Impact investing Business Entrepreneurship Sustainability
The epochal change that happened in impact investing seems implausible if it weren’t true. The quantity and quality of players, the new mentality, the imperative of urgency has made the last decade grow exponentially. It seems that the next ten years will be no less quiet as per the involvement of Stanford Social Innovation, Harvard University, Rockefeller Foundation, GIIN, International Finance Corporation, Unilever, BlackRock, Acumen and many more.
After having excessively quoted different parts of the seminal article Investing for Social & Environmental Impact report (2009) it was interesting for me to stop and see what the future predictions of the report were as of today and compare it with actual results. To this end, I found the Stanford Business Social Innovation Review article The Next 10 Years of Impact Investment (2021) very useful.
Successful impact investing required:
THEN
Impact-driven investors — including retail, high-net worth individuals, corporations, and foundations — effectively develop skills and approaches that enable them to leverage investment as a tool to drive social change. Impact investing outstrips philanthropy in terms of capital volume and, some would argue, impact. A range of supporting infrastructure — including intermediaries and social metrics — enables investors to better understand choices and tradeoffs.
NOW
Foundation assets exceed USD 1.5 trillion and are heavily concentrated in the United States (60 percent) and Europe (37 percent). (Global Philanthropy Report. Perspectives on the global foundation sector. Paula D. Johnson. Harvard Kennedy School). The International Finance Corporation (IFC) put the estimate of impact investments in $2.1 trillion. With such remarkable growth over the last 10 years, we wondered how far impact investment might advance from 2021 to 2030.
THEN
Investors led by a desire for social or environmental impact use the market as a means to achieve it.
NOW
Number of organizations making their first impact investment in 2007 were no more than 7. The cumulative up to 2016 was more than 200. Global Impact Investing Network (GIIN) Roadmap for the Future of Impact Investing: Reshaping Financial Markets (2018)
THEN
Impact investment becomes a popular retail consumption experience tied to brand and social networking.
NOW
The Rockefeller Foundation The individual imperative retail impact investing uncovered.
THEN
Some private banks and wealth advisors are drawn in to offer innovative products for their clients.
NOW
BlackRock Chief Pushes a Big New Climate Goal for the Corporate World. Larry Fink is using his firm’s huge influence to pressure companies to eliminate greenhouse gas emissions by 2050. (2021)
THEN
Multinational companies or large national companies set aside concessionary capital to fund socially oriented R&D and business development.
NOW
The Unilever Foundry Sustainable Living Plan: ‘We want to push our business — and the way business is done — further than ever before. Find out how we’re taking action on the issues affecting our world.’
THEN
Sovereign wealth funds (SWF), under public scrutiny to produce social as well as financial value, deploy substantial capital into impact investments.
NOW
Given their focus on the long-term and immunity from pursuing short-term financial returns, it is reasonable to expect that SWFs may be in a prime position to focus on long-term corporate and societal sustainability by taking environmental, social, and governance (ESG) issues into account in their investment decisions. Harvard Law School The Global Sustainability Footprint of Sovereign Wealth Funds (2020)
THEN
“Blended value” and “patient capital” approaches to investing gain traction. This may occur as a result of a growing conviction that financially driven deals often sacrifice social impact and/or as a result of moral objections to exploiting social problems for profit.
NOW
For Acumen, patient capital is understood as a debt or equity investment in an early-stage enterprise providing low-income consumers with access to healthcare, water, housing, alternative energy, or agricultural inputs. The patient capital Acumen provides is accompanied by a wide range of management support services nurturing the company to scale. In the long-run we aim to see a return of our capital. We do not expect high financial returns to come from investing in businesses that serve the poor.
