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 November:
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Risk, Reinvention, and Renewal With The Ford Foundation[/custom_headline]
Impact investing, which seeks both financial return and intentional, measurable social returns, is attracting more and more money—most of it from private investors. Foundations are hard-wired for social purpose and would seem to be natural candidates for impact investing, but so far they are behind the curve.
For the past two years, the Ford Foundation has been hashing out a blueprint for changes in the foundation’s investing culture, programs, and assets. As of this month, that transition is complete (as announced by Ford’s president, Darren Walker). The Ford Foundation is planning to concentrate its massive endowment and substantial impact investments on combatting inequality. According to Mr. Walker, “Inequality, in all its forms, represents the greatest impediment to just, fair, and peaceful societies that offer opportunity for all.” The foundation will also be consolidating many of its programs to drive greater, deeper impact.
With regards to impact investing specifically, they also no longer find it defensible to say their investment strategy is only to maximize the value of their endowment. There is growing evidence (as PCV and our partners have shown) that it’s possible to find impact investing opportunities that deliver financial and social returns. In light of new guidance from the Internal Revenue Service on mission-related investments, now is an opportune time for foundation boards to embrace the practice. Read more here.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]20 Years Of Opportunity Finance[/custom_headline]
CDFIs like PCV, are a key player in the U.S. impact investing market and provide much needed capital to people and areas that are underserved by traditional banks – especially during periods of weaker economic growth like we saw in the mid 2000’s. We often end up taking on riskier loans, but our performance is on par with traditional banks, tracking very closely to FDIC institutions over the last two decades. These are the findings from OFN’s examination of 20 years of data on the CDFI industry. Read more.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Smarter Government For Social Impact[/custom_headline]
Americans, regardless of political party, are willing to support social programs and impact investments if those programs are tied to clear outcomes, responsible spending, and better results. When policymakers and public sector leaders agree on the most effective method of providing public services, government makes smarter investments that are good not only for the country’s most vulnerable citizens, but also for the entire nation.
In its latest report, The Beeck Center details how outcomes-focused funding is just one piece of what is needed to build a smarter government, but is still a crucial stepping-stone that carries broad implications for how policymakers, government, and the public sector as a whole assess and imagine policy for the future. In an age of big data and vast technological advances, this approach is a critical step toward unlocking the potential of government to think smarter and more holistically about social issues. Read more.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Impact Investments Are Posting Substantial Returns[/custom_headline]
A commonly held belief among investors is that impact investing would require a trade-off in financial performance. Though this may have been true in the early days of impact investing, the space has evolved significantly in the last decade. In a new paper from Merrill Lynch, they evaluate current impact investing by examining what it is and how it has evolved to be a viable investment approach; how investors can maintain returns in their portfolios while investing for impact; and how investors can start accessing the impact investing marketplace today. Read more.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Building Community Wealth Without Gentrification[/custom_headline]
In cities across America, a few enjoy rising wealth while many, many more people struggle to get by. This rising inequality is created in part by the practices of traditional economic development. And current trends threaten to worsen, unless we can answer the design challenge before us. Can we create an economic system—beginning at the local level—that builds the wealth and prosperity of everyone? The cities profiled in this new Democracy Collaborative report show the way forward. Read more.
[custom_headline type=”left” level=”h3″ looks_like=”h4″]What Is The Role Of Business In Society?[/custom_headline]
Capitalism is failing to live up to its unique promise. By practice or by law, the operating system and the culture of business and capital markets in the last 150 years became Milton Friedman’s maxim, that the social responsibility of business is to maximize wealth for stockholders, even at the expense of the interests of society and even the long-term interests of stockholders. Fortunately, we are in the early stages of a great re-balancing and B-corps, impact investors, and social enterprises are at the forefront. Read more.