The Many Kinds of Impact
Everyone agrees that impact investing is on the rise. According to the Global Impact Investing Network, the market for impact capital, currently sized at $60 billion, could grow over the next decade to $2 trillion, or 1% of global invested assets. But despite this growing interest, impact investing still faces a significant stumbling block that limits the flow of new capital into the field: not everyone agrees on what “impact investing” actually means.
Currently, impact can mean anything from venture investments in new health technologies to microfinance loans in Peru; from affordable housing in the US to renewable energy in India; from social impact bonds to private equity funds that create jobs. That’s just the beginning of the confusion—even if you accepted that such diverse investments should all be grouped into one category, how do you even measure and compare impact anyway?
Faced with this uncertainty, most investors have chosen one of three options. First, they search for examples of impact within their existing portfolios, bringing no incremental capital into the field. Second, they deploy a small amount out of an experimental or mission-motivated pocket, which still holds back enormous amounts of capital. Or third, and more common, is that they sit on the impact-investing sidelines. None of these are ideal outcomes.
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