Impact investing—funding enterprises with the intent to create positive change while earning a financial return, is on the rise–and for good reason. The rewards can be two-fold, and can also help spearhead more socially and environmentally focused endeavors. This potential prompted Dallas-based entrepreneurs Eva Yazhari and her husband Hooman to found Beyond Capital, an impact investing fund that helps to grow for-profit companies in India and East Africa with a mission to alleviate poverty. After working in the venture capital and asset management industries for five years, Yazhari set out to build a different kind of model that could affect individuals living under the poverty line. “I was motivated to follow in my grandfather’s footsteps after hearing stories of his time operating a health clinic in rural Tanzania,” she says.
Nine years since its inception, Yazhari reports that Beyond Capital is impacting 2.3 million people–1.6 million of which are women–with eight investments that are helping to provide healthcare, clean water, sanitation, energy access, and agriculture tools. We asked her for a closer look at impact investing, the risks vs. the rewards, tips for success, as well as her forecast for where it’s headed.
A Q&A with Eva Yazhari
What advantages does impact investing have over philanthropy?
Impact investing sits at the intersection of financial returns and social good. Philanthropy plays an ever-important role in society, and can at times be the best solution to aid social problems, but impact investing offers greater potential to generate a financial return—and have it grow over time. It also offers the opportunity to invest in a solution to a social problem that will one day become self-sustainable. An example is our recent investments in Kasha, a Rwanda-based company that makes health and hygiene products accessible to women in Africa. While Kasha could certainly operate as a charitable organization, the founders decided to run it as a business so that one day they could operate without reliance on grants, and have the ability to grow organically and eventually return money back to its shareholders.
Impact investing also pushes the boundaries of the potential available funds that can go toward doing good, beyond even the estimated $390 billion that’s donated to US nonprofit organizations by individuals, corporations, foundations, and estates annually. The most recent annual survey of the Global Impact Investing Network estimates that at least $114 billion is already invested with a social impact focus and is largely producing returns in line with expectations. I anticipate this number to grow as foundations continue to shift their endowments to charitable organizations, millennials increasingly invest with their conscience, and financial institutions offer a greater number of impact-investing products available to the general public.
What are the risks that come with impact investing? Are they similar to traditional investing, and can the financial returns be just as lucrative?
The risks do vary specifically with impact investments. For example, management teams are often leaner in early-stage social enterprises because it can be more difficult to attract talent to work in a remote area of the world. Markets for a particular good, such as solar lanterns, are also less proven, so there are fewer examples of social enterprises being successful in the long-term.