Seven years ago, the Rockefeller Foundation convened a group of global leaders engaged in building businesses that were intentionally utilizing market-based approaches to make progress on major social challenges. At the time, leaders combined a range of terms—including “social enterprise,” “socially responsible investing,” “triple-bottom-line business,” and “social venture capital”—under one big tent. From all accounts, key players left the meeting with two key decisions—first, the desire to unite and combine all their approaches, and second, to use the term “impact investing” to describe what they were all working on.
Impact Investing: Mainstream?
Impact investing. Everyone from President Obama to the CEOs of Morgan Stanley and JPMorgan to Pope Francis are now using the term. Over the past seven years, the growth of the “impact investing” approach and movement has been amazing to watch. In the last 12 months, impact investing has been front and center at the World Economic Forum, the G-8 Summit, the Clinton Global Initiative, and even at the Vatican. University programs have been dedicated to impact investing—the Sorenson Global Impact Investing Center in Utah, CASE at Duke University, and a major impact investing initiative at Wharton, are just three among many. We’re seeing an emerging intergenerational paradigm shift.
Another outcome of the meeting seven years ago was an industry association, the Global Impact Investing Network (or GIIN), which was instituted in 2009 to shepherd the effort and popularize the concept of impact investing. By all accounts, the GIIN has been tremendously successful in reaching this goal. The report from the Social Impact Investment Task Force, a brainchild of the G8 (link here) and national advisory boards in the G-8 countries, alongside increasing validation in the Economist, the New York Times, and the Wall Street Journal, would suggest that impact investing has arrived.
As the World Economic Forum declared this year, impact investing is moving from the “Margins to the Mainstream” (as the report said), and impact investing is a top career for MBA students according to the Economist. A recent report, Impact Investing 2.0, suggested that we have successfully completed the 1.0 phase of “impact investing”—broad acceptance of the term and thesis in society. The data points above would seem to agree.
The Dog has Caught The Bus—What’s Next?
After a month of large-scale convening—the Clinton Global Initiative, the Social Capital Markets Conference, the Aspen Network of Development Entrepreneurs annual meetings—it’s probably a good time to reflect on where we are with “impact investing” as a concept. I use GIIN as a “straw man” here, indicative of an amazing collection of entrepreneurs, investors, foundations, and community leaders who have been relentlessly pushing the impact investment approach mainstream. If you read the news, it looks like the “dog has caught the bus”—leaders have reached the GIIN’s original goal of jumping on board, promoting, and building a concept where values and financial returns are globally integrated. Which logically leads to the question: what’s next?
While it’s incredibly encouraging that impact investing is capturing the public’s imagination, the amount of actual impact capital flowing into mainstream markets is lagging Tweet This Quote
I see two schools of thought. The first is a bit of a radical thought experiment: with impact investing hitting the mainstream, as one very active impact investor suggested to me, should the GIIN declare victory and wind down? We’ve achieved the original goal of promoting and popularizing impact investing, the argument went. Early adopters are on board, and there are terrific entrepreneurs generating a social impact who are raising capital, more often than not, from people who are not self-described as impact investors—a positive development. And we’re seeing more and more specialization company-by-company.
Yet in floating this concept by with respected players engaged in impact investing, the general response has been that while it’s incredibly encouraging that impact investing is capturing the public’s imagination, the amount of actual impact capital flowing into mainstream markets is lagging far behind—so declaring victory would be premature. “While impact investing is truly global, the cash flows need to catch up,” said Vineet Rai, leader of Aavishkaar, one of the oldest and best impact investment funds in India at this year’s SOCAP conference. And promoting the general sector seems to have moved all the money it will. As one example, the Rockefeller Foundation, one of the largest champions of the concept, is shifting its impact investing approach from general sector-building to specific program-related investments and innovative finance tools. Which begs the question: What does scaling the goals under which the GIIN was created look like? What could a GIIN 2.0 look like?
This is the first of a five-part series that focuses on leadership and the growing impact investing landscape.