These are investments made into organisations, companies and funds with the intention to generate a measurable, beneficial social or environmental impact along-with a sustainable financial return. These are typically “for-profit” businesses as against philanthropic and not-for-profit social enterprises. Their mission is to create a more inclusive environment with the haves and the have-nots of the world getting equal access to opportunities in all domains of life.
Impact investments adopt the approach that deliberately builds intangible and tangible financial assets, (generally at market-rates) and wherein the economic value is not compromised in favour of social value. These social venture capital funds are equity or debt investments over $ US 1000 without an exit strategy vis ” a ” vis traditional businesses.
Impact Investments aka social venture capital can be done by socially and environmentally conscious individuals, large corporations, DFIs, and pension funds and can be directed to achieve certain missions. It has the potential to unlock and galvanize trillions of dollars of private capital to solve large scale complex social and economic problems of the world like K-12 education, child malnutrition, environmental preservation, social integration, the ageing population, healthcare, long-term unemployment and agriculture, to name a few. With so much at stake, there is a need for collaboration between all stakeholders in order to realise the full potential of the desired impact.
Funds can be harnessed in an innovative manner in the form of Social Investment Bonds (SIBs) and Social Success Notes, and through different investment vehicles like microfinance loans, web- based investor platforms and investor networks.
JPMorgan Chase in collaboration with the Rockfeller Foundation, USAID, Bill and Melinda Gates Foundation, have done pioneering work by investing their social finance in Wilmar Flowers in Kenya through the African Agricultural Capital Fund (ACCF) which will enrol the services of atleast 2,50,000 smallholder farmers to supply and export flowers. This is but one project in their portfolio.
In India too, there are several organisations like Aavishkar and Acumen, which are involved in impact investment across domains of education, healthcare and agriculture. Aavishkar with Karadi Path, which has a unique methodology of language learning, are helping school children achieve faster proficiency in languages through their programs of Magic English and Power English, whereas the Vatsalya Hospitals and the MeraDoctor App have helped scores of underserved people gain access to world class healthcare at very affordable rates. Acumen has invested in clean energy, among scores of other sectors, through supporting the solar light manufacturing company d.light, with the help of DOW and IDEO.org. As a result of this intervention, unit sales scaled upto about 500,000 per month.
The above are just a few examples of Impact investments and their positive, far reaching impact which has the ability to change the course of mankind.
Measurement of the impact of investments is an inextricable part of investing. Currently, organisations use 3 interdependent impact metrics to evaluate themselves viz. IRIS, PULSE and GIIRS. IRIS encompasses a set of standard definitions used by all stakeholders to define performance, PULSE is a tool which manages various portfolios of the company and GIIRS is a tool that rates impact and is also an analytics platform that assesses companies depending on their social and environmental performance.
This humungous work is definitely a work in progress, the high tides of which seem unabatable. The amalgamation of Capital, Innovation and Entrepreneurship, for the benefit of mankind, seems to have finally come of age!!