Overcoming the Challenges of Impact Investing: Insights from Leading Investors

Abstract

Interest and activity around impact investment have increased significantly in recent years as businesses, governments and communities seek new solutions to enable an inclusive and sustainable society in the face of social and environmental challenges. Philanthropists, charitable foundations and institutional investors have been among the early adopters in implementing impact investment strategies and developing the field. Despite the initial enthusiasm for impact investment, many investors raise concerns as they begin to explore the practicalities of impact investing. This paper responds to these concerns by providing empirical insights on how leading institutional investors and charitable foundations have begun to develop impact investment strategies and overcome various trepidations. The findings reveal four main themes: a focus on financial-first investments; the importance of using established due-diligence processes; the opportunity to align mission and values; and, the value of networks and collaboration.

A Proposed Framework to Analyze the Impact Investing Ecosystem in a Cross-Country Perspective

“…This change of attitude has stimulated the practice of impact investing, giving financial incentives for investors to create social values. Secondly, impact investing is seen as the evolution of Corporate Social Responsibility (CSR) and Socially Responsible Investing (SRI) movements (Ormiston et al, 2015). The third trend that contributes to impact investing is the change in the social sector.…”

“…In this context, impact investing can be practiced in a wide range of forms to address social or environmental issues wherever needed. Firstly, impact investing can appear in the form of debt, equity, loans, microfinance funds, venture philanthropy, or hybrid capital (Achleitner et al, 2011;Bugg-Levine & Emerson, 2011;Ormiston et al, 2015). In other words, impact investors can choose from a broad spectrum of investment strategies for any combination of social and financial risks and returns, according to their investing interest and rationality (Nicholls, 2010;Rangan, Appleby, & Moon, 2011;SIITF, 2014).…”

“…Market infrastructures, networks, platforms, and methods to measure social impacts have been established (Jackson, 2013). In addition, academic research has provided empirical evidence that impact investing has been successfully implemented in a wide range of forms (Ormiston, Charlton, Donald, & Seymour, 2015). Governmental institutions, such as the European Commission and G8 countries (now G7) led by the United Kingdom, have shown their support (European Commission, 2011;Social Impact Investment Taskforce [SIITF], 2014).…”

Inversión social responsable: una forma de potenciar los agronegocios - caso Colombia

“…Por consiguiente, sería lógico pensar que la ISR también contribuye a la construcción de desarrollo empresarial y al refuerzo de la competitividad empresarial; sin embargo, para que su adopción produzca los resultados esperados, el contexto empresarial respectivo, así como las políticas y los actores implicados, juegan un papel importante, a lo largo del proceso. Lamentablemente, la comprensión que hasta el momento se tiene sobre esta temática es aún muy primitiva y, en consecuencia, con inmensos vacíos conceptuales y teóricos (Clarkin & Cangioni, 2016;Ormiston et al 2015).…”

“…Segundo, la carencia de aportes académicos enfocados en rubros específicos en aras de incrementar la calidad y la cantidad de trabajos relacionados con las ISR, teniendo en cuenta el escaso conocimiento que se tiene de ellas, así como su relevancia y pertinencia en el contexto de los países en vía de desarrollo (Contreras-Pacheco et al 2017). Finalmente, se hace posible entender su aplicabilidad, a partir de la perspectiva receptora de una ISR (para este caso, asumir el lugar del emprendedor), lo cual, representa un tema que, modestamente, se ha tratado en la literatura científica a la fecha (Ormiston et al 2015;Clarkin & Cangioni, 2016). Evidentemente, la aproximación que de este aspecto se hará, contempla más la descripción, que aquellas particularidades normativas que evocan el "deber ser" y, por lo tanto, sugieren una propuesta idealizada del concepto.…”