Impact Investment, the new age?
In a world riddled with increasing uncertainty, a new movement has taken over and is now dominating the corporate landscape. Over the last decade, the world of Impact Investment has been gaining momentum. Executives have suddenly found themselves sitting in meetings of corporate self-introspection in a bid to find solutions to the rapidly growing environmental and social ills. An increase in the levels of social inequality, environmental degradation and of late, the Covid-19 pandemic, have become major boosters in realigning, redirecting and increasing awareness at all levels, to the Environmental, Social and Governance (ESG) issues. Often used as a marketing tool in past decades by many, Corporate Social Responsibility (CSR) is no longer enough, let alone attractive. Most businesses are now moving to a more measurable space of Sustainable Corporate Social Responsibility (SCSR) where profitable impact has become priority in various areas including health, safety, sustainability and ethics. Impact investment is now a key driver complementing traditional tools of public funding and philanthropy, aligning private markets to the social and environmental needs of society.
What is Impact Investment?
According to Global Impact Investment Network (GIIN): “Impact Investment is investment made in companies, organizations, and funds with the intention of generating measurable, social and environmental impact in addition to financial return. Impact investing occurs across asset classes and financial products, including private equity and venture capital as well as debt.” The term Impact Investment was coined in 2007 in an initiative led by the Rockefeller Foundation which by 2009 had established the GIIN in a bid to standardize and coordinate the fledgling sector. In 2012, the Foundation, through its Impact Investing initiative, funded research in five Sub-Saharan African countries with the aim of understanding the barriers for impact investing across Africa, as well as recommending national policies to encourage the growth of the industry.
“We need to start to talk about money in ways that dethrone it and make it subject to human ethics and standards of love and decency” -Joel Solomon, The Clean Money Revolution: Reinventing Power, Purpose and Capitalism
In 2011, the GIIN developed their definition of impact investing to include the following three criteria:
a)Profitability-Financial return expectations.
b)Intentionality- The aim is to address social and environmental challenges.
c)Impact measurement- Measuring and reporting against social and environmental impact objectives.