2013 Will Offer Impact Investors New Opportunities
By Luther M. Ragin, Jr., CEO of Global Impact Investing Network
Today, the market for impact investment is at an inflection point. Investors are beginning to shift the way they think about financing social and environmental solutions. Whereas historically, impact has been achieved primarily through grants and other charitable contributions, the emerging impact investing market offers a path for investments that generate social and environmental good as well as financial return.
Impact investing is particularly attractive because of the diversity of opportunities within this field. Because impact investments can be made in developed and emerging markets, across the asset classes in a traditional portfolio allocation, and targeting financial returns ranging from below-market to market rate, there are opportunities for all types of investors. Unifying these investments is a fundamental commitment to transparency and the accountability of investors to measure and report the social and environmental benefits they seek.
Indeed, in recent years, diversified financial institutions, pension funds, and family offices have allocated funds for impact investing. Today, more than $13 billion in impact investment capital is committed to over 200 funds and products listed onImpactBase, the online global directory of impact investment vehicles.
In 2013 and beyond, as even more capital is committed to impact investment, we expect to see significant growth in the development of investment products that aggregate these dollars and distribute them to mission-driven projects addressing social and environmental challenges around the world, not unlike the technology startup boom that arose in response to the rising popularity of venture capital over the past thirty years.
There are opportunities in this market across asset classes, financial return hurdles, and in diverse regions of the world. For investors who have thought about impact investment but remained on the sidelines so far, this is the time to get engaged.
Luther M. Ragin, Jr. is the chief executive officer of the Global Impact Investing Network (GIIN), a nonprofit organization dedicated to increasing the scale and effectiveness of impact investing. Prior to joining the GIIN, he served from 1999 to 2011 as vice president for investments at the F.B. Heron Foundation, where he oversaw the foundation’s endowment, building a portfolio of more than $260 million and steadily increasing the impact investing allocation to more than 40 percent.