What is Impact Investing?
Impact investments seek to generate social and environmental impact alongside a financial return. A hallmark of impact investing is the commitment of the investor to measure and report the social and environmental performance and progress of underlying investments (http://www.thegiin.org).
Impact investing has grown rapidly. The 2016 GIIN Annual Impact Investor Survey identified some USD 77.4 billion in impact investing assets under management at the end of 2015, primarily in developed markets, but with increasing attention to developing markets. The major foci for impact investments currently are housing, microfinance, energy, financial services, and food and agriculture but there is rapid growth and innovation in other sectors such as climate adaptation, healthcare, and education.
How is Impact Investing Different?
As Judith Rodin and Margot Brandenburg note in their seminal book “The Power of Impact investing” (Wharton, 2014), “impact investors are members of a diverse community or individuals and organizations, all of which want to tap into the power of business models to provide new solutions to social and environmental problems.”
Impact investments are an increasingly influential part of a larger ecosystem of philanthropic, private and public capital that shapes global development. While relatively new, impact investing has already demonstrated enormous capacity to bring new approaches and funding to bear on the major social challenges of our time – impact investing is already being tapped to achieve the United Nations Sustainable Development Goals.
Impact investing complements other funding sources, but also brings a strong discipline to social and environmental project design through its emphasis on measuring and tracking impact and fiscal performance. Impact investments by definition place an equal emphasis on investment and impact performance and that provides significant opportunities to measure, learn/adapt, and improve.