By Brenna McCallick, Research Associate, Pacific Community Ventures
This week, the Social Impact Investment Taskforce convened by the G8 has released reports assessing the policy infrastructure that undergirds impact investing markets around the world. This surge of new information will be at the forefront of discussions about impact investing for some time to come – and with good reason. The Taskforce has undertaken the ambitious goals of mapping its member countries’ markets and producing recommendations that promise to unleash new streams of capital.
The stage is set for a dynamic international conversation – one that will benefit from the participation of investors, entrepreneurs, financial managers and government workers who do not always self-identify as impact investing practitioners.
In light of this recent flurry of activity, let’s take a moment to get back to basics. If you’re hoping to make sense of these latest developments, but aren’t fluent in the language(s) of impact investing, we’re here to help. We at the Global Learning Exchange (GLE), convened by the Impact Investing Policy Collaborative (IIPC), know that tracking down introductory-level information about impact investing can be daunting.
Granted, as ours and other resource libraries demonstrate, the field does not suffer from a shortage of information about the practice of investing for both financial and social return. But many of the most recent reports and thought pieces tend to take for granted their readers’ familiarity with impact investing, and remain all but impenetrable for the interested but uninformed.
[pullquote cite=”” type=”left, right”]Impact investing is really about very simple ideas; namely, that capital markets should work for good as well as profit, and that financial tools can play a powerful role in solving the massive global challenges of our day.[/pullquote]
We are therefore pleased to announce a new blog series: “Impact Investing 101.” Each 101 post will direct readers to key information about a particular topic in impact investing, including: impact investing and public policy, investing with a gender lens, impact metrics and measurement, social enterprises, the role of the social sector, even debates about the very definition of impact investing.
Within each post, we will provide lists of beginner-friendly resources, directing newcomers to information that will illuminate the central tenets of impact investing while highlighting major developments in the field.
Let’s Get Started.
Fittingly for our first installment, we’re beginning with the basic question, “What is impact investing?”
Despite the impression commonly given by dense, jargon-packed publications on the topic, impact investing is really about very simple ideas; namely, that capital markets should work for good as well as profit, and that financial tools can play a powerful role in solving the massive global challenges of our day. Understanding this vibrant, evolving field should not require herculean effort – or even a dictionary. It should only require openness to embracing a new take on the status quo.
To get a general introduction to impact investing, we recommend exploring the 10 resources below (listed in no particular order). Each of these publications contains easily digestible information delivered in clear, concise terms.
(Please note: This list is not intended to be comprehensive; we recognize that there are other valuable publications we have not included. The list reflects a limited range of informative pieces that serve as helpful starting points for newcomers.)
- Impact Investing(GIIN, 2014)
The GIIN – or Global Impact Investing Network – is one of the most important players in impact investing today. The organization has been called “the closest thing the field has to a trade association,” and it has played a significant role in shaping the market by uniting a network of impact investors around the globe, and by setting impact measurement standards (see IRIS). The GIIN definition of impact investing is largely regarded as the standard – and anyone interested in impact investing should know it.
- Impact Investing: An Introduction(Rockefeller Philanthropy Advisors, 2014)
A prime resource chock-full of useful information on topics ranging from the risks and opportunities of impact investing, to the various financial products an investor might pursue. Concise and engaging, this piece was produced as a resource for donors looking to change up their philanthropic giving strategies. While the target audience is somewhat narrow, the report offers helpful insights applicable to anyone new to impact investing.
- Social Finance: A Primer(Sonal Shah and Kristina Costa, Center for American Progress, 2013)
If you’re looking to place impact investing within the larger context of efforts to address social and environmental issues, we recommend this excellent report from the Center for American Progress. Shah and Costa describe three innovative approaches that bring the power of the private market to bear on global crises: innovation funds, impact investing, and social impact bonds (SIBs). The section on impact investing gives illustrative examples of the various forms the practice can take, while providing details about some of the most recent initiatives to scale it. (If you’re interested, the primer’s sections on the Social Innovation Fund and SIBs – while more complex – are definitely worth parsing through.)
