Impact investing comes of age, set to revolutionize the investment world
As impact investing comes of age, to quote the Economist, it is time to take a look at the largest survey of the Impact Investment landscape, and see how this nascent industry is fast becoming a mainstream phenomenon.
A decade into the creation of a formal impact investing industry, the Global Impact Investing Network (GIIN) continues to dig deep into the data generated by the now multiple players —including fund managers, institutional investors, and foundations, as well as field-building organisations, advisors, and others in the impact investing ecosystem— and explore important issues about the market’s development. These investment insights serve to assess the progress the impact industry has made, and identify what is needed to exponentially enhance its scale and effectiveness over the next ten years.
The GIIN’s Annual Impact Investor 2017 Survey is as definitive as it is comprehensive – taking into account the consolidated responses of 209 members of the impact investment world who together manage USD 114 billion in impact investing assets. Factoring in the responses from this broad sample base, the seventh Annual Impact Investor Survey by GIIN found that investors plan to commit USD 25.9 billion in assets to impact investment deals this year, a 17% increase from a year ago. What is most encouraging though is that investors continue to be overwhelmingly satisfied with the performance of their investments – both in terms of their financial return and the impactthey generate. Indeed, 98% respondents reported that the returns met or exceeded their expectations in terms of impact, and 91% reported that this was the case in terms of performance.
Moreover, as the impact investing industry matures, the GIIN notes that impact measurement has grown increasingly nuanced and sophisticated. In the past year alone, there has been a significant increase in in-depth research and data on impact measurement and management and growing collaboration among different players. An indicator of growing maturity, the industry has begun to shift focus from the “why” to the “how” of impact measurement and management, with several recent studies exploring different methodological aspects. Some noteworthy studies are the Tideline’s Navigating Impact Investing publication, GIIN’s The Business Value of Impact Measurement, the Rockefeller Foundation’s Situating the Next Generation of Impact Measurement and Evaluation for Impact Investing and the Bridges Impact+ and Skopos Impact Fund’s More than Measurement.
Further, multi-party data projects such as the World Economic Forum’s Shaping the Future of Impact Investing initiative, the OECD’s multi-participant study, the GIIN’s Navigating Impact initiative, the Impact Measurement Project and the Fourth Sector Mapping Initiative are all indicative of a shift toward increasingly collaborative effortswithin the industry around impact measurement and management.
Finally, three big takeaways from this year’s report were that, first, the impact investment space is broad enough to allow for a range of impact objectives and financial return targets; secondly, large firms are entering this field, but must conform to the high standards set by the existing, niche players, and lastly, the Sustainable Development Goals are influencing both impact objectives and their measurement in a big way. Most significantly, while the entry of large firms is an exciting development as it points to the mainstreaming of impact investing, this phenomenon calls for a wait-and-watch approach as there is a risk of ‘impact dilution’ or mission drift. While large-scale firms will help professionalise and bring credibility to the market, as well as bring in much-needed capital, they may not be as intentional about generating impact, may prioritise returns over impact, or may not sustain their commitment to impact for the long term. Existing, niche players then have the overriding responsibility of ensuring that the impact investment landscape continues to deliver on its promise of socio-economic returns beyond mere financial profits.
As one of the respondents selected to form part of this noteworthy initiative, GroFin is proud to represent the impact investment space in Africa and MENA, and bring its experience and expertise to bear on this comprehensive survey of the impact investing industry. A pioneering impact investor whose fund management capabilities have lent support to over 8,000 entrepreneurs and transformed more than 600 SMEs, GroFin has been active in this nascent industry for the last 13 years.
Indeed, GroFin co-developed a unique Small and Growing Businesses (SGB) model together with the Shell Foundation, that has been successfully applied since 2004 to generate employment at scale and benefit multiple lives at the base of the pyramid. With 95,130 jobs sustained and 480,000 family members supported through its investments as at close of December 2016, GroFin has won CFI.co’s Best Social Impact Finance Africa award for 2017, proving the effectiveness of its model and its application to the SME space in emerging markets.
With its pioneering and award winning model, GroFin has the potential to create exponential impact and uplift entire communities. We invite you to be a part of this far-reaching and impactful movement, whether as an entrepreneur making a difference to the lives of their community, or an investor seeking a reward beyond just financial returns from emerging market investments. If we all come together, impact investing will indeed come of age.