Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
1. The current market landscape
For several years, momentum has been building among select private investors to
focus on a new type of asset: impact investments – investments intended to create
positive impact beyond financial return. These “impact investors” have been
motivated by the view that their invested capital can be utilized to generate positive
social and/or environmental change, and until recently have mostly been operating
independently from mainstream financial markets in doing so. In recent years,
participants in the impact investing market have recognized the common threads
across their respective activities and a larger movement has begun to emerge. As this
movement gathers steam, we recognize the potential for impact investments to attract
a larger portion of mainstream private capital and anticipate that more investors will
seek to generate positive social and/or environmental impact when making
investment decisions. In fact, we believe that impact investing will reveal itself to be
one of the most powerful changes within the asset management industry in the years
to come.
Part of the reason that impact investing is such an innovative concept is that it defies
the traditionally binary nature of capital allocation. By convention, capital has
traditionally been allocated either to investments designed to optimize risk-adjusted
financial return (with no deliberate consideration of social outcomes), or to donations
designed to optimize social impact (with no expectation of financial return).
Recognizing that charitable donations will never reach the scale needed to address
the world's problems, and that business principles and practices can unleash
creativity and scale in delivering basic services and addressing environmental
challenges, impact investment introduces a new type of capital merging the
motivations of traditional investments and donations.
In this section, we provide a definition of impact investments and characterize the
market participants, industry associations, and the nature of the investments
themselves, including the sectors and geographies in which they are made.
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