical role in the flow of capital from insurance companies to affordable housing developments, small or sustainable businesses, and community facilities that benefit rural or underserved communities within the state of California.
We’re excited to release COIN’s inaugural impact report, assessing the social and environmental benefits supported by COIN’s activities and investments. Our findings demonstrate that COIN has played an important role in facilitating safe, low-risk investments that significantly benefit California’s underserved communities – something the insurance industry writ large can learn from. Read more >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Cracking The Code[/custom_headline]
A new paper, from PCV’s partner Cathy Clark and former-PCV team member Ben Thornley, lays out the creation of “impact classes” as a new classification system, having the potential to address a number of stubborn barriers in impact investing. After studying how a wide range of groups are describing impact investments, they believe impact investing needs a simple, widely accepted “impact classification” system that helps investors readily match their financial and impact objectives to the right products. They argue that such a classification system would help crack the code of impact investing for investors and advisors, as well as enable researchers to compare like investments, including for the purpose of understanding the relationships between impact and financial performance. Read more >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Big News For Impact Investing And Small Businesses[/custom_headline]
President Barack Obama announced a new federal $1 billion fund for impact investing in 2011 – and now it seems that pilot program could be here to stay! The specific goal of the $1 billion was to support small business investment strategies that maximize financial return while also yielding measurable social, environmental or economic impact. The program is housed under the SBA’s Small Business Investment Company (SBIC) licensing program. Under the impact investment program, SBIC-licensed funds promise to invest in small businesses in federal priority sectors and underserved communities, while at the same time contributing to the growth and development of the impact investment industry. Read more >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]CDFIs Have Been Impact Investing For Decades[/custom_headline]
For 30 years, high-impact CDFI investments have provided people in disinvested and underserved communities with access to responsible, affordable finance. Our friends at Opportunity Finance Network wanted to find out more about why CDFIs are high-impact, who invests in CDFIs, how transformative change is happening, and what we can expect to see next from some of the opportunity finance industry’s most influential voices. To do that, OFN Member Cinnaire has published a new issue of Avenues to Affordability featuring CDFI industry leaders. Read the roundup >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Impact Investing Grows Across The Globe[/custom_headline]
The Social Finance Global Network’s latest white paper, Social Impact Bonds: The Early Years, details 60 social impact bonds across 15 countries, with more than $200m in investment to address social challenges. The white paper reflects the shared lessons from the Social Finance Global Network, across sister organizations in the UK, US and Israel—which, together, represent the largest pool of Social Impact Bond expertise globally. In 2010, Social Finance pioneered the Social Impact Bond, an innovative public-private partnership model that aims to measurably improve the lives of people most in need by driving resources towards better, more effective programs. Six years later, Social Impact Bonds have gained significant global momentum. Read the report >
This growth is also reaffirmed in the 2016 Fidelity Charitable Giving Report — a snapshot of 132,000 donors and the impact of their support. The Giving Report also highlights the ways Fidelity Charitable donors give that differentiate them from charitable donors nationwide. As more people adopt donor-advised funds as an efficient, tax-effective and accessible means of supporting their philanthropy, their impact on the charitable sector grows as well. Read more >
So how will the future affect impact investing – and how will impact investing affect all investors? The World Economic Forum has predicted the impact investment market will grow to $500 billion by 2020. Other analysts place the figure closer to $1 trillion. Despite all the enthusiasm surrounding impact investing, some financial advisors remain uninformed. According to a CFA Institute report, 66% of advisors admitted to being unfamiliar with the practice. The continued growth of impact investing will depend on educating financial advisors and investors. Read more >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Clean Water Through Mission Investing[/custom_headline]
Millions of people around the world lack access to clean water for drinking and sanitation leading to thousands of premature deaths. In addition, the lack of access to safe water results in up to economic losses equivalent to 7% of GDP in some countries every year. A new report out this month from Yale focuses on the need for capital in the water sector, and how foundations can address water issues through program-related investments (PRIs). In incorporating PRIs into a foundation’s water-related strategy, there are opportunities to invest in water trading programs, product research and development, social enterprises, social impact bonds, and note programs. Read more >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Making Social Impact Bonds Easier On Cities[/custom_headline]
Based on a growing mountain of nationwide evidence, Denver estimated that providing housing for 250 chronically homeless people would lead to a 35 to 40 percent reduction in jail bed days and 83 percent increase in housing stability. If a social impact bond from the city meets those goals within five years, the city repays the eight investors on the deal a total of $9.5 million. The city repays less if those goals aren’t met.
While the savings potentially pop up in all the above parts of government and maybe more, the city of Denver is the only agency or level of government that is on the hook to pay investors that $9.5 million. It’s called the “wrong pocket problem.” There is now a bill to create a mechanism to put the federal government on the hook to pay back part of what is owed to SIB investors. It could encourage even more cities, counties and states to try SIB-financed programs, as they would no longer be the only ones on the hook to repay investors. Read more >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Impact Investing: Good For The Spirit[/custom_headline]
Pope Francis has made it a theme of his papacy that capital markets should be redirected to help the poor, and has assembled investors, entrepreneurs, and academics for its second Impact Investing Conference. The conference will explore how the Catholic Church might channel some of its riches to impact investing. Wealth managers are also starting to wake up to the call – but they’re maybe more concerned with mammon than with God: they have watched as some very rich clients pulled their money from firms who cannot offer impact investing advice. Read more >
Could impact investing help to protect human rights? Around the time that the impact investing community was basking in the afterglow of the Papal blessing, something else happened: a coalition of 80 investors representing $4.8 trillion worth of assets announced support for the Corporate Human Rights Benchmark — an initiative intended to incentivize companies to decrease the adverse human rights impacts of their operations. It’s the latest signal that the investment community is ready to be guided by a human rights framework in its analysis and decision to invest in listed equity. Read more >
Human rights are women’s rights, and women’s rights are human rights. For investors who prioritize gender equality, new market data tools are emerging to help them assess efforts on this front. Bloomberg launched an index that scores financial-service companies on how well they treat women and whether they are promoting gender equality. Called the Bloomberg Financial Services Gender-Equality Index (BFGEI), it rates companies not only based on programs like parental leave and flexible work arrangements, but also whether a company has product offerings geared toward women and community engagement. Read more >