Three Trends in Impact Investing by Impact Foundation
Impact Foundation exists to invest charitable capital for economic, social, and spiritual transformation, our version of impact investing. It's the next iteration of philanthropy because innovative foundations and givers have recognized that all enterprises, not just charities, can produce both social and financial results on a spectrum from positive to negative. While we whole-heartedly believe impact investing is here for the long run, not everyone lives every day in this world. That's why we bring you this summary of the most important conversations in impact investing.
If you're new to the conversation and just wondering what the words mean, check out the FAQs and Resources and on our website.
# 1. DEBATE OVER RETURNS
Is it ever okay to accept less than market-rate returns for the sake of achieving more impact? Some say that doing so is just an excuse for mediocrity. Others point out that reducing global poverty through job creation requires patient, friendly capital that can pave the way for traditional investors to enter the market.
Read more in Stanford Social Innovation Review article, "Marginalized Returns"
#2. GETTING SERIOUS ABOUT MEASURING IMPACT
The Global Impact Investors Network recently published its first study of impact measurement practices. (Sounds boring, but we read it so you don't have to - you're welcome). This survey of over 120 impact investors demonstrates two important ideas:
investors care about measuring the impact, and
In a survey of 208 impact investors managing more than $118 Billion, nearly 100% of respondents measure the social and environmental performance of their investments. GIIN Investor Report. The primary motivations for tracking non financial metrics are to better understand and to proactively report impact. Interestingly, the desire to manage or improve impact came in third. GIIN Measurement Report.
no one has it figured out.
Jean Case, Chair of National Geographic Board of Trustees and CEO of the Case Foundation, says it well in SSIR:
At present, public data collection and management practices are implemented too haphazardly. Even in instances where a company or an investor has shared some data, a lack of clear industry standards for categorizing it hampers consistency from one platform to the next.
Should we measure inputs, outputs, or outcomes? Is IRIS, GIIRS, PULSE, IPAR or some other tool right for a given application? I find it overwhelming and confusing and this is my industry. Just like the development of GAAP has done for management and finance, impact investing needs its Generally Accepted Impact Measurement Principles.
#3. INCREASING USE OF UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS
In 2015, the United Nations unanimously adopted a set of goals, called the Sustainable Development Goals (SDGs), to end poverty and contribute to improved communities by 2030. The SDGs represent a simplified way for investors, donors, and enterprises to communicate the outcomes they seek. This simplicity and breadth accounts for the relatively quick adoption of the SDGs (42% of impact investors use the SDGs two years after they were adopted). GIIN Measurement Report.