Smarter Money
Mainstream asset owners are on a journey to make their investments a powerful force for good — let’s welcome them.
In the impact investing community, there is continuing talk about whether “the big tent” — created by the diversity of strategies and approaches pursued by investors– is too big.
There are continuing calls for tighter definitions of what qualifies as an impact investment, and greater clarity on how the various segments of the impact investing community — from big pensions to small, early-stage funds — fit together. These are important issues, springing from our community’s shared desire to safeguard the integrity of impact investing so it can reach its great potential.
While these discussions are very important, I believe they are best held with an eye toward building an even bigger tent than the one we have today.
As field-building leaders, we encourage debate about issues like these that have the potential to delay or derail effective and sustainable social and environmental progress. Concerns about “mainstreaming” are real, and we share these concerns. We also acknowledge the very exciting opportunities such mainstreaming offers.
The field at large shares this mixed reaction. Data from the recently published 2017 GIIN Annual Impact Investor Survey address the entry into impact investing of large-scale asset owners and other financial firms, with respondents expressing both positive expectations as well as concerns.
On the positive side, a majority felt that this trend would help professionalize the market, bring much-needed capital into the market, and enhance the credibility of impact investing. On the cautionary side, more than two-thirds of respondents believed that this trend was associated with a risk of mission drift or “impact dilution.”
Impact mindset
The Global Impact Investing Network, like many in the impact investing community, fiercely upholds the definition of impact investing. We know that not everyone who is having some sort of social or environmental impact qualifies as an impact investor.
It is important to recognize, though, that every investment has an impact. Some newcomers entering the market may be bold in their pursuit of impact, and others may be more incremental and cautious. That is only natural. What we encourage is a heightened consciousness about impact adopted throughout the global population of investors, driving greater flows of capital to high-impact enterprises. For those who choose to start more incrementally, we wish to embed the mindset that this is the first step in their journey, not the final destination.
This is where we stand: the GIIN welcomes an influx of new players who may be at various stages on the journey to incorporate impact into their investment strategies.
The magnitude of problems that need to be addressed in the world demands much greater engagement from the investor community. Far too much capital is still sitting on the sidelines, failing to drive positive social and environmental change alongside its financial returns.
To attract many new investors to this exciting and diverse tent, but also preserve the integrity of the impact investing model, I suggest we need to expand the dialogue. We need to move from asking only “what is an impact investment?” to also questioning “how are you investing for impact?”, and encourage everyone involved in the financial community to view investment capital and the investment process with an impact-focused lens.
To some, the impact investing tent may feel big, and indeed it is compared to a decade ago. But when compared to the scale of challenges our world is facing, it is still a very, very small (but hugely important!) tent. I recommend that we take a more inclusive approach to growing the market, proactively helping more investors, especially large-scale asset owners, to start the journey toward making impact investing the powerful global force for good that it needs to be.
The GIIN’s efforts to raise awareness about impact investing, and support new investors with the information, tools, networks, and confidence they need to enter the impact investing tent will, I hope, help to mitigate some of the risks of mainstreaming and contribute meaningfully to the scale of capital being deployed.
As a community, we can all help guide investors on their journey to becoming effective impact investors. Over time, as impact investing becomes business as usual, we hope it will also drive a change in the way people in a much, much bigger tent perceive the powerful role of money and the positive impact it can have on the world.
This isn’t easy work, changing mindsets, challenging assumptions and values about capital and the way the investment community works. Yet, as Einstein once said, “A new type of thinking is required if mankind is to survive and move toward higher levels.”
Thinking bigger
In pursuit of that higher level, we, with support from the Rockefeller Foundation, and with actors across the ecosystem that have a commitment to field-building, are working this year on a Market Roadmap, to chart the course for what needs to happen in coming 10–15 years to ensure impact investing reaches its great potential. As one part of that work, we will be considering the shape a set of principles could take, to clarify expectations for people who are calling themselves impact investors.
In the ten years since the impact investing industry began, “the big tent” has already grown exponentially, and there has been great progress, with momentum in activity among experienced and new impact investors, as well as growing support from policy makers, grant makers, and other field builders.
But to tackle issues on the scale of the Sustainable Development Goals and global climate targets, we must think even bigger and engage a much broader set of investors. The global capital markets are worth trillions of dollars, and against this, impact investing is still just a drop in the ocean.
Let’s recognize that this is hard work we are doing together, building a highly effective, large-scale market. It will take time. Yet, as more data and success stories, and new products and larger networks are created, we are confident there will also be even greater sophistication, collaboration, and mutual understanding, not just in our community of existing impact investors, but all across the big social change spectrum.
We look forward to welcoming many more on this important journey.
Amit Bouri is the co-founder and CEO of Global Impact Investing Network. Follow him on Twitter at @amitkbouri.
An impact investing tent big enough for the problems we are trying to solve was originally published in ImpactAlpha on Medium, where people are continuing the conversation by highlighting and responding to this story.
This post was originally published on ImpactAlpha.com
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