News & Insights
3 Developments Point to Next Era of Impact Investing
Some of the latest developments in the impact investing field point to a trend that is increasingly gaining steam: impact investing 1.0 is coming to a close and version 2.0 is here. The evolution includes a shift in conversation from defining “who” impact investors are and “what” we do, to how we do it to create impact, and how we will define and measure that impact. This evolution to the next stage requires: a framework by which investors can more easily decide where to invest their money; strategies for exits; and cooperation from government and corporations. Here are 3 articles we read recently that expand on this trend in greater detail:
1. A newly-formed Social Impact Investment Taskforce (announced at SOCAP13) will provide recommendations on a policy framework that will “help foster a social investment market” by standardizing (1) how social impact is measured and (2) the methods by which foundations, institutions, and private investors can invest. The taskforce’s members come from high levels of government and foundations in France, Germany, Italy, the U.K. and the U.S, and they aim to present their policy framework within the next 12 months.
2. Sasha Dichter (Acumen) responded to a Stanford Social Innovation Review article about creating impact. Sasha argues that it’s time to shift the conversation to focus on defining and measuring impact, because ultimately "what we care about is whether, how, and why impact investments improve peoples' lives." He says, “Nearly all of the discussion in impact investing currently is focused on the capital-formation end of the value chain: Who is an impact investor? What are returns? And yet the things that matter the most happen at the other end of the value chain, at the level of customers and the enterprises that serve them [...] The [Global Impact Investing Network’s] IRIS taxonomy and its GIIRS ratings system serve as strong foundations for these efforts, but they are just a starting point.”
3. Three insights into the future of impact investing emerged from SOCAP13 that you should know about: (1) the discourse in the impact investing landscape is shifting from “who” constitutes an impact investor and “what” impact investors do, to “how” impact investing can be done in order to achieve both social impact and financial return. (2) Impact investors must address the need for successful exits and provide entrepreneurs with “the appropriate mix of capital—solutions such as royalties, demand dividends, etc.” (3) Capital is not enough; corporations and governments need to also participate.