The idea of investing both for profit and social good has come a long way in the last few years, but the sector still has enormous potential to grow.
The idea of deploying capital not only to generate a profit but to create some social return–“impact investing”–has come a long way in the last few years. From benefit corporations to social impact bonds, we now have plenty of variations on the theme, but perhaps not as much progress as first appears.
For example, a recent report from the Global Impact Investment Network and JP Morgan said the world’s 125 leading impact investors will raise their commitments by 125% this year. And yet, there’s universal agreement in the sector, even among its biggest champions, that it’s nowhere near the force it could be.
Various recent reports and books have attempted to identify bottlenecks to further growth. The latest comes from an international task-force set up by the G8 group of leading industrial nations. Called the “Impact Investment Report”, it’s a comprehensive survey of the scene, combined with some detailed proposals for what needs to happen if impact investing is to gain steam. Here are a few ideas we picked out.
PUT A VALUE ON SOCIAL OUTCOMES
Social impact bonds pay a return to investors if a social goal is met–say, a reduction in the recidivism rate at a prison. The report argues that intermediaries would be more likely to organize investment rounds if the potential value of the improvement was more visible or quantifiable–say if keeping one person out of prison equals returning $50,000 to the taxpayer. “Greater transparency about the fiscal value of achieving specific social outcomes would help enormously, by showing social innovators where opportunities exist to do better,” the report says.
The U.K. government now publishes a “Unit Cost Database” covering 640 social issues, from education to crime. For example, a child taken into care costs taxpayers over $100,000 a year. So, investors now know they need to provide a solution that costs less than that. Such measurements would also allow non profit groups to put a value on the services they offer, and allow something like a market to develop.
The Latest on: Impact investing
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The Latest on: Impact investing
- Impact Minds: Standing Together, the Latimpacto event that focuses on promoting more social and environmental investment in Latin Americaon May 12, 2022 at 9:17 pm
Standing Together included the participation of actors such as Larry Sacks, Mission Director at USAID Colombia; Juan Carlos Mora, president of Bancolombia; and Kai Grunauer, from UBS Family Advisory.
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- New Ground Capital weighs in on the rise of impact investing with New Zealand’s first impact investment fund.on May 9, 2022 at 3:30 pm
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- Profit vs. Good: How the Impact Investing Strategy Delivers Bothon May 8, 2022 at 3:00 am
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- Creative Industries Are the Next Frontier in Impact Investingon May 6, 2022 at 1:37 pm
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- What The Federal Reserve And Impact Investing Have In Commonon May 3, 2022 at 6:11 am
If you find yourself questioning the famous proverb, “You can’t have your cake and eat it, too,” then you will appreciate one of the longstanding debates in impact investing. For years, people ...
- The Difference Between Sustainable Investing and Impact Investingon May 2, 2022 at 9:15 am
socially responsible investing (SRI), impact investing and philanthropy. These names refer to real investing practices. Investors deeply engaged with the emerging sustainable investing products are ...
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