April 20th, 2017 | By Maria Camacho, Georgetown University Law School ’17 | Insights from the World Forum on Impact Investing
On March 24, 2016, after two full days of conferences in London, England, the World Forum on Impact Investing ended on a high note. The event gathered an impressive lineup of high-level speakers who participated in panel discussions and answered questions from the audience, offering an in-depth understanding of impact investing and its current and future landscape.
Cliff Prior, from Big Society Capital, opened the forum by presenting the three main types of investment: 1) market rate investments, 2) below market investments, and 3) philanthropic investments. This set the tone for the conference, emphasizing the importance of each of these three categories, all equally significant to the impact investing ecosystem. Prior was careful to explain that highly transformative impact comes in many forms, all of which are vital to advance impact investing and further publicize its mission. In other words, Prior understands that impact investing is heading in a more “mainstream” direction, which he is excited to embrace as long as we maintain the initiative’s integrity throughout.
But how do we do that? One key setback is that, while impact investing is constantly growing in societal recognition, it is not growing equally in participation. This may be because not everyone agrees on what “impact investing” is, which greatly inhibits the likelihood that a given investor will partake. Many of the speakers pointed out that, in the past, the focus has been on finding a universally understandable categorization of impact investing, which has been essential for the development of this initiative. Now, however, it is important to focus less on this categorization and more on the tangible: the “what can we do?” And the first step towards doing anything in this realm is acknowledging that all three of these types of investments are equally important and needed.
Throughout this process of guiding the understanding of impact investing as it becomes more mainstream, three things are key. The first is the importance of data collection. This is important to note not only because it provides investors with the information necessary to make well-informed decisions but also to allow for accurate measurements. The more data we collect, the more effectively we can deploy capital, measure our own impact, and alter our future investments. Second, while measuring our impact is important, so is management of this impact. This simply means monitoring how that impact is growing now and how we can continue growing it over the coming years. Third, it is crucial that we challenge the idea that investments are either profitable or socially/environmentally beneficial, but never both. This is simply not true. Together, these three aspects will be key in order to unlock more capital and inspire more investors to partake, which could be truly transformative for society.
When I acknowledge that there is such a diverse range of investments and such potential if we harness these opportunities, the famous expression from Marvel Universes Spider-Man stories comes to my mind: “With great power comes great responsibility.” The opportunity to truly transform societies through impactful investment is certainly a great power, but with this power comes the responsibility to maintain impact investing’s integrity and mission. Although this field of investing with impact is vast and full of promise, it is not limitless. The somewhat ambiguous boundaries of impact investing should not lead us to believe that it’s all encompassing, or all problem-solving. Instead, it is important to note both the potential and the limits. With this understanding, we must respect our responsibility to care for this power and protect it from being falsely labeled.