News & Insights
Impact First? Return First? Hint: It’s Neither
by Jason Henning, director of investor relations, Global Partnerships
It happens more times than I care to admit. I am holding a promising conversation with a potential investor who signals alignment on impact objectives and geography. Timing works, the approval process is shared, and then it happens: we have the rate conversation. It quickly becomes very clear that our fund’s pricing does not match the investor’s fiduciary priority of maximizing returns.
For years now, an “impact first” vs. “return first” debate has played out within the industry. The former argument holds that below-market rates are required to truly achieve high social impact in poor, underserved markets. Those who subscribe to the latter believe that market rates of return are necessary to attract large pools of capital into the field.
To me, the problem with this debate is that it holds the investor as the central actor in the story, and suggests that we in the industry are structuring funds based on the return expectations of investors. As a nonprofit impact investor, Global Partnerships builds its programs – and by extension, its pricing and capital type – around the needs of clients.
Since its inception, Global Partnerships has made approximately $100 million in impact investments in over 65 partners, and among our key insights is that most high-performing institutions demonstrate a strong commitment to client satisfaction. We identify a problem to solve – lack of access to health services, poor market access for smallholder farmers – and we tailor our approach, including matching the capital intervention to the needs of those we’re serving. This may mean providing a startup grant to a credit and savings cooperative to launch a market-sustained health program. Or it could mean a low-cost working capital loan to a solar light distributor in an effort to address a bottleneck within the value chain. In each example our approach is driven by the desired outcome, not price expectations on the part of our investors.
A key to our approach is working with mission-aligned partners throughout the process. To ensure exceptional, results-driven social impact, we have created a portfolio of social enterprises with strong commitments to the needs of people living in poverty. And since the inception of our first fund, we have sourced capital from over 100 impact investors who value our funds’ stable, fixed income return as well as the thoughtfulness of our impact areas.
Impact first? Return first? Let’s identify the challenge, put the client first, and build our solutions from there.
Blog Tags: social impact