Impact investing is about a very simple, progressive idea: markets and money for good. Impact investing is built on the belief that financial tools 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 May:
Pay-For-Success Gains Steam — and Critics
State Legislator Magazine looks at the state of pay-for-success initiatives across the US and describes the motivations behind both supporters and detractors of the financial tool. States are striking deals with investors to deliver results—reducing prison recidivism by 8 percent within five years, for example—and save taxpayers’ money in the long run. Read more.
The Growth And Challenges of Impact Investing
Our partners at the GIIN and JP Morgan released their annual survey, providing a look at the state of the field from an investor perspective. They found that 146 of the world’s largest impact investors manage upwards of $60 billion. But they also collectively speak of a lack of high-quality investment opportunities. The research surveyed fund managers, foundations and other financial institutions globally to assess the state of impact investing today. In 2014, investors committed $10.6 billion to impact investments, with plans to commit 16% more in 2015. Read more.
Socially-Responsible Investing Continues To Beat The S&P
For many years now, sophisticated institutional investors like CalPERS have make purchases of certain investments for a better environment, and in 1986, pension funds globally moved to oppose apartheid in South Africa by divesting of $200 billion in companies that supported it. More recently, impact investing has caught on with traditional wealth management firms, large banks, fund companies, and boutique investment firms. The question of whether investors sacrifice returns by doing good is a big one — but since 1990, the social index (MSCI KLD 400) returned an average annual total return of 10.46% compared with the S&P 500’s 9.93%. Read on.
Largest Impact Investing Fund Launched in Brazil
A Brazilian investment fund is taking to heart the Vatican’s endorsement of leveraging capitalism’s tools to help address inequality and aid the poor. An investment firm is on track this year to raise the country’s largest so-called impact investing fund, which is aimed at promoting social good as well as profitable returns. And it is being supported by some big players like JPMorgan Chase and the World Bank’s private investment arm. Read more.
CalPERS Gives Its Managers an Ultimatum
An environmental, social, and governance ultimatum, that is. In what promises to be a major moment for ESG integration into investment management, CalPERS will require all of its managers to identify and articulate ESG in their investment processes. The purpose of the project, which has been two-years in the making, is to integrate ESG risk and opportunity considerations into the investment processes and decision making across the total $307 billion fund. Read more.
Harnessing Social Impact Investing in Latin America
Despite Latin America’s robust growth over the past decade, 4.6 percent of people still live on less than $1.25 a day, making it the world’s most economically unequal region. Low levels of productivity, struggles with competitiveness, and educational systems that inadequately prepare Latin American youth for today’s labor market threaten to stagnate, or even reverse, the gains made in the past few years. Reaching the next level of development requires greater competitiveness. Here, social impact investment plays a unique role. Read more.
New US Initiative to Support Global Entrepreneurship
U.S. President Barack Obama announced the Spark Global Entrepreneurship coalition, made investing in women and youth entrepreneurs a top priority, called for greater investment in emerging market entrepreneurs, and introduced nine presidential ambassadors for entrepreneurship in an event at the White House. The goal of Spark is to generate more than a billion dollars in private investment for entrepreneurs around the world by the end of 2017, with half of those funds targeting women and young entrepreneurs. Read more.