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.

As the impact investment sector continues to evolve and progress, more and more energy has been spent on determining whether high levels of social impact are harmonious with market-rate 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.

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Two clients served by GP's partner ADRA (Peru) weave mats to sell.
Corina Apaza is a microentrepreneur and a client of ADRA, a GP partner in Peru. Through ADRA, Corina has received training on how to save and manage her money, in addition to financing to run her mat weaving business. Corina dreams of her four children becoming professionals and works hard to provide brighter futures for them. She is pictured weaving mats using cane (similar to bamboo) with her husband. Photo © Global Partnerships 2013

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