What are the impact trends that have you excited – or worried – as we enter 2020? We’ve been thinking about this question at CASE and have outlined six topics below that will drive our efforts in 2020 and will guide the second season of our CASE in Point Podcast, in which we interview impact leaders to hear their stories and tactics related to these trends. Read more about these can’t-be-missed trends below and stay tuned for the return of our podcast next month!
1. The shift from shareholder to stakeholder capitalism
“From my point of view, the Business Roundtable deciding that the purpose of business is to benefit stakeholders instead of just shareholders is a game changer,” said Kevin Trapani, founder of The Redwoods Group, a North Carolina B Corporation.
In August 2019, 181 CEOs committed to leading their companies for the benefit of all stakeholders (employees, suppliers, customers and communities), not just shareholders, in a new “Statement on the Purpose of a Corporation” from the Business Roundtable. This announcement adds to an ongoing conversation about the changing nature of business. For example, we have seen increasing activity and expectations around CEO activism, such as BlackRock CEO Larry Fink’s annual letter, and more companies taking stances on meaningful issues, such as the 500+ B Corps commit to net zero emissions by 2030. In the coming year, we’ll see if and how these CEO pronouncements move beyond words to action and how the rules and expectations of capitalism continue to shift.
2. Increased understanding of the unintended risks of data and technology
With the rise of artificial intelligence, machine learning, big data, predictive analytics and blockchain, the 21st century has seen enormous innovation in technology and the use of digital information. These tools can be used to innovate and transform lives – from combatting deforestation to preventing suicides and much more. Yet, looking to 2020, social impact leaders are warning about the unintended consequences of these same technologies, including the inherent biases of algorithms, the weaponizing of data to harm and manipulate people and more.
As Everett Harper, CEO of Truss said, “The opportunities to use technology for good are profound, but the risks are also significant. When there are gaps in security, servers stored in closets in local offices or NGOs targeted for hacking, already vulnerable populations can be made more at risk. We need to update the rules to protect vulnerable people and their data.”
3. Centering marginalized communities
For many social impact organizations, creating equity and diversity internally is not only about the business case, but is also about modeling and contributing to the “just world” these organizations are striving to create. However, as Leigh Morgan, former COO of the Gates Foundation and current Chief Strategy & Operating Officer of Nia Tero, said, “The resources in the social impact movement continue to be controlled mostly by white, well-educated elites. To drive sustainable impact the sector needs to transform itself. Those in power must open more doors, give up seats in the front and let go of the steering wheel. Doing so will result in tangibly better ideas, outcomes and positive change.”
We’ll continue to see impact leaders working to transfer power to marginalized communities, thus making space for them to create and lead scalable and sustainable solutions for the challenges in their own communities. We will also continue to see thoughtful prioritization of diversity, equity and inclusion in talent management (see this excerpt from CASE’s People Matter: Evolving Talent to Drive Impact at Scale) and a conscious decrease in implicit bias in our data collection and investment decisions (listen to this CASE In Point interview with Daryn Dodson, founder of Illumen Capital).
4. Mainstreaming of impact investing
Impact investing continues to gain momentum – the Global Impact Investing Network estimates the current size of the global impact investing market to be $502 billion and a recent report from the International Finance Corporation estimated that investor’s appetites for impact investment could be as high as $26 trillion. As impact investing and ESG (environment, social and governance) investing continue to gain momentum, nearly all major asset-management firms have launched impact strategies. For example, Ommeed Sathe, Vice President of Impact Investments at Prudential Financial, will be at Fuqua on January 28 to discuss Prudential’s commitment to grow its impact investing portfolio to $1 billion by 2020 (join us!). However, as Brian Trelstad of Bridges Fund Management noted recently, in order for the mainstreaming of impact investing to achieve real change: “Rather than being a fig leaf, impact investing must be the thin end of the wedge, opening a space for traditional investors to eventually apply environmental and social impact assessments to every asset in their portfolios.” As impact investing continues to become mainstream, we’ll be keeping an eye on the strategies being used, the players involved, the risks and the opportunities.
5. Clearer standards for the impact in impact investing
“In order to fulfill the potential of impact investing, we’ll need to protect against impact washing and ensure that we have alignment on definitions as new players enter. However, I am excited about the excellent work being done around standards for reporting on impact and I believe we’ll continue to see lots of progress in 2020 and beyond,” said Cathy Clark, Faculty Director of CASE and CASE i3.
Related to the previous trend, many individuals and organizations are already working hard to define impact standards to ensure that impact investing meets its goals. For example, the Impact Management Project is working to build consensus among enterprises, investors and practitioners about how we define, measure and manage impact. In addition, the International Finance Corporation recently announced that 60 investors – holding over $350 billion in assets invested for impact – are adopting the Operating Principles for Impact Management, which integrate impact considerations into all phases of the investment lifecycle and also require annual disclosures and independent verification of impact management systems. The Global Impact Investing Network also recently released the second edition of the “State of Impact Measurement and Management (IMM) Practice” showing the growing sophistication of IMM.
6. Scaling and systems change, oh my!
Scaling, systems change, collective impact, movement building – what’s it all mean? The field continues to push to increase scale, but confusion remains on terminology and, more importantly, how impact enterprises and impact investors can get to scale. Konstanze Frischen, Executive Director of Ashoka North America, stated: “Given the deep problems that humanity is facing, achieving long-term, transformative change is critical. Achieving this change is also deeply complex and will require social entrepreneurs, funders and intermediaries to work together to get at the root causes of problems, understand the best practices of scaling impact and collaborate to change underlying systems, including norms, beliefs and culture.”
This year will see more attention paid to the best practices for scaling impact, the competencies needed to drive change at scale, the impact measurement of systems change work and the changes required to funding models. To that end, Ashoka, McKinsey and other partners just announced the launch of a new report at Davos, sharing collective best practices for funders on how to more effectively fund and support systems change efforts.