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By Beth Sirull
Last year, here on TriplePundit, I proclaimed 2014 the Year of Impact Investing. Whether it was or not — and what that would really mean — is open to argument. Clearly, a lot happened in the U.S. and around the world — and a lot of impact capital was deployed — in 2014.
But SRI funds and impact investing are not perfect overlays for one another. Impact investing requires not just the intention to affect a specific social change, but also the commitment to measure and report on that positive social change. SRI efforts to screen out particular ills do not automatically create positive social impact, certainly not a measurable one. ESG screening, a key component of SRI, is not impact investing.
Still, the two are correlated and the substantial, documented growth in SRI funds speaks to the growth of impact funds as well. Indeed, USSIF reports that community investments combined with socially-responsible alternative investments — private equity, hedge funds, property funds and other private market vehicles more likely to be impact investments targeting direct, measurable social impact — have grown over 40 percent since 2012, to approximately $300 billion in 2014. Clearly that’s a lot of investment activity.
A lot happened in impact investing policy in 2014, but much more needs to happen this year. The G8 Taskforce on Social Impact Investing, originally convened at the 2013 G8 Summit, released its final report, Impact Investment: The Invisible Heart of Markets in 2014. This report is the cumulative effort of hundreds of people from around the world, with the backing of the G8 governments —England, France, Canada, Italy, Japan, Germany and the United States, as well as Australia — and outlines what policymakers can do to encourage investors to put money to work in financially sensible (given a variety of investor profiles), and socially impactful, ways.
Alongside the global effort, each of the member countries 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.
At the end of 2014, we saw the beginnings of an effort to make sense of this information. In November, the Global Learning Exchange on Impact Investing (co-convened and hosted by Pacific Community Ventures), released Impact Investing Policy in 2014: A Global Snapshot. What differentiates this report from all the others is that it begins to shift the question from “What should governments do?” to “What have governments done to encourage impact investing and what has happened as a result?”
In 2015, we need to take all these ideas that have been thrown up against the wall and start making sense of it all. We need to ask and get answers to questions like:
Beth Sirull is president of Pacific Community Ventures, whose mission is to create jobs and economic opportunities in low income communities through the direct support of small business and entrepreneurship as well as by promoting policies that drive investment in underserved communities. PCV is an impact investor providing capital directly to small businesses. The organization also works to build the capacity of these small companies to accept and deploy impact capital effectively.
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