The growing interest in impact investing is hard to miss. Today, more investors and entrepreneurs than ever are proactively investing their capital in solutions designed to generate a positive social or environmental impact, while also having the potential for some financial return. In practice, such opportunities are emerging in most parts of the world, across nearly all asset classes, and at many different levels of risk and return.
A standard impact investment structure today will invest in enterprises that provide self-sustaining solutions to social problems, such as access to clean water, improved health care, or the provision of clean energy. Investing in these organizations provides a direct and significant impact for those in poverty, and in many cases also offers a financial return.
Beyond investing in social enterprises, other impact investment vehicles are also evolving fast, ranging from a variety of innovative impact bond structures to peer-to-peer funding platforms to seedstage investing forums. Still, the field is at an early stage of development, with participants grappling with a number of hurdles such as agreeing on standardized impact metrics, finding optimal financing mixes, avoiding mission drift, and, of course, connecting investors who can deploy “patient capital” with promising social enterprises.
The purpose of this report is to offer investors and social entrepreneurs alike a better understanding of these complexities. The report begins with an introduction to the topic by Credit Suisse analysts, offering a contextual framework for impact investment solutions. This introductory chapter is followed by an interview with Mark Kramer, co-founder of FSG Advisors and a leading authority in the field, who presents an overview of the major trends shaping the industry today.
Chapter three analyzes the drive to expand the range of vehicles available to retail investors, while chapter four features a fascinating discussion between Dr. Julia Balandina Jaquier and Dr. Ernst von Kimakowitz, on the promise and the risks of promoting growth in the social entrepreneurial space.
In chapter five, Katherine Milligan at the Schwab Foundation for Social Entrepreneurship charts the rise of social entrepreneurship over the past decade and discusses some exciting examples of how leading social enterprises deliver impact. Several examples are profiled in the section “Stories from the field.”
In chapter six, Cathy Clark and Jed Emerson present an overview on the current trends in the development of metrics to measure social impact and offer pragmatic advice to newer investors. Chapter seven includes the most important “lessons learned” by early pioneering impact investors, including several specific examples in the section “Stories of private investors.”
In chapter eight, Brian Trelstad and Rob Katz of Acumen Fund, one of the oldest and most respected impact investment funds, share the lessons they have learned over the past decade on the optimal financing mixes throughout the entrepreneurial trajectory of social enterprises.
Chapter nine presents the insights of Rupert Scofield, CEO of FINCA, one of the largest global microfinance institutions, on what other social enterprises can learn from the pioneering work done in the microfinance sector. Chapter ten closes the publication with a thought-provoking and engaging interview with Sir Richard Branson, who discusses the instrumental role business-based solutions can play in solving some of the world’s most intractable problems.
The underlying message of this collection of articles is clear: the potential of growing efforts to deliver entrepreneurial solutions to global problems is bigger than ever before – as are the opportunities to channel private capital toward social and environmental issues. We hope this publication will offer you more insight into this exciting new field.
Giles Keating, Head of Research for Private Banking and Asset Management, Credit Suisse
Mirjam Schöning, Senior Director of the Schwab Foundation for Social Entrepreneurship
File Name: investing-for-impact