Social Impact Investing

By creating mechanisms
through which investors
can both make money and
address social and/or environmental
challenges, Impact
Investment offers the potential
to expand the pool of
capital available to fund innovative
solutions.
Opportunities for institutional investors are still
constrained by the relatively small size of many
funds in this emerging sector, but as the sector
matures, larger opportunities are becoming
available. However, as opportunities grow in
scale and number, will the same returns exist?
Will impact be compromised as the sector
grows? The answers to these questions will
prove critical to the future of the sector.
The early pioneer investors are helping catalyse
the sector by showing how profitable
investment portfolios can be compounded
with impact. Early investors have also helped
inspire replication in other areas of impact.
Having seen the success IFFIm was able to
achieve through its bond offering, the Prince of
Wales is currently proposing a similar structure
for rainforest bonds to halt the deforestation of
the world’s endangered rainforests.
Impact Investment is Emerging
from Infancy
New capital is employed across the asset
allocation spectrum. In Mexico, Ignia is developing
housing communities for families who
earn less than $10,000 a year while still targeting
above market-rate returns. In Honduras,
Pico Bonito is looking to receive a 20% IRR
from the regeneration and sustainable forestry
of native forests adjacent to a national park
without the aid of local government subsidies.
These investment vehicles are examples
of how expansion into new asset classes is
helping to broaden the reach of Impact Investment,
while allowing investors to diversify
across multiple asset classes.
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