Carola Schropp opened Partnering for Global Impact, a conference she created, by outlining her goal: matching funds with sustainable and scalable solutions. It is obvious from conference attendees that impact investing is attracting a wider range of investors. It also suffers (and benefits) from various definitions. There appears to be two points of agreement: impact investing produces social benefit and supports social entrepreneurs-people creating new organizations designed to benefit society. In some cases these organizations are return-seeking, in most cases they intend to be scalable and sustainable. Social entrepreneurs are creating opportunities to channel private capital to societal problems.
So the outcome is social benefit, the mechanism is entrepreneurship, but what is impact investing? Answers to that question range from pure philanthropy (i.e., grants to nonprofits) to venture capital (i.e., investing for profit startups) and mixtures of the two. Prince Max of Lichtenstein said his 5 year old LGT Venture Philanthropy uses approximately one third debt, one third equity, and one third grants to promote social benefit in their selected categories in emerging economies.
My friend Josh Cohen, co-author of white paper on impact investing and founder of City Light Capital, and I share a narrow definition of impact investing as seeking both high return and high impact. Cohen thinks it’s entirely possible to have high expectations in both regards across education, safety and security, and energy and environment. In the white paper, released for the conference, Cohen and I argue that foundations should consider return-seeking investments as part of their impact strategy. When it’s possible to produce high returns and sustainable impact, it’s time to pay attention to the other 95%–endowments not promoting the mission.
Andrew Kuper, Leapfrog investments, is a pioneer in micro insurance. His firm brings financial products to a market of more than one billion with limited access to traditional banking. Kuper believes Leapfrog can help alleviate poverty while producing robust profits and that, “Money and meaning can be brought together.” Like Cohen, Kuper aims to build an asset class that managers have obligation to include in their portfolios.