Add Impact
“Add Impact” is the new rallying cry of the Global Impact Investing community, which concluded a two-day plenary meeting of its Steering Group in Lisbon, Portugal on July 8. Championed by Sir Ronald Cohen, founder of Big Society Capital (BSC), which is hailed as the world’s first social investment bank, the Global Impact Investing Steering Group is the heart and mind of a growing social investment movement bent on making impact investing mainstream.
Impact investments are those that intentionally target specific social objectives along with a financial return and measure the achievement of both. BSC formally launched in April 2012, using an estimated £400million in unclaimed assets left dormant in bank accounts for over 15 years and £200million from the UK’s largest high street banks.
The UK experience is now informing a global impact investing movement, and the Lisbon meeting provided a venue for many country delegations to showcase their fledgling National Advisory Boards, comprised of policy makers, impact-oriented organizations, nonprofits, and intermediaries. New boards from Argentina, Australia, Brazil, Canada, Germany, India, Israel, Italy, Japan, Mexico, Portugal, the UK, and the US are organizing and innovating to solidify and strengthen the impact investing landscape and resources in their respective countries. And it’s clear the UK is the trend setter. Many countries are following the Big Society Capital model and working to set up impact investment wholesalers funded with unclaimed assets to unleash new sources of social finance to support access to basic services, education, improved housing, and aging populations in underserved communities in rich and poor countries alike.
What’s needed: scalable enterprises, new funding facilities, regulations, and champions of impact investing
However, along with this greater mobilization of impact capital comes the need to stimulate deal flow, which still lags behind investor demand. There is an overall lack of scalable social enterprise models, signaling the need for catalytic grants, other flexible financing tools, and acceleration support to help social entrepreneurs validate proof of concept, solidify business models, and become investment-ready.
It’s also clear that new funding facilities, regulations, and champions are needed to make impact investing mainstream. Social impact bonds (SIBs) were introduced in 2010, a type of “Pay For Success” model where private investors invest capital and manage public projects, usually aimed at improving social outcomes for at-risk individuals. SIBs are gaining traction with 57 models operating, but they have proven complicated and costly to design and implement. Yet, the practice of pay-for-performance that the SIB model requires has captured the minds of policy makers, non-profits, development finance institutions, and private sector investors, including the Multilateral Investment Fund of the Inter-American Development Bank Group, which is working to help bring the first SIBs to Latin America.
