Looking Back to Look Forward: What's Next for Impact Investing in 2015

Last year, Beth Sirull proclaimed on TriplePundit that 2014 was the Year of Impact investing. The Pacific Community Ventures President rounded up the biggest impact investing trends and noted how the field is taking shape in 2015.

More capital invested in 2014

Social investments can fall into one of two big categories – social responsible investments and impact investments. Beth notes the difference between social responsible investing and impact investing, the latter requiring not only an intention to bring about social change, but also a commitment to measure and report on that social change. While SRI strategy and impact investing don’t overlap entirely, there’s a correlation between the documented growth in SRI funds and impact funds.

Nearly $7 trillion in U.S.-domiciled assets employ at least one socially responsible investment (SRI) strategy. This [is] up 40 percent from $3.74 trillion in 2012. These SRI strategies include incorporating environmental, social, and governance (ESG) factors into investment decision making; shareholder advocacy; direct investing for measurable impact; or some combination.

Global policy activity increase

The amount of capital invested wasn’t the only thing that increased in 2014. A lot happened in the public policy sphere too. Public policy matters to social investing because policy sets the stage on which investors invest. Impact investing has the potential to become the next venture capital, but it will need to be guided by policy changes if it is going to change the trajectory of poverty, education, green energy, and other social and environmental issues.

Alongside the global effort, each of the member countries [of the G8 governments —England, France, Canada, Italy, Japan, Germany, and the United States, as well as Australia — ] formed a National Advisory Board on Impact Investing (NAB). Each NAB member country released a National Advisory Board report. These are all valuable inputs to help policymakers around the world guide markets to ensure that private dollars are deployed for financial return and public good wherever possible.

Opportunities for 2015

The conversations around impact investing have already begun to take a different shape. At the end of 2014, the Global Learning Exchange on Impact Investing – co-convened and hosted by Pacific Community Ventures – released a report that shifted industry dialogue from “what should government do?” to “what have governments done to encourage impact investing and what has and hasn’t worked?”

2014 brought considerable growth and progress to the field, but there is still much to be done if impact investing is going to help solve global social and environmental issues. In truth, impact investing is still in the beginning stages of that, but there is an immense potential to deliver social good on investment if the infrastructure for the field is carefully navigated. Beth notes the important questions impact investment leaders, policymakers, advocates, and investors should be asking, including:

• Which of these policy ideas have been tried somewhere in the world? What happened? What can be learned and applied elsewhere? Surely some will be abysmal failures. How can we share these failures so they are not repeated in other geographic settings?
• Which ideas are likely to be most impactful? Which of these ideas are pipe dreams and which stand a real chance of being adopted somewhere? Analyzing what policies address gaps in the market versus those that work alongside other policies already in place is a useful place to start the prioritization.
• What’s being done to make sure that existing (and new) policies actually get implemented and widely used to maximize impact? Changing policy alone is often not enough to change. Policy changes are a necessary but sometimes insufficient condition. Strengthening networks that build practitioner awareness and educate investors, investees, and asset managers, among others is also critical.
• And what about the many ideas that didn’t make the reports? Should some of these be picked up off the cutting room floor?

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