Greetings, ImpactAlpha readers!
The impact investing conversation is heating up. This week’s flurry of ImpactAlpha posts might suggest an identity crisis that has resurrected long-running debates over definitions. We’d offer a different take: as more players get into the game, the community is rallying to keep everybody’s eye on the prize of transformational change.
That may provoke some difficult discussions. “Impact-washing” has jumped to the top of industry concerns. Well-meaning (and well-heeled) changemakers get skewered in Anand Giridharada’s new book, Winners Take All – and in his latest column ImpactAlpha’s David Bank suggests that critique is a too-easy out. Foundation leaders Susan Phinney Silver and Debra Schwartz called on philanthropies to finally go big on climate action. And ImpactAlpha’s podcast roundtable took to task impact investors who can’t seem to get to yes when it’s time to write a check.
Impact investing’s identity is at the core of ImpactAlpha’s new What’s Next series with the Global Impact Investing Network. “A clear identity will reinforce that impact investing remains a distinct new way of doing business,” writes GIIN CEO Amit Bouri to kick off the series. “Nurturing this core identity will help impact investing to achieve its full potential to fuel solutions to global challenges.” A half-dozen practitioners and experts responded with their own suggestions. That so many players are trying to get impact’s identity right is a sign of both the potential and the urgency. Let’s not let a good identity crisis go to waste.
– Dennis Price, editorial director
Featured: The Brief’s Big 6
1. The Impact Alpha: Big winners want to be changemakers? Hold them to it. Anand Giridharadas in his new book, “Winners Take All,” takes down “changemakers” among the global elite who he suggests are really preserving their own privilege. “Taking down bogus marketing messages and bold-faced billionaires is a good talk-show ticket,” David Bank writes in his weekly column. “The tougher question is how to leverage the social-good impulse and rhetoric into real, systemic change.” Bank is banking on “the personal agency of ‘agents of impact’ working inside and outside of elite institutions to drive the new calculus of risks and opportunities already changing finance.”
- Bridgespan’s Michael Etzel tweeted, “@davidbank nailing the antidote to impact washing: ‘Rather than worrying about too many people claiming to want to change the world, let’s hold them to their word.’ The full column.
2. What’s Next: Building a trusted identity for the impact investing movement. “As the industry grows beyond the early adopters, we need to establish a stronger identity for impact investing,” says Amit Bouri, co-founder and CEO of the Global Impact Investing Network. In the opener for What’s Next, a new ImpactAlpha series co-produced with the GIIN, Bouri calls on impact investors to make their impact intentions known, hold themselves accountable and collaborate and co-invest with others. What’s Next.
ImpactAlpha published a half-dozen responses from impact investing practitioners and experts
- Define the challenge. That the Sustainable Development Goals “have attracted a full suite of players across financial markets globally,” says Credit Suisse’s Marisa Drew, should be instructive to the impact investment movement. Global Goals give impact investors a model for collective action.
- Set firm goals. A strong identity, with shared goals, will provide “clarity about what motives, actions and outcomes we expect of those who are part of this movement,” writes Tim Macready, chief investment officer of Australian superannuation fund Christian Super. Common goals, not just common language, will drive institutional impact.
- Establish a theory of change. Such a theory, says Triodos Investment Management’s Marilou van Golstein Brouwers, “will contribute to investors becoming increasingly aware of this responsibility and the relevance of investing for positive change.” A theory of change sets impact investors apart.
- Be accountable to impact. Matt Onek, head of Mission Investors Exchange, calls out foundations’ “unique role in keeping the entire field laser-focused on creating a more equitable and just society and a healthier planet.” Philanthropy can champion the impact in impact investing.
- Segment the market. The industry “needs more sophisticated approaches to classify and cluster investments not only by sector, asset class, and risk-return profile – but also by the type of impact sought, and by the ways in which investors contribute to impact,” write Omidyar Network’s Chris Jurgens and McKenzie Smith. Segmenting the market can unlock impact capital.
- All hands on deck. Achieving real and sustainable impact is complex and requires a range of capital and businesses along a spectrum of social and financial returns, says DFID’s Tony Burdon. “Shouldn’t our overall goal be: All investment is impact investment?” A vision to make all investment impact investing.
3. Getting to Yes: Would-be impact investors start to run out of excuses. Renewable energy investment is flat. The missing middle funding gap for small businesses in developing markets: still missing. Impact fund managers of all sorts report slow and difficult fund raising.
Impact investors talk a lot about a better future. In the latest Returns on Investment podcast, ImpactAlpha roundtable regulars squabble about what it will take for them to make big bets on that better future. Listen in.
- Align Fund’s John Kluge tweeted: “Time for capital- especially ‘committed’ capital- to get off the pot and into the game. Don’t let the perfect be the enemy of the good.”
4. Deals of the week. Drink from the deal firehose all week long on ImpactAlpha.com. A few that stood out:
- Financial inclusion. Off-Grid Energy Access Fund raises $58 million to expand local debt financing… FINCA Ventures to fill early-stage capital gaps for African social enterprises.
- Health tech. myUpchar raises $5 million for local language health content in India… Argentina’s Puerto Asís backs uSound’s low-cost hearing tech.
- New Revivalists. Western New York-based EcoVerde Organics secures funding for waste recycling… MacArthur Foundation backs Self-Help credit union and ‘community-led solutions’ for Chicago.
- Climate finance. PRIME Coalition sets three climate-tech startups on path to commercial capital.
5. Helping companies tap ‘alternative capital’ for sustainable growth. Last week, we flagged the new demand for the “demand dividend” as an alternative to venture capital-style investment terms. This week, with help from Candide Group’s Aner Ben-Ami, we clarified the use-cases: For smaller companies, says Ben-Ami, “the growth trajectory required to repay investors starts to look a lot like the kind of ‘hockey stick’ projections that the venture capitalists are looking for.” More alt-capital structures.
6. Susan Phinney Silver and Debra Schwartz: Collaborate on catalytic financing to accelerate climate action. Impact investors at the Packard and MacArthur foundations argue in ImpactAlpha that foundations working together can fill capital gaps and help move the needle on high-leverage issues like sustainable land use, energy efficiency and renewable energy. Look for foundations to step up at next month’s Global Climate Action Summit in San Francisco. Impact voices.
— August 31, 2018.