Is 2014 Really the Year of Impact Investing?

Beth Sirull,
Beth Sirull, president of Pacific Community Ventures, whose mission is to create economic opportunities in low-income communities.

By Beth Sirull

Earlier this year, on this forum, I proclaimed that 2014 would be The Year of Impact Investing. Now that half the year is in the history books, it’s fair to ask if 2014 is living up to that billing. Let’s take a look at what the first six months of the year have produced:

Alongside initiatives by mainstream private investors to catalyze financial markets, there have been accelerated efforts to inform design of more effective policy to drive private capital for social impact. An important step towards this outcome here in the U.S. has been the work of the United States National Advisory Board (NAB) on impact investing.

The U.S. NAB consists of a group of 27 thought leaders including private investors, entrepreneurs, foundations, academics, intermediaries and nonprofits. The NAB released its final report, Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing – and Why It’s Urgent, last month. As part of the report launch, the White House convened a Roundtable on Impact Investing, where more than 20 private corporations and foundations announced a total of over $1.5 billion in new impact investments. These include:

  • Prudential Financial committed to building a $1 billion impact investing portfolio by 2020 to eliminate barriers to financial and social mobility.
  • The McKnight Foundation and the Rockefeller Brothers Fund committed to allocating at least 10% of their endowments — $200 million and $84 million respectively — to impact investments.
  • The Omidyar Network committed $100 million in early-stage risk capital over the next three years to new impact investments that will benefit underserved communities around the globe, enhancing financial inclusion, improving education, and using internet and mobile technologies to create positive social change.
  • The Ford Foundation committed $9 million to impact investments that will increase economic mobility and opportunity for low-income Americans.

Of course, $1.5 billion in impact investing commitments from 20 investors is a great start, but for impact investing to have long-term legs, we need more, both in the U.S. and abroad.

And more there is:

  • In June this year, Rep. Todd Young (R-Ind.) and Rep. John Delaney (D-Md.) introduced H.R. 4885, the Social Impact Bond Act, which was followed by the introduction of another bipartisan legislation that uses the Pay for Success model for energy efficiency. When was the last time a bipartisan group agreed on anything? Social Impact Bonds (SIBs), also known as Pay for Success, are appealing across the political spectrum. SIBs harness the market, which attracts the ‘right,’ even as they address pressing social problems, which attracts the ‘left.’ In a nutshell, SIBs constitute a public-private partnership whereby private investors put up funds to enable a social service provider (think a program to reduce prisoner recidivism or reduce childhood obesity) to produce a measurable set of outcomes (e.g., a 10 percent reduction in recidivism for a set group of previously incarcerated individuals). If the outcomes are achieved as determined by a third-party evaluator, the government pays back the investors with a profit. This legislation would authorize federal government-funded SIBs.
  • Recognizing the need for more cohesive policy activity, a group of organizations (including Pacific Community Ventures) are leading the Accelerating Impact Investing Initiative (AI3), to create a multi-stakeholder policy platform for the U.S., building on the history of community development in the U.S. and work of milestone efforts such as the U.S. NAB. Watch this space for developments on the AI3 in the coming months.

In the meantime, there’s still more activity on the global front around impact investing:

The U.S. NAB was formed under the auspices of the G8 Global Task Force on Social Impact Investment, which was established in 2013 to catalyze the impact investing market across the globe. Under the auspices of the Taskforce, the countries of the G8 established individual National Advisory Boards, such as the U.S. NAB, to work both independently and in concert with their colleagues from other countries on the Taskforce, to scope their unique policy, investor, capital markets and social challenges and to share learnings across the globe. The Global Taskforce will be issuing its final report in September 2014.

Along with the Global Taskforce, the G8 also established the Global Learning Exchange (GLE), an online platform to anchor a cross-sector community of practice to improve the networks and knowledge base critical to growing impact investing around the world. The GLE, jointly run by the Impact Investing Policy Collaborative (IIPC) and the World Economic Forum, is providing a resource for global peer-to-peer learning on social impact investment among public officials, investors, philanthropic and civil society organizations, international financial institutions, and business leaders with a nexus to policy. The GLE began its work in December 2013. Going by the first six months of its pilot phase, the GLE’s accomplishments are impressive:

  • The GLE hosted five webinars on topics ranging from the role of the public sector in enabling social innovation to “reporting back” on landmark meetings of the G8 Taskforce; over 1,000 people, representing over 70 countries have registered to attend these virtual meetings. If web traffic is anything to go by, the appetite for the kinds of conversations the GLE website provides is growing. The GLE site has attracted over 16,600 page views from visitors in more than 120 countries.
  • In addition to its online engagement, the GLE has also been in conversation with governments and organizations in different countries. For instance, the IIPC engaged with the Head of the Hong Kong government’s Efficiency Unit, work that ultimately resulted in the launch of a $500 million Social Innovation and Entrepreneurship Development Fund.
  • Representatives of countries ranging from Sweden to Brazil are working with the GLE to inform Taskforces in their own countries, while organizations in Ghana, India and the U.K., among several others, are developing content and toolkits for local investors, entrepreneurs and policymakers in their home countries.

Finally, even His Holiness Pope Francis is joining the movement. The Vatican hosted a two-day symposium on impact investing in June, organized by Catholic Relief Services, the Mendoza College of Business at the University of Notre Dame, and the Pontifical Council of Justice and Peace. The Investing for the Poor conference was billed as “an opportunity to learn the core concepts of impact investing, discuss how it aligns with Church mission, and to discern how the Church might use or promote impact investing to serve the poor.” Surely, if the Pope has gotten on board, we are on to something.

Clearly, this is a lot of activity—with significant, measurable outcome s— for a six-month period. But is it the Year of Impact Investing? It doesn’t really matter. What matters is that impact investing — harnessing private capital to address pressing social issues, providing financial returns appropriate to the type of capital invested, and having measurable, positive social impact — is trending in the right direction.

Let’s keep it up.

Beth Sirull is President of Pacific Community Ventures, whose mission is to create economic opportunities in low income communities. PCV leverages impact capital, entrepreneurship and thought leadership to fulfil its mission. Tonusree Basu, Associate Director (Policy) at PCV, provided information for this blog post.

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