I’m not so convinced that philanthropy meets finance is the best way to describe SIB per se but it seems to stick in the public consciousness. However you look at it the alignment of interests is key, as is the idea that this is not merely money donated which while originally a great thing has become sadly somewhat of a recipe for less competent solutions in many arenas…
Social Impact Investments: Making Money And Saving The Planet Is Hard!
nerd wallter investing
Impact investing is a marriage of opposites, finance and philanthropy. And while “opposites attract” is an accepted maxim, what is often glossed over is that although opposites attract, keeping opposites happy and satisfied is hard work. For impact investing, one of the greatest obstacles to success is the dearth of investible products that adequately satisfy both social impact and financial requirements.
Many stories about impact investing trumpet the industry as a panacea. They argue—with ample evidence—that impact investing will not only save the world, but give investors a handsome profit as well. In the JP Morgan and the Global Impact Investing Network (GIIN) annual survey of large impact investors, two-thirds of respondents said they were targeting market-rate returns.
Firms such as LeapFrog Investments, which has invested in emerging market insurance companies, promise market-rate returns. Many environment- or real estate-oriented funds—JP Morgan’s Urban Renaissance Property Fund targets both—already attract retail investment and provide market-rate or above market-rate returns as well.
However, for investments that target social issues such as poverty and education, the path to providing both financial returns and alleviating social ills is far more difficult. According to Triodos Bank’s Dan Hird, there are two reasons for the paucity of investible social impact investments.