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Impact Investing: A New Book Reveals Its Challenges and Prospects

3p Contributor | Wednesday October 12th, 2011 | 0 Comments

By Geri Stengel

As Robert Kennedy famously noted, “even tiny ripples can become a powerful current that sweeps aside the established order when they are multiplied and brought together.”– from Impact Investing

Indeed, ripples of social change in finance are forming into waves, waves that have the potential to become tidal in proportion. Impact Investing: Transforming How We make Money While Making a Difference by Antony Bugg-Levine and Jed Emerson provides a framework for harnessing the swell of these waves into powerful positive disruptive forces.

Whether you’re an investor, philanthropist, entrepreneur, employee or in the public sector, if you have some odd notion that business practices can play a role in solving the world’s social and environmental problems, this book is for you. It points the way to creating positive impact without trading off financial returns; it shows you how to blend values to achieve both returns and impact.

It is tricky to define an emerging field without cutting off the evolutionary process of what’s happening. It’s even trickier when what you’re doing encompasses many emerging fields, from micro-finance to social enterprise to measuring social impact. You can’t fully appreciate impact investing without touching on all of them. In each case, Antony and Jed take complex concepts and drill down to their essence in a way that any layman can understand.

If lessons are to be learned in each field, we need to know the good, bad and ugly. Failure is a great learning tool. The book extracts great lessons from stories about successes and failures.

Some of  world’s problems are just too big for government and philanthropy to solve. Other problems such as domestic violence, can only be solved by government and philanthropy.

Emerging models from the business world address some of the biggest problems within healthcare, affordable housing, education, agriculture, utilities, among others. These fledgling efforts aren’t able to attract mainstream investors … yet.

Antony and Jed point out that the government must encourage new models through such things as tax breaks, incentives and, maybe, even mandates and regulations to protect investors and entrepreneurs, and educate the next generation of leaders. Remember, failure is a teaching tool.

Where will the funding come from? Two streams are suggested:

  • Typically only 5% of a foundation’s assets are given away in grants each year. The remaining 95% is reinvested. Imagine if that money was invested in social enterprises as debt or equity to provide both a social return and a financial one.
  • The $80 trillion global capital market always wants investment options. Look to family offices followed by private banks and their clients as the first movers. Institutional investors are like turning an ocean liner and will follow, not lead.

Who might be the first impact investing “Apple IPO?” While Antony and Jed acknowledge there is no way to predict the future, they do provide an example. IGNIA Fund, Monterrey, Mexico. The company funds the founding and expansion of high-growth social enterprises that provide poor people in Latin America with healthcare, housing, education, and basic services such as water, energy, and communications.

If you’d like more insights into impact investing as well as answers to your question by Antony and Jed, sign up for the free Ventureneer webinar Impact Investing: Challenges and Prospects.

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Geri Stengel is founder of Ventureneer, which connects values-driven small business owners with the knowledge they need to make the world a better place and to thrive as businesses. You can learn new skills, collaborate with peers, develop solutions to your real-world problems, get one-on-one help from experts, and access the information you need to make better decisions for your organization.


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