Field Notes: Impact Investing’s Potential

A few updates in the impact investing space.

First off, Sasha Dichter of Acumen blogs about not rushing expectations for the impact investing industry in the  Harvard Business Review: (If you aren’t a subscriber, you can also read it in the Pioneers Post.)

Impact investing is not just a new, undiscovered corner of the investing world. It has the potential to join traditional investing and government aid and philanthropy as a third way to deploy capital to address social and environmental issues. A fully developed impact investing sector will incorporate the best features of markets—rigor and speed; quickly evolving business models; strong revenue models; and access to capital as ventures show signs of success—with the best features of government aid and philanthropy—serving unmet needs; reaching populations that are bypassed or exploited by the markets; investing in goods with positive externalities; and leveraging public subsidy to extend the reach of an intervention—to solve social problems.

Check out this article by our former CIO and the current CEO of the Global Impact Investing Network, Luther Ragin, on how impact investing is proving to be reliable regarding financial returns. He says that “the realized market rate returns for many impact investments are testament to the opportunity of this growing field.”

Have you heard of donor-advised funds? According to Jack Shakely, “they are taking over the philanthropic world”:

An alternative was created by the IRS to give modest philanthropic efforts a cheaper, easier path to existence, bundling them together under an umbrella nonprofit for investment and management. A donor-advised fund offered the wannabe philanthropist the same tax deductions as a foundation but without the red tape and with maximum donor control. No annual disbursement was required; no annual report either. The money can come in and go out whenever, however and to whomever the donor likes. Call it foundation lite. It’s swiftly becoming the philanthropic delivery system of choice for the wealthy.

We would be amiss not to mention that today in Ontario, a large impact investing conference hosted by the MaRS Centre for Impact Investing is uniting investors, advisors, social ventures, co-ops, nonprofits, and many others “ to support deal flow and impact investing opportunities [and] to increase capital directed to profitable ventures with a scalable, sustainable impact.” You can hear from Eric Hoskins, the city’s minister of economic development, on why he sees social enterprise as a critical partner for government here, and read more about the state of impact investing’s growth in Canada here on Purpose Capital.

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