SOCAP17 and Observations On Impact Investing’s 10th Anniversary
By all measures, the impact investing industry is at a major tipping point. The industry recently celebrated its 10th Anniversary and at last count per the GIIN 2017 Annual Impact Investor Survey, is currently sized at USD 114 billion in impact assets, viewed as “…the best-available “floor” for the size of the impact investing market.” A 2016 study showed that 22% of investment funds already have an ESG (Environmental, Social and Governance) factor incorporated into their investment strategies. And at last month’s SOCAP17 conference, one of the industry’s most important events, I saw an impressive turnout of investors, funds, foundations, financial institutions and gender lens leaders, all eager to discuss the next steps in the industry’s evolution.
As impact investing evolves from a passionate, deeply dedicated community into something that can truly scale, it’s also at a crucial crossroads. In order to keep impact investing from experiencing the same evolutionary hurdles faced by the sustainability, green business and other movements that came before it, the industry needs to address many foundational issues.
The need for clear measures of impact
As the nascent impact industry continues to evolve, there’s still substantial confusion around how to measure, and standardize, impact. This is to be expected in an industry that’s not yet regulated, but it’s an important issue nonetheless.
Many leading institutions and individuals are now uniting around the United Nations’ Sustainable Development Goals as a way to collectively track impact outcomes. This is a clear step in the right direction. Why does this matter? Standard measures are key to the industry’s credibility. Without a clear, consistent way to measure impact, the industry risks falling into the same kind of trap that have ensnared sustainability, green business and other predecessors: the co-opting and use of the terms by people who don’t necessarily hold themselves to the same standards, however good their intentions may be.
I was thrilled to hear Fran Seegull, who leads the US Impact Investing Alliance, validate my observation during her SOCAP17 remarks. I’m grateful that she is at the helm of this important new organization, given her unwavering commitment to building industry infrastructure with integrity.
The need for more resources for individual investors
We’re living in an anxious time where violence, natural disasters and heated political debates dominate the headlines. So it’s no wonder that more people, especially Millennials, want to use impact investing as a vehicle for making a difference. But when they start out on the process of aligning their values with their portfolios, they find little information about how to do so.
Now, I don’t say this to criticize established institutions, which are crucial to the growth of the impact investing industry. Simply put, it’s clear that demand for individual investors is quickly starting to outstrip the supply of information and resources available to them.
There are many reasons for this, one of which I was reminded of at the Wharton Social Impact Conference in April of this year. It’s well-known that most individual financial advisors are ill-equipped with information about options for their clients. This is partly due to a lack of incentive alignment around compensation. Given the industry’s relatively young age, there also simple aren’t enough products that address retail investors, though this is changing.
In the weeks and months to come, I plan to contribute to fostering this crucial conversation with individual retail investors. By looking outward, we can continue the work of industry leaders like Seegull and realize our vision for the next phase of impact investing. I left SOCAP17 invigorated, energized and driven to help “the rest of us” take part in this movement.
