I have been researching and meeting with people involved in social impact investing and I am convinced that this emerging asset class is about to take-off. Social impact investing aims to solve social or environmental problems while generating financial profit. These investments in social enterprises come in many forms – but what has been typical is a private equity structure. The investments range from producing a return of principal capital to offering market-rate or even market-beating financial returns.
A growing number of individuals, families, foundations and pensions believe that the assets set aside for investment should be invested in such a way that supports and complements their philanthropic work and values.
There are organizations and companies in the field who are taking steps to add some infrastructure so that this investment opportunity can be more readily consumed.
Investors Circle is a network of social impact investors who collaborate on deals. They are making strides in adding some infrastructure to this growing segment of the market.
Global Impact Investing Network (GIIN) is in the process of creating a data engine that contrasts – and quantifies – the tangible social benefits of these investing opportunities in addition to a more traditional benchmark to gauge financial return. The data engine is set to launch in February.
There is also BLab, which is a Philadelphia-based organization supporting the emergence of the B Corp – B stands for Benefit – this is a formal structure for a social enterprise.
In November of last year, JP Morgan, Rockefeller Foundation and GIIN produced a report called: Impact Investments: An emerging asset class. The report estimates significant market opportunity for impact investment over the next ten years. After analyzing selected segments of five sectors – urban affordable housing, rural access to clean water, maternal health, primary education, and microfinance – serving the population at the “base of the economic pyramid,” the authors identify a potential profit opportunity between $183 and $667 billion and a potential investment opportunity between $400 billion and $1 trillion in the next decade for just these segments of the impact investing market.
This is real innovation in philanthropy and something to keep an eye on as the infrastructure continues to grow.