The Rise of Impact Investing

The buzz phrase of the past several years is impact investing — all of a sudden, it seems every business school is throwing resources at it, businesses are scrambling to have programs of their own, and millennials matter-of-factly tell you they are pursuing careers in the sector. You smile and nod of course, but do you really know what exactly they’re talking about? The little secret is very few people do, and even fewer know the wide spectrum of activities to which the phrase actually applies. Here’s a quick, simplified way to get you to the head of the pack with your knowledge base.

Impact investments are a broad term given to those investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Within impact investing, there exist a number of styles, ranging from impact-first investors, which can skew to purely philanthropic giving (no expectation of financial return) to financial-first investors, whose priorities are to first achieve a desirable commercial return, while also potentially creating social good.

The Impact Investment Spectrum

There has been an explosion of activities on either far end of this spectrum. In regards to commercial impact investors, the Global Impact Investing Network (GIIN) reported a market size of $77.4 billion in their 2016 survey, up from $60 billion in 2015.

Six Year Impact Investment Growth

While the growth in the impact investment market is clearly helping to address the significant funding needs of many for-profit social enterprises, it has not helped deal with the significant amount of philanthropic capital which sits idle. More on that in our next post.