1.2 Structure of this Report
Recognizing that readers will have differing levels of familiarity with the impact investing field, the report is divided into five sections and a conclusion. Sections 1, 2 and 3 introduce the report, contextualize impact investing within the broader universe of sustainable and responsible investing and provide readers with an updated overview of impact investing. Sections 4 and 5 introduce the Impact Investing Roadmap and detail the questions and recommendations referenced above. Readers familiar with impact investing but short on time may choose to skip to these later sections. Specifically, the sections of this report are broken down as follows:
Section 1 outlines the context in which this report has been written and specifies mainstream investors as the primary target audience with secondary audiences including intermediaries, self-identified impact investors, academics and policy-makers. The section also states that the content of this report is intended to help investors determine how to engage with impact investing and to ask the right questions along the journey.
Section 2 describes impact investing as a distinct approach within the broader set of sustainable and responsible investing approaches. Specifically, impact investing intentionally seeks financial returns alongside social and/or environmental returns that are actively measured. This section explores this distinction, concluding that all approaches within the sustainable and responsible investing universe have merit and that experience in any approach can serve as an “on-ramp” toward additional engagement with other approaches. Additionally, the section provides brief examples of impact investments, showing that while many of the most widely-known impact investments involve the financing of socially-focused start-ups through private equity or debt structures, there is a much broader array of impact investing approaches across asset classes.
Section 3 outlines the forces driving interest in impact investing. Since the set of impact investing approaches is still evolving, comprehensive data on asset allocation, risks and returns does not yet exist. However, this section looks at growth in allocations to responsible and sustainable investments in order to illustrate a growing trend among investors to incorporate non-financial considerations in portfolios. Additionally, it examines a set of global economic, demographic and environmental trends that are creating new market opportunities – opportunities that the impact investing approach is poised to seize.
Section 4 introduces the Impact Investing Roadmap. The first component of the roadmap involves defining the organization’s vision for impact investing. Recognizing that mainstream investors are a heterogeneous group, a series of questions are proposed that will help an organization clarify this vision based on its unique motivation, organizational context and market goals. The second component of the roadmap involves pursuing stages of impact investing activities. These stages range from evaluating feasibility, to performing sector due diligence, to launching pilot programmes, to institutionalising an impact investing strategy. Based on an organization’s specific and evolving circumstances, these different stages of engagement may be considered and sequenced over time.
Section 5 continues from Section 4 to walk through the Impact Investing Roadmap. The third component of the roadmap includes 12 tactical maps which detail specific approaches and methodologies. These tactical maps are meant as reference guides for interested investors. They are structured around three strategic pillars (reflected below) and supported by examples from the field:
• Investing Strategy:
– Capital Sources
– Investment Vehicles
– Investment Sourcing
• Organization Strategy:
• Ecosystem Strategy:
– Technical Assistance