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 December:
[custom_headline type=”left” level=”h2″ looks_like=”h3″]Explaining Impact Investing As We Grow[/custom_headline]
Growing number of investors are attempting to create social value with their investments, but it’s often more difficult to achieve than one might think. Impact-fund managers, who invest mainly in privately held businesses, are having trouble finding companies that are ready to put large amounts of capital to work. But, clear measurement standards, high-grade operations, specialized products, and more training for entrepreneurs can make impact investing a more influential practice. Read more on McKinsey >
As the field of impact investing grows from a collection of double- or triple-bottom-line funds and foundations and our aligned organizations to the broader financial world, we’re finding more and more the need to refine our messaging. Part of the need to break down myths about financial return, part of it is to explain how impact investment are structured and measured, and part of it is to keep consistent standards to avoid the financial equivalent of greenwashing.
One example is green bonds. Green bonds are experiencing explosive growth, but do they bridge conservation funding shortfalls or just lead to greenwashing? the pressures of population growth, consumption, and development continue to increase conservation needs around the world, while dollars for conservation are plateauing, dwindling, or fundamentally threatened. To better understand the potential of green bonds and their attendant challenges, MIT, the Harvard Kennedy School, and Lincoln Institute of Land Policy looked closely at green bonds used for sustainable land use and conservation. Read more at Stanford Social Innovation Review >
Our friend Cathy Clark from the Center for the Advancement of Social Entrepreneurship (CASE) at Duke University’s Fuqua School of Business just released Smart Impact Capital – a series of nine modules that address the needs and common pitfalls of impact entrepreneurs seeking to raise investment capital. Through action-oriented online resources, Smart Impact Capital allows entrepreneurs to access the right information at the right time. Check it out >
From the early days of building the field, two important sets of criteria emerged to begin trying to define what those words mean: Impact Reporting and Investment Standards (IRIS) and the Global Impact Investment Rating System (GIIRS, pronounced “gears”). The systems’ inventors had identified the need for standards of measurement, and a rigorous means of assessing social and environmental impact (PCV helped provide commentary on both). Now, using these rigorous measurement frameworks, our partners at B Labs have a new list of the 50 “Best Of The World” funds. See the list >
[custom_headline type=”left” level=”h2″ looks_like=”h3″]Impact Investing Is Done With Its Growing Pains[/custom_headline]
At the Global Impact Investing Network’s forum in December, 800 investors and industry leaders gathered to cheer the field’s growth and opine on the role of investing in meeting today’s challenges and shaping the future. Amit Bouri, the GIIN’s CEO, said, “Investors are increasingly bullish about the use of capital to address social and environmental challenges, and we are confident that this trend will continue.”
The forum built on the GIIN’s latest report: Impact Investing Trends, the first-ever industry-level analysis on global impact investor market activity. This new report was produced using data from the GIIN’s 2013-2015 Annual Impact Investor Surveys and representing a range of geographies, organization types, and returns philosophies. This report provides compelling evidence that the impact investing industry is growing, both in terms of size and maturation. Check out the findings >
Sometimes a little star power doesn’t hurt. Fresh off the news that Bill Gates was launching a billion-dollar renewable energy fund, a group of high-profile executives and investors (including Bono, Jeff Skoll, Richard Branson; Reid Hoffman, and Lynne Benioff) are putting together perhaps the most ambitious social impact fund. Called Rise, the $2 billion fund is being developed by William E. McGlashan Jr., a partner at the private equity firm TPG. The new fund is expected to invest about half of its money domestically in areas like health care, education and clean energy technologies. The other half will be invested in emerging markets in sectors like microlending and other financial services, housing and education. Read more >
Individuals aren’t the only ones contemplating how their money can combat climate change. Sixty-nine percent of Fortune 500 companies reported more demand for “low carbon” products this year, according to the nonprofit Carbon Disclosure Project. And some of the country’s largest pension funds, including the California State Teachers’ Retirement System and New York State’s retirement fund, have begun tilting away from fossil fuels. Read more on The New York Times >
[custom_headline type=”left” level=”h2″ looks_like=”h3″]Impact Investing Means More Innovative Ways To Strengthen Communities[/custom_headline]
Billion-dollar natural disasters used to strike the United States once or twice a year. But since 1980, such events have occurred five to 10 times annually and will only increase due to climate change. These catastrophes threaten public safety, disrupt daily activities, and lead to economic losses. At the same time, federal government budget cutbacks have led to underinvestment as in preparedness. To change that mentality, states and communities are experimenting with innovative approaches to raise awareness of risk, generate smarter investments, and shift resources to pre-disaster mitigation. Read more on The Pew Charitable Trusts >
Impact investments can do small things on large scale to make a big difference. Malaria may not seem an obvious focus for financial markets but Nigeria plans an ambitious new instrument to tackle the heavy burden of the disease, seeking up to $300m from investors to fund distribution of bed nets impregnated with insecticide for the country’s malaria control program. Investors have the option of a bond, either issued or underwritten by the World Bank, delivering a 3 per cent yield and the satisfaction of seeing their money tackle an important problem — with disbursement of the funds based on performance. Read more on The Financial Times >
[custom_headline type=”left” level=”h2″ looks_like=”h3″]The Intersection Of Conscious Capitalism And Philanthropy[/custom_headline]
Social impact investing has grown to the point that investment giants such as Goldman Sachs, JP Morgan, and BlackRock are all exploring more responsible investments. These businesses have established social impact investing units, serving clients from the largest foundations (the pioneers in new impact investment tools and approaches to grant making) to small family offices that are just beginning to explore best practices. But NGOs and other nonprofits are also fueling the trend, with notable success. Read more >
If you’re like us, your inbox overflows with pleas from good organizations hoping to tap your charitable inclinations this holiday season. Go ahead and write that check to Doctors Without Borders or The Southern Poverty Law Center (or PCV!). But, what if you could give to great causes and get a little gift for yourself too? It’s possible with an investment of as little as $20 in a Community Investment Note, a type of bond sold by our friends at Calvert Foundation to fund nonprofits, microfinance firms and social enterprises in the U.S. and across the globe. Learn more >
A new report from our partners at the Omidyar Network suggests that impact investing can be done well along a continuum with fully commercial investments on one end, and charitable gifts on the other. The report is based on analysis of more than $1 billion invested in a combination of for-profit and nonprofits over the last 12 years. The result of the two-year-long analysis is what the report’s writers call a “framework for investors across the returns continuum.” In other words, how do you decide how much return you want and how much good you want your money to do? That answer’s not as fuzzy as it sounds. The report offers specifics on how to carefully structure decision-making and includes numerous examples. Read more on Nonprofit Quarterly >