Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
• Private wealth managers such as Capricorn Investment Group and New Island
Capital in the US are integrating impact investments into their traditional asset
management portfolios.
• Commercial banks such as Triodos Bank in Europe and Charity Bank in the UK
tap into retail customer interest in impact investment and lend to charities.
• Retirement fund managers such as PGGM in Holland and TIAA-CREF in the
US are responding to demand for impact investments rather than simply sociallyresponsible
investments that “do no harm.”
• Boutique investment funds such as responsAbility in Switzerland and Root
Capital in the US are raising capital from a growing class of high-net worth
individuals, family offices and private foundations seeking fund managers who
can offer high-impact, low-risk investment options.
• Companies such as General Mills and the Starbucks are diversifying their supply
chains and expanding their fair trade operations through impact investment.
French food company Danone is teaming with Grameen to address malnutrition.
Others are using impact investments to identify the potential for serving new
markets.
• Community development finance institutions (“CDFIs”) in the U.S. such as
the rural-focused Southern Bancorp and New York-based Carver Federal Savings
Bank. In Appendix III:CDFIs, we present a short history of this segment of the
investor base.
While some of these investors are more recent entrants to the market, others have
been making impact investments for some time, including DFIs, which have been
operating for over sixty years. Historically, many of these investors operated
independently or partnered within one geographical region. More recently, disparate
sectoral or regional initiatives are coming together to build a cross-sector, global
impact investing marketplace.
In January 2009, the Monitor
Institute published Investing for
Social and Environmental
Impact: A Design for Catalyzing
an Emerging Industry, a report
that documented the activities and
challenges faced by these early
impact investors. This report made
recommendations for the
development of critical industry
infrastructure, without which impact
investing would at best remain a
small niche subset of private
investing with disparate
participants, and at worst taper out
entirely in the face of the global
economic downturn.
Recognizing the need for a global, cross-sector impact investment infrastructure
As different investors develop their impact investment portfolios, similarities emerge
between their investment activities. Ten years ago the Social Investment Task Force
was set up in the UK to define "how entrepreneurial practices could be applied to
obtain higher social and financial returns from social investment" 7 . In October 2007,
The Rockefeller Foundation hosted an international meeting of approximately 15
impact investors to discuss the similar investment approaches and challenges shared
by the group. A broader meeting in June 2008 brought 40 impact investors together
to discuss how they could work together to accelerate the development of the impact
investment industry. The investors at this meeting found that their common
challenges included: deal sourcing, impact measurement, and the lack of a common
language to describe their investment activities and performance targets. They also
highlighted the need for an organized network to advance their shared interest in
using for-profit investments to fund social solutions.
In essence, these investors envisioned a well-developed impact investing marketplace
that functioned like the traditional capital markets. They sought a marketplace in
which investment opportunities are transparent; performance data is accessible,
7 “Social Investment Ten Years On - Final Report of the Social Investment Task Force,” April
2010.
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