Impact Investing: Transforming How We Make Money while Making a Difference

Abstract

An investor in Hong Kong wants to secure her children's economic future. But, she also wants to use her wealth to address the social and environmental challenges she cares about and thereby leave a broader legacy. She becomes convinced that simply giving her money away cannot be the only way she can make a difference. So, she redirects her assets into investments that preserve her wealth and also directly tackle problems of poverty and environmental degradation.A group of friends volunteering for a nonprofit organization look for ways to help reduce poverty in rural Mexico. They stumble onto the idea of lending small amounts to poor people who cannot access loans from banks. But they struggle to secure donations and instead take on loans. When their success exhausts their available charitable capital, they convert to a for-profit enterprise and eventually hold an initial public offering on the Mexican stock market that raises more than $300 million. Suddenly they find themselves in the middle of a global media storm, lionized as saviors and vilified as greedy capitalists.A senior investment banker in New York decides to shift career tracks to contribute to the fight against global poverty. But instead of leaving Wall

Performance of impact investing: A value creation approach

“…They constitute a specific category of non-for-profit organizations, developing innovative ways to tackle complex social problems and fill in the insufficiencies of other non-for-profit organizations. To do so, they take advantage of the combination of social and business logics (Bugg-Levine and Emerson, 2011;Kroeger and Weber, 2014), searching for a blended value (Emerson, 2003 and the "Blended value proposition"). Already in 2002, Lynn Sharpe Pain supported the idea that to be considered as superior performing firms, they had to turn to a shift in value, and consider, besides the financial performance, non-financial one (Sánchez, 2003).…”

The Philanthropy As One Big Impact Investment: A Framework For Evaluating A Foundation’s Blended Performance

“…How much of a foundation's assets should go into "impact investments"? And there is also the issue of how to calculate the impact of an investment -especially before you make it, which is when that information is really useful (Brest & Born, 2013;Bugg-Levine & Emerson 2011).…”

“…For philanthropy to embrace impact investing fully, it must find a way to understand these opportunities in terms of their blended value of both impact and financial return. Several efforts are underway to standardize and make transparent the impacts of for-profit entities, which will help evaluate individual impact investments in a systematic way (Godeke & Burckart, 2015;Miller & Johnson, 2015;Miller & Rogers, 2014;Bugg-Levine & Emerson, 2011).…”

New Investment Approaches for Addressing Social and Economic Challenges

“…There is a scarcity of high quality investment opportunities into which larger amounts of capital can be deployed. As in the mainstream financial markets, investment evolution is not necessarily linear although it is often assumed to follow a path from individual transactions, to boutique offerings to funds, funds of funds and ultimately fully "liquid", or tradable, capital markets where investors have a range of choices to buy and sell investments (Bugg-Levine and Emerson, 2011). More products could be developed, across the risk return spectrum, into which institutional investors can deploy social impact investment funds.…”