Impact Investing in 2013: Reasons to be Cheerful
by Marta Maretich
This has been an amazing year for impact investing. Here we round up some of the top reasons why the sector has the right to feel cheerful about 2013; and look forward optimistically to 2014.
1. The Impact G8
If it needed confirming, June’s Impact G8 was the sign that impact investing has officially arrived. It was UK Prime Minister David Cameron’s own idea to host this high-level social investing pow-wow; and the leaders of the world’s eight largest economies were eager to attend. That tells us something. For the first time social investment found itself on the G8 agenda and we saw major nations, like the US and the UK, announce significant investments in developing our sector. How good was that?
2. Mainstream Investors Join the Party
Morgan Stanley, USB and Goldman Sachs were some of the big financial institutions that created impact funds in 2013, largely because of demand from investors. Good for them. We knew they’d get there eventually.
3. Social Stock Exchanges
A sensible idea that’s catching on partly thanks to the UN’s Sustainable Stock Exchange initiative. 2013 saw the launch of a Social Stock Exchange (SSE) in London and an enhanced Impact Investing Exchange Asia (IIX). They joined other global exchanges including the SVX, Ethex, and KSIX in a global push to establish more exchanges.
4. Social Impact Bond Results
We’ve been keeping our fingers crossed for social investment bonds (SIBs) since the first was rolled out in 2010. Finally the results are coming in and it looks like this pay-for-performance model is delivering. Phew! Now can we expect to see more take-up of the SIB model by the public sector? Hope so.
5. Metrics Move On
Questions may remain about how to measure impact and how best to use measurement data to improve effectiveness across all three bottom lines. But, take note: no one is arguing about the need for metrics any more. Instead, 2013 saw us using our energy to develop more streamlined, business-based and strategic approaches to impact measurement. IRIS, the best-known system, has come a long way and we are looking forward to alternative systems emerging including ones that measure outcomes and impact, not just outputs.
6. Better Exits
2013 brought some relief for those of us who are still worried about the lack of exits in the sector. The traditional venture capital exits; IPOs and acquisitions; may not be right for all impact investments. But now clever impact financiers, many working in developing economies, are beginning to identify other ways for investors to get their money out: royalties, demand dividends and employee stock ownership plans are some of the creative approaches being used. New methods of grassroots capital sourcing, like crowdfunding, could mean exits are less of an obstacle in the future.
It’s been a terrific year for sector research. There’s no way to do justice to all the publications; major and minor, digital and in print; that have informed us in 2013, but here are some game-changing staff picks: From Blueprint to Scale (Monitor Group); From the Margins to the Mainstream (WEF); Women Wealth and Impact (Veris Wealth Partners); Bridging the Pioneer Gap (ANDE and Village Capital); Impact Investing 2.0 (Pacific Community Ventures, CASE, and ImpactAssets). More of this quality research in 2014, if you please.
8. Data Adds Up
The ability to gather, analyze and deploy data is becoming vital to success for all kinds of industries, including ours. So it’s a good thing that 2013 saw impact investing gain not one but two (count’em) open data platforms; Wikivois (soon to become part of The Global Value Exchange) and ImpactSpace; created just for us. Now all we have to do is find new ways turn this raw sector data into positive impacts in the real world.
9. Great Get-Togethers
The social investment sector loves to socialize and 2013 gave us more opportunities to get together than ever before. At SOCAP, Skoll, events around the Impact G8 and countless smaller national and regional convenings we schmoozed, we shared, we learned and we found inspiration. Why stay in your silo when there are so many great events to choose from? Get out there!
10. The Next Generation
2013 brought us glimpses of the next generation of impact investing leaders. They are young “millennials” many are female; many come out of developing economies. They are “multilingual“, fluent in the languages of finance and business and philanthropy and development. For them, the idea of using market models to create beneficial impacts is a no-brainer. They’re perfecting their craft in an increasing number of graduate programs that teach social finance and impact investing as part of the core curriculum. We can’t wait to see where this new generation takes the practice impact investing next.
So there you have it, our list of reasons to be cheerful about 2013.
There are certainly more reasons than this (it has been a fab year!) and we would really love to hear about them from you. Email or Tweet us with your own reasons to be cheerful about impact investing in 2013 and we will be delighted to share your stories with our readers.
In the meantime, have a great holiday season and be sure to rest up: next year is set to be even more lively for the impact investing sector. Can’t wait!
[Image credit: 123RF]