By Cathy Clark, Jed Emerson and Ben Thornley
Impact investing is at an inflection point, building off the rich histories of community finance in the United States and other countries, microfinance, international development, and the integration of ESG factors (Environmental, Social and Governance) in institutional portfolios more broadly. For over 30 years, these practices have been laying the foundation for an expanded continuum of investor options for thematic and asset allocations into privately-owned investments structured for financial returns and social and environmental impacts. Today, this literal and figurative capital convergence is creating tremendous momentum, bringing with it new players and assets, infrastructure, and enabling public policies. Yet it remains challenging for investors to understand which practices hold the greatest potential, which strategies deliver integrated performance, and how to best transfer these efforts to the ever growing market of new funds, asset owners and advisors seeking to move greater amounts of capital in o impact investments. The problem is not the absence of history and track records of real, positive performance within the field. Indeed a growing variety of investors are already creating strategies to capture integrated performance in markets around the world. Lacking still is a deeper and more transparent understanding of this performance – based on the experiences of fund managers across stages, industries and geographies – and the practices that have actually led to positive financial and social outcomes. We recognize that in some ways effective impact investing is simply sound investment practice augmented with consideration of social and environmental aspects; in other ways, impact investing is an evolving and different animal from traditional investment practice and is in urgent need of further investigation.
CASE, Insights, ImpactAssets, 2012