First things first, what is impact investing?
Impact investing refers to investments in entities and funds with the purpose of generating a determinate, positive social or environmental impact, along with a ﬁnancial return. Another term for impact investing is “socially responsible investing.” Impact investments can target a range of returns from below-market to market rate, depending upon the circumstances, in both emerging and developed markets.
With impact investing on the rise globally, the market provides capital to address the most pressing challenges in sectors such as housing, education, sustainable agriculture, green technology, and healthcare. As such, impact investing counters conventional views that social and environmental issues can only be addressed by philanthropic donations.
Impact investing reduces the burden on philanthropists and other not-for-proﬁt entities by stepping in to ﬁll a vital funding gap at a time when so many people are struggling, and the programs meant to support them are more strained than ever. Indeed, the world truly needs impact investments.
Impact investing looks at impact, social and investment return. Here, you target an entire system when you look at the social return and convert it into an economic return, education, create jobs, improve health, and take the burden off the government. This kind of investment can save the government more money so that can in turn, be invested into developing other critical infrastructure in the continent.
John Pierpont “J. P.” Morgan was an American Financier and banker who dominated corporate finance and industrial consolidation in late 19th and early 20th Century United States. He, in 2014, along with Monitor Deloitte and the Calvert Foundation, predicted investments to increase from US$60 billion to between US$400 billion and US$1 trillion worldwide in the next five years.
Additionally, of this number, 22 percent of global impact enterprises are located in Sub-Saharan Africa, and much of the opportunity lies throughout the continent.
No matter where you are in the world, chances are that impact investing is happening all around you. You may not realize it, but a road under construction could have been made possible by impact investments – or a new school, a new water ﬁltration system, a wind farm. The possibilities are endless. But one common thread remains the same: impact investing, at its core, is about the investor’s intention to facilitate a beneﬁcial social or environmental impact that goes beyond the individual. It is not a practice solely for personal gain but rather for the greater good. After all, what again is the deﬁnition of an investment in its truest sense? “A devoting, using, or giving of time, talent, emotional energy, as for a purpose or to achieve something.”Chances are that impact investing is happening all around you, here's how to get into it Click To Tweet
Ready to get started in impact investment? Some next steps
Marina Leytes is an Impact Consultant. Most recently, she worked with the World Economic Forum’s blended finance and Impact Investing Initiatives; among others. As outlined by Marina, there are at least seven steps that any individual who desires to pursue Impact Investing, should consider.
- Explore: Discover and build an initial understanding of the principles and practices of impact investing.
- Reflect: Identify your motivations—why you wish to make impact investments, and how those investments might fit within your broader “portfolio” of impact (philanthropy, work, advocacy, etc).
- Assess: Determine the specific needs and constraints that govern your asset owning entities and consider how those needs and constraints shape your investment strategies.
- Strategize: Develop an actionable impact investing strategy, guided by an understanding of your personal motivations and objectives, and the needs and constraints.
- Invest: Make impact investments! You can make these investments across asset classes, sectors, geographies, impact strategies and return profiles.
- Measure: Gather and assesses performance and impact data from the existing investments to determine whether the investments are achieving their objectives and meet the requirements of your impact investment strategy.
- Optimize: Use the data you have gathered and the experiences you have gained through the process of making and monitoring investments to revise and/or expand your impact investment strategy, in order to continually pursue better outcomes with your investments.
Finally, these are some Impact Investing Institutions and the areas they operate:
- Global Impact Investing Network (GIIN): operating in Kenya, Ghana, India, France and the Netherlands.
- Rockefeller Foundation: operating in Cote d’Ivoire, Ghana and Senegal.
- Acumen : Accra, USA, Kenya, Pakistan and India.