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Funding the market infrastructure for impact investing’s ‘tipping point’

ImpactAlpha, Dec. 5 – A handful of funders have ponied up most of the capital spent to date on the ‘public goods’ required for a robust impact investing marketplace. 

To fulfill its potential to shape a more inclusive and sustainable economy, impact investing needs broader support for shared metrics and management systems, policy advocacy and other common infrastructure. 

This week, nine private and corporate foundations and family offices launched the Tipping Point Fund, committing $12.5 million in grant capital to underpin the growth of the market. The fund will be managed by the U.S. Impact Investing Alliance.

The Tipping Point Fund is an explicit effort to safeguard the impact in impact investing and “shape the rules of the game,” said Darren Walker of the Ford Foundation, which supports the Alliance. 

Omidyar Network’s Mike Kubzansky said the growing embrace of “stakeholder capitalism” makes all the more crucial the effective practice of impact investing. “The social purpose of business is finally up for discussion, opening the way for impact investors to play a leading role,” he said. 

Joining the collaborative as well are Blue Haven Initiative, Rockefeller Brothers Fund and the Packard, MacArthur, Surdna, Rockefeller and Visa foundations. 

“At a time in which deep-seated skepticism and criticism has emerged about the role of capital in our society,” said the Alliance’s Fran Seegull, “the Tipping Point Fund will look to position impact investing as one of the critical tools needed by policymakers and investors to contribute to a more equitable future for all.”

Public goods

The fund’s first request for proposal is expected later this month, seeking projects focused on public engagement and policy for impact investing in the context of the 2020 U.S. election.

The other core focus of funding will be data, metrics and measurement, where much progress has already been made to build consensus around core standards and best practices. The fund will look to “push those efforts over the finish line,” said Seegull.

Earlier impact investing field-building efforts have found success. Much of the agenda of the US National Advisory Board, the predecessor to the U.S. impact investing Alliance, for example, has been achieved (see the 2014 report Private Capital, Public Good). 

Removal of regulations barriers have freed up foundations and pension funds to allocate to impact investing. U.S. development finance has a wider mandate and new tools under the new U.S. Development Finance Corp. Pay-for-success schemes now have dedicated funding from the U.S. government.

Other field building efforts have supported industry groups like the Global Impact Investing Network and efforts to standardize impact measurement and management.

Broadening participation

“Current grant funding available is modest compared to the size of the market we are trying to influence,” said Seegull. “Far from being primed to match our aspirations, the public goods upon which every impact investor relies are being strained, putting the movement itself at risk.”

Notably absent from the list of Tipping Point Fund backers are legacy finance firms now launching impact investing funds and products, such as Goldman Sachs, Nuveen, Blackrock, KKR, TPG and Partners Group, among others. 

Kubzansky said he hoped others will join the effort and “pay their fair share to fund the rails upon which we all ride.”

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