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6. Road Map: Next Steps for Mainstreaming Impact Investing

By Jed Emerson, Chief Impact Strategist, ImpactAssets

In many ways, more is “known” about the successful execution of an impact investing strategy today than in years past. Clearly, diverse practices and actors are coming together under a banner of impact – and now, each stakeholder community has work to do. The path to success is not guaranteed, however. Table 5 below offers a road map of the actions that should be considered by various actors with the potential to influence the development of impact investing and traditional finance in the next years. While these are currently discrete stakeholder groups and strategies, they will combine in the future to advance a single, integrated approach to investing capital for financial returns and impact.

Table 5: Road Map for Mainstreaming Impact Investing

StakeholderRecommendations
Policy-makers
  • Engage market stakeholders
  • Develop government capacity for action
  • Build market infrastructure and capacity
  • Prepare impact funds for growth
  • Create enabling environment to support movement to private capital
  • Review and refine impact investing policy experience
Institutional Investors
  • Explore ways that definitions/regulations of fiduciary responsibility may be revised and/or redefined to capture greater value
  • Promote the variety of ways that consideration of “impact” may be executed within traditional portfolio management
  • Promote practices for effective due diligence of impact investing funds
Impact Investment Fund Managers
  • Adopt common reporting practices, such as IRIS/GIIRS
  • Engage asset owners as anchors for new investment strategies
  • Collaborate with investees to promote better performance measurement practices
Intermediaries
  • Work to “connect the dots” between related investment areas
  • Promote total portfolio investment strategies with asset owners
  • Advance collaborative public-policy strategies with impact investors
  • Engage institutional investors in creating new investment platforms
Development Finance Institutions
  • Develop more effective communications strategies to share best practices pioneered by DFIs over past decades
  • Engage more directly with foundations, family offices and institutional investors to explore strategic co-investment opportunities
  • Work to more effectively link DFI capital with public and foundation capacity-building capital
Foundations
  • Commit to total portfolio management to make use of every investment asset class for creating impact
  • Fund field-building, sector-based and general infrastructure development within impact investing
  • Work to structure philanthropic capital investments as catalytic capital assets
Asset Owners and Family Offices
  • Manage capital for total performance that integrates social and environmental factors in pursuit of financial returns
  • Seek out innovative financing opportunities in partnership with impact investment fund managers
  • Report on performance and investment experience
  • Demand that mainstream investment advisers and banks offer impact products/strategies on their platforms or transfer assets to those that do
Retail Investors
  • Purchase products such as community investment notes to demonstrate market demand for impact investment options at the retail level
  • Engage with crowdfunding platforms to move money to impact
  • Advocate for retirement plans to offer impact/SRI options to investors

 

These steps forward are all elements for advancing impact investing over the years to come.

Impact investing gathers together many aspects of traditional financial practices combined with a variety of community, development and environmental finance strategies. The numerous impact investing practices of the past are becoming the common, integrated investing practice of the future. 

Diverse financial strategies may be applied to advance social and environmental value creation, while at the same time, social and environmental factors may be seen to impact the ability of traditional investment strategies to generate financial returns.

Traditional investors are recognizing that unrealized, “off-balance-sheet” liabilities represent a real threat to their ability to make a simple financial return. By not considering such factors as global climate change, pandemics and educational levels of national workforces, investors are placing their portfolios at risk. However, by engaging with stakeholders in addressing those factors, they are advancing their own interests and those of society. 

The awareness of the power of managing portfolios for total performance – for financial returns woven with social and environmental impacts – is bringing not only new capital to market, but advancing a new vision of investing to generate sustained and blended value. 

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