- Investing for Social and Environmental Impact(Monitor Institute, 2009)
A foundational piece of market research written about two years after the term “impact investing” was coined. In the report, Monitor grapples with the risks of impact investing, attempting to lay out the “promise and perils” of the field, especially in light of the Recession. The publication provides helpful insight into how the market has evolved since it was first conceived as a uniform practice, uniting a broad spectrum of investors, financial tools, strategies and outcomes under one name.
- A Short Guide to Impact Investing (Case Foundation, 2014)
Specifically designed for newcomers, this primer from the Case Foundation presents answers to many basic questions about the field. Want to know which sectors impact investors typically target? The differences between investing in emerging vs. developed markets? How investors balance risks, returns and impact considerations? Based on the Foundation’s conversations with hundreds of people working in impact investing, this guide offers useful information in clear terms.
- Put Markets to Work for Global Good Through “Impact Investing”(TheStreet.com, Margot Brandenburg, 2014)
If you’d like to understand the differences (and similarities) between impact investing and socially responsible investing (SRI), you should watch this short video. In an interview on TheStreet, Margot Brandenburg of the Rockefeller Foundation (and co-author of the new book, The Power of Impact Investing) succinctly explains the characteristics of each practice and how they’re related. She also gives some helpful background on the variety of impact investments – including the range of return expectations and impact areas.
- Debunking the Myths of Impact Investing (Ballentine Partners, 2014)
No one would doubt that impact investing is gaining momentum worldwide, but persistent misconceptions about the field continue to limit its growth. This paper released by Ballentine Partners presents five reasons people often give for not engaging in impact investing, explaining why each is based on fallacies. In the process, the paper offers powerful insights into how impact investing can transform the way we think about our financial system, as well as how we address global crises.
- Impact Investing: Getting to Grips with the Jargon (ImpactInvestor.co.uk, 2014)
It’s easy to feel overwhelmed by some of the more nuanced concepts and terminology in impact investing. Perhaps you’ve heard of responsible, sustainable, clean tech, impact-first, and philanthropic investing, but you may not know how they’re related, or what exactly differentiates them. Fear not: ImpactInvestor has some wonderful resources to help you keep track of it all. Prime among these is “Getting to Grips with the Jargon,” a straightforward discussion of the various “types” of socially responsible investing – including impact – and a variety of different fund types and focus areas within these.
Terminology aside, the profusion of acronyms can add another level of confusion to understanding impact investing. You’ll hear BoP, DFI, ESG, PRI, SROI…and the list goes on. This glossary produced by INSEAD (in collaboration with the Global Impact Forum) can serve as a quick “cheat sheet” for those unfamiliar with all the shorthand. It also includes definitions for common terms.
- Seven things We’ve Learned about Impact Investing in Seven Years (Rockefeller Foundation, 2014)
Finally, a great summary offering Rockefeller’s take on some of the key developments in the field since “impact investing” was coined. Their seven observations offer a broad outlook on how the field has grown and where it’s going.
For additional information, we recommend taking some time to explore the following resource libraries:
- Rockefeller Foundation
- Impact Investor
- Case Foundation
- Omidyar Network
- Aspen Network of Development Entrepreneurs (ANDE)
- US SIF
Still have questions? Stay tuned.
In future “101” posts, we will point you toward more prime information about impact investing. We look forward to sharing the best resources available on different topics in the field, reflecting a variety of perspectives.
If there’s a topic you’d like to learn more about, or a report, article, blog post, video, infographic or other informational resource you think belongs on one of our lists, let us know: firstname.lastname@example.org.
 In Impact Investing 2.0 – The Way Forward, published in part by Pacific Community Ventures, researchers found that the most effective impact investors have developed “multilingual leadership,” or a level of understanding and demonstrated ability across the public, private and social sectors.
 See the description of the GIIN in “Chapter 2: Impact Investing: A (Short!) Definition,” in the Case Foundation’s Short Guide to Impact Investing, another one of our recommended resources: http://casefoundation.org/impact-investing/short-guide
Brenna McCallick serves as Research Associate for InSight, supporting PCV’s domestic and international impact investing policy initiatives. She conducts research on public policy as it relates to impact investing, produces content for InSight publications and monitors global trends in the field. Prior to joining PCV, Brenna worked as a Development Assistant at Room to Read, an international nonprofit that promotes literacy and gender equality throughout impoverished regions of Asia and Africa. She holds a BA in History from the University of San Francisco. She can be reached at email@example.com.