investing for social and en vim pact execsum 000

8/3/2019 Investing for Social and en Vim Pact ExecSum 000

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A Design orCaaz An emerging inDustry

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investing orscal &eal impACtexecutive summary


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i nw Yk Cy, a lw-c h a apa bul lad dlpd wh a la

h nw Yk Cy Acqu ud. The Fund, created in 2004, aims to acilitate the construction o 10,000 units

o aordable housing in a city with rapidly diminishing aordable housing stock. The Fund came together when

private oundations made $32 million in low-interest, subordinated loans and a city-based charitable trust invested$8 million on similar terms, enabling commercial banks to raise and place more than $160 million o commercially

priced debt into the und.

i ual tazaa, a ud ad a h by h lh a lcc lh bulb pwd by a la pal

h h buh cd a lcal dbu. The distribution business could reach her village because o

an equity and working capital investment made by E+Co, a nonprot mezzanine und ocused on making debt and

equity investments in businesses that develop and sell modern energy services.

i Cabda, a all bu xpad wh db a cac bak. The bank is originating new

loans ater accessing commercial capital markets through a $110 million loan und structured in 2007 by Blue

Orchard, a Swiss micronance-ocused asset management company, and Morgan Stanley. The loan und, rated by

Standard & Poors, was syndicated on commercial terms among institutional investors, such as pension unds, in

Europe and the United Kingdom.

The New Yorker moving into her rst home, the student in Tanzania studying under

electric light, the small-business owner in Cambodia expanding her payrollnone o

these people would recognize one another as co-participants in the same emerging

industry. Neither, perhaps, would the commercial banker placing debt in the Acquisi-

tion Fund, the high-net-worth individuals investing in E+Co, or the German worker

whose pension und invested in micronance through Blue Orchard.

Yet these are all examples o the prolieration o activity occurring as a new industry

o impact investing emerges. This industry, which involves making investments that

generate social and environmental value as well as nancial return, has the potential to

complement philanthropy and government intervention as a potent orce or addressing

global challenges at scale. This document is intended to shed light on the industrys

recent emergence and highlight the challenges it aces in achieving its promise.

WhAt is impACt investing?


3/16

1

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overvieW

Thats why the idea ousing prot-seeking investment to generate social and environ-

mental good is moving rom a periphery o activist investors to the core o mainstream

nancial institutions.

These impact investors want to move beyond socially responsible investment, which o-cuses primarily on avoiding investments in harmul companies or encouraging improved

corporate practices related to the environment, social perormance, or governance. In-

stead, theyactively seek to place capital in

businesses and unds that can provide so-

lutions at a scale that purely philanthropic

interventions usually cannot reach.This

capital may be in a range o orms includ-

ing equity, debt, working capital lines o

credit, and loan guarantees. Examples in

recent decades include many investmentsin micronance, community development

nance, and clean technology.

The pressing question is whether impact

investing will remain a small, disorga-

nized, underleveraged niche or years or

even decades to comeor whether leaders

will come together to ulll the industrys

clear promise, making this new domain a

major complementary orce or providing

the capital, talent, and creativity neededto address pressing social and environ-

mental challenges.

Our premise is that there is only one ac-

ceptable answer. It matters a great deal that

more o our eras assets are used to address

some o its most troubling challenges.

Ab t r

The point o view expressed here was ormed ater exten-

sive scouring o existing studies as well as a convening o 45

investors and intermediaries interested or engaged in invest-

ing or impact. It refects more than 50 original interviewsconducted with a range o investorsincluding private

individuals, amily oces, investment banks, institutional

investors, oundations, and pension undsabout their

experience with investing or impact, how they think it may

evolve, and what will best accelerate its evolution. While

no one can predict with certainty how the global economic

markets will evolve, we also have sought through these

dialogues to understand the potential implications o the

nancial crisis o 2008 on investing or impact.

Our ndings are organized into our sections:

A description o the emerging industry

Hypotheses about how impact investing might evolve

An approach or accelerating the growth and impact o

this style o investing

A call to action or building the industry

overvieW


4/16

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opportunities ChAllenges

An inDustry emerges

Impact investing is being propelled by a powerul set o opportunities that appear likely

to continue or even strengthen despite the capital market shocks that began in 2007. But

there are also many existing challenges that stand between the promise and the realityor impact investors, and these will need to be tackled or the industrys development to

accelerate.

The global nancial crisis has the potential to ampliy some o these opportunities and

challenges. In the short term and on the downside, it will likely dampen interest among

potential investors not yet engaged, who may retreat to conservative investing. General

mistrust o markets and market innovations as a result o the crisis could also constrain the

development o investing or impact.

On the other hand, a macroeconomic slowdown may make impact investing more attrac-

tive or those already engagedparticularly those who are driven primarily by social andenvironmental impactbecause it helps diversication and assets are relatively cheap ater

the market drop in 2008. Given how seriously the market has mispriced risk, the expec-

tations o appropriate return or appropriate risk may be changing, and this may render

impact investing more attractive (or example, i relative risks such as poor governance are

lower). The lack o opportunities in traditional nancial markets will likely increase the

ability to recruit high-level talent into investing that has a purpose beyond making money.

Moreover, there is tremendous potential upside i the inevitable government regulation

that results ends up encouraging investment that takes into account other actors besides

nancial gain.

The net eect o the economic climate on investing or impact is impossible to predict. Butwhat is certain is that most o the ollowing opportunities will persistand the ollowing

challenges will need to be surmounted.

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3An inDustry emerges

Our research indicates that as a result o this confuence o opportunities and chal-

lenges this emerging industry has reached a transitional moment in its evolution. It

is poised to exit its initial phase o uncoordinated innovation and build the marketplace

required or broad impact, as illustrated in the diagram o the prototypical phases o in-

dustry evolution.

Sectors within impact investingsuch as micronance and community development

nancehave moved through these phases at dierent paces, sometimes with uncoordi-nated innovation emerging over decades and the marketplaces built in as much as a decade

or so.

But recently it has become possible to start to see these sectors as parts o a broader impact

investing industry, using the denition o industry applied by strategy guru Michael

Porter: a group o rms producing products that are close substitutes or each another.

Increasingly, investors are looking or the best ways to achieve nancial return and impact

and are eager to source deals in diverse settings such as micronance in rural India or com-

munity development in Los Angeles. At the same time, intermediaries initially developed

to serve a specic sector are proving valuable platorms across multiple impact investing

sectors. Actors who once saw themselves as engaging in dierent businesses are discov-

ering that they are part o a broader emerging industry that is lled with uncoordinated

innovation.

With coordinated eort and sucient investment in inrastructure, investing or

impact could move out o the phase o uncoordinated innovation and build the mar-

ketplace required or impact at scalepotentially during the next ve to 10 years.

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CApturing the

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mArketplACe

mArketplACe

BuilDing

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innovAtion

Over the next5-10 years, impac

investing could

grow to represen

about 1 percent o

estimated curren

assets under

management

about $500 billio


6/16


The growing,

global cadre

o leaders who

are committing

themselves and

their institutions

to this new style

o investing have

one belie incommon: they

insist that some

level o nancial

return and social

or environmental

impact can be

achieved together.

Beneath this

shared conviction,

however, many

dierences must

be conronted.

the uture o impACt investing

How this transition is traversedand how quicklywill determine the size and ultimate

impact this new domain o investing can and will have. The question or today is whether

the bar will be set high enoughwhether pioneering leaders will provide the talent,discipline, and resources that will be needed to create a coherent marketplace with high

standards or impact.

We know that the uture scale and value o impact investing will be threatened i any o the

ollowing risks materializes:

The risk that investing or impact will ultimately be had. Current challenges could become

persistent obstacles and insucient compensation or risk may result in lack o interest in impact

investing. The will to overcome the typical challenges acing a messy, new industry could disappear

i investors simply give up too soon.

The risk that investing or impact will ultimately be ay. Here, the denition o social and envi-

ronmental impact would turn out to be so loose and diluted as to be virtually meaningless. At best,

this outcome would turn this type o investing into a eel good rather than a do good exercise.

At worst, it would actually divert capital away rom philanthropy, decreasing the amount o resource

dedicated to conronting serious societal challenges. The hype about using markets to do good may

create a bubbleespecially i there is a signicant gap between expectations or nancial and social

returns and actual perormance, which may happen i the concept is sold ahead o demonstrated

social impact and/or economically viable deal fow. Poor thinking and sloppy execution might lead

to returns that are substantially below expectations.

The risk that the industry becomes cllaal daa in the global economic slowdown that took

hold during 2008. This crisis could be long and deep, and/or lead to dramatic changes in industry

structure and regulation that constrain investors appetite or the new style o investing. There is

a version o this downside view that simply delays the emergence o the industry until the next

economic cycle. There is also a trajectory o the nancial industry problems in which all the bets

on when this type o investing could emerge are called o. (At the same time, i the worst happens,

much else will change as well, including regulatory changes that could actually uel investing or

social and environmental impact.)

To surmount these risks, a growing global cadre o leaders will need to conront the para-

dox that investing or impact is both one thing and many things. On the one hand, this

ipac , wh k pz

cal al pac wh a f

acal u. These investors primarily aim

to generate social or environmental good, and are

oten willing to give up some nancial return i

they have to. Impact rst investors are typically

experimenting with diversiying their social change

approach, seeking to harness market mechanisms to

create impact.

acal , wh k pz acal u wh a