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 June:
New Report: Policy Change Is Necessary But Insufficient
What’s standing in the way of impact investing exploding in the United States? We are seeing lots of intention. Bain Capital and Blackrock have created dedicated impact practices. High net worth individuals and family offices are starting to gather on a dedicated platform to share ideas. Foundations are sharing best practices and forging ahead. Even pension funds are making some economically targeted investments. And yet, the dollars invested in real projects and actual businesses is still a miniscule percentage of invested capital. What’s holding us back? Read more.
Measuring The Impact Of Community Investing
Some great news for impact measurement out of the Clinton Global Initiative meetings this month. Our friends at Aeris, working with our partners at the Global Impact Investing Network (GIIN) and the Annie E. Casey Foundation will begin work to create standards to measure the true social impact of community loan funds. These funds are typically nonprofit, financial institutions that provide loans in underserved communities, benefitting low-income families, women, the environment, and small businesses, to name a few. Read more.
Ford Shifts Grant Making to Focus Entirely on Inequality
Not only will Ford direct all of its money and influence to curbing financial, racial, gender, and other inequities, but it will give lots more money in a way grantees have been clamoring for: It hopes to double the total it gives in the form of unrestricted grants for operating support. The doubling of general operating support will enable Ford to create what its president, Darren Walker, calls a “social-justice infrastructure” reminiscent of the support it provided nonprofits during the civil-rights era. Read more.
Introducing The Impact Investing Benchmark
This report (produced by Cambridge Associates in partnership with the Global Impact Investing Network) presents findings from the first comprehensive analysis of financial performance in impact investing. To maintain a manageable scope, the report specifically evaluates the performance of market rate private investment funds in the impact investing space. It also marks the launch of the first ever financial performance benchmark of private impact investing funds, which Cambridge Associates will maintain and update on a quarterly basis going forward. Read more.
Why Impact Investing Needs Millennials
Though it’s grown from its initial inception, impact investment continues to suffer from limited transaction flow and anemic dollar commitments. Most relevant to stunted growth, however, is cultural resistance —the apathy of traditional financial players who are wary of new investment structures and skeptical about trading some amount of profitability for social return. Enter the millennials (the 80 million Americans born between 1980 and 2000, and their peers around the world). For millennials, pressing social problems are not just the preserve of philanthropists or governments. Millennials consistently cite social impact as one of the most important roles of business. Read more.
How Do We Parse Impact Investing’s Big Tent?
As the momentum of impact investing builds, the field attracts new participants that believe in its potential as a powerful tool for good. While these are exciting developments, the lack of proper taxonomy or classifications poses a risk. When industry leaders coined the term impact investing eight years ago, they used a “big tent” approach to unite diverse players around a shared purpose. That big tent approach has yielded tremendous benefit. Eight years later, however, we now face two major issues. Read more.
Creating Fossil Fuel-Free Investment Portfolios
Over the past year, the idea of creating fossil-fuel-free portfolios has gained traction. The strategies adopted to meet this goal vary: Some argue for engagement with the financial community while others advocate outright divestment of an array of fossil fuel companies. When evaluating the performance of fossil-fuel-free funds, caution should be taken to compare them to the correct benchmark. Read more.
Behind The Crazy Idea That Investors Can Make Money AND Change The World
For decades socially responsible investing meant keeping businesses you disapproved of–say, tobacco or weapons producers or polluters–out of your portfolio. By contrast, impact investing is more targeted, funneling money into businesses likely to do good. Financial returns? They’re all over the lot, with some impact investors consciously sacrificing profits and others dreaming of venture-capital-like returns. Read more.