Why We Invested — Global Steering Group for Impact Investment
Is impact investing reaching a tipping point? Multiple signs point to growing momentum.
First, more investors are deploying more capital towards impact. The Global Sustainable Investing Alliance reports nearly $23 trillion of assets being managed under socially responsible investment strategies globally. And the 200+ impact investors reporting to the GIIN’s annual survey have more than $114 billion worth of impact investing assets under management, nearly double the amount reported in 2015.
Second, specific impact investing markets are reaching greater maturity. In India, there is now a robust ecosystem of private equity investors — such as Elevar, Aspada, and Aavishkaar –focused on scaling solutions for low income communities in sectors such as financial inclusion, housing, and agriculture. A 2017 market study revealed growing evidence of such investors generating impact alongside strong financial returns — a sample of 48 impact investing exits included companies reaching large numbers of low income customers, and yielded a median IRR on par with wider market benchmarks. Finally, in the Pay for Success field, just last week the Social Finance Global Network announced over 100 Social Impact Bonds (SIBs) have now been launched worldwide, which have collectively mobilized $392M in capital across 24 countries. And this month in the US, Congress passed legislation that provides $100m in funding for state and local governments to develop Pay for Success projects.
Furthermore, recent moves by prominent institutions signal a future where impact is integral to decision making, providing models for others to emulate. Blackrock CEO Larry Fink penned a letter to corporate CEOs demanding that, “every company must not only deliver financial performance, but also show how it makes a positive contribution to society.” TPG has now made several flagship deals from its landmark $2 billion Rise Fund, which is committed to achieving social and environmental impact alongside competitive financial returns. Last year, Ford Foundation President Darren Walker committed to investing $1 billion of its endowment in mission-related investments, and issued a call to action to other endowment holders to follow suit. And impact investing is on the global development agenda like never before, as the world looks to leverage private capital to achieve the Sustainable Development Goals.
The progress of impact investing to date owes much to pioneering investors and the innovative entrepreneurs they have supported — but also to committed coalitions of field builders and policy makers who have shifted policies and perceptions to help unlock private capital for the public good.
Notably, in 2013, the G8 Social Impact Investment Taskforce was established with the aim of catalyzing a global market for impact investing. To complement this global effort, eight National Advisory Boards (NABs) were created to advance country-level policy agendas to enable impact investing. These NABs take different shapes in different country contexts — but all serve as platforms that bring together multiple constituencies — investors, the business community, civil society, and governments — to set country level priorities for advancing impact investing as a tool for addressing social and environmental challenges.
Founded in 2015 as the successor to the G8 Taskforce, the Global Steering Group for Impact Investment (GSG) serves as both an umbrella organization for the NABs and an advocacy platform for the impact investing movement globally. Under the leadership of Sir Ronald Cohen, the GSG has articulated the bold goal of accelerating the impact investing industry to a tipping point by 2020. At Omidyar Network, we think the GSG can contribute to this aim in a number of important ways.
First, the GSG helps bring more countries into the global impact investing movement. We’ve already seen the number of NABs grow to 16, with the goal of reaching 30 by 2020. NABs often emerge when impact investing is still a young industry in a particular country. By developing a multi-stakeholder platform focused advancing impact investing as a field, they help attract attention from key audiences like government and commercial investors, broaden engagement beyond the initial pioneers, and share best practices from countries that are further along their journeys. We’ve seen the catalytic role NABs can play in markets from Australia to Argentina.
Second, the GSG can help drive and replicate specific policies and models that unlock capital for impact. For example, the UK was the pioneer in developing a model for leveraging stranded assets to fund an impact investing wholesaler, Big Society Capital. Seeing the ability to replicate this model, the GSG has helped facilitate peer-to-peer learning between countries, and now Australia, Japan, and Portugal are all in the process of mobilizing wholesale impact investing vehicles based on the learnings from the UK. Similarly, we’ve seen the Pay for Success movement spread from the UK and US to two dozen countries globally, thanks in part to Sir Ronald Cohen’s advocacy on behalf of the GSG.
Finally, the GSG can serve as a global platform for championing the power of impact investing to drive social change. In its early days, the impact investing conversation has too often taken place in an echo chamber with the already converted. The GSG, with prominent global leaders at the fore and backed by broad-based multi-stakeholder coalitions, can help engage wider audiences important for impact investing to reach the mainstream — from ministers of finance to corporate CEOs to leaders in the global development sector.
At Omidyar Network, we’re optimistic about the progress impact investing has made, but clear-eyed about how far we still have to go to move from niche to mainstream. To get there, we’ll need to not only shift how and where investment is deployed, but reform policies, recruit new champions, and win over hearts and minds. The GSG is a powerful platform to help get us there.