Impact Investing 2.0: Uncovering The "There There"
In certain circles, "impact investing" has started to become trendy. Over the course of 2013 -- from Davos to the G8 to CGI -- you could not attend a global gathering without hearing poetic waxings on how impact investing is able to effect positive social change, while still generating a return on capital. Indeed, if done right, impact investing can prove to be a sustainable, long-term solution to some of our more intractable development challenges - like housing finance, affordable education, health, clean energy and financial services - that can impact millions of lives for the better, while lessening the load on taxpayers. No wonder it's trendy.
For those of us who heretofore have never been accused of being trendy, we can't help but be tickled by the attention. Nevertheless, we can't also help feel a bit uncomfortable for two reasons:
1) We know the impact investing is not a silver bullet, and we are a bit wary that the hype might paint it so. It is but one of the many tools in our problem solving toolbox; we just haven't figured out how to optimize it -- yet.
2) Our proof points to date have been anecdotal, given the lag time we face between initial investment and exit.
That is why this week's launch of Impact Investing 2.0, could not be more timely. This comprehensive report, produced by a partnership between InSight at Pacific Community Ventures, CASE at Duke University and ImpactAssets, represents the largest public release of data on the inner workings of 12 outstanding impact investing funds: their origins, development, goals, leadership, investors, investees, strategies, and financial and social performance. It analyzes the performance of over $1.3 billion (USD) in investments across more than 80 countries.
The funds profiled work in vastly different sectors, from microfinance in India to sustainable property in the UK, and have accordingly pursued very different investment strategies and approaches to social impact. Their success across such a broad set of parameters offers many lessons for the industry and beyond.
They are affirming our assertions and proving the concept. For skeptics that claim no one can serve two masters -- financial success and social impact -- these cases are a clear signal of the diversity of paths towards high performance in impact investing. And they are but the tip of the spear. We are confident that in the coming years, many more pioneering impact funds will mature and inspire us with their successful track records. The idea that it is possible to combine financial return and social impact will come to be regarded as common sense.
As road tested impact investors, we know that there is "there there," and Impact Investing 2.0 is just the start of its discovery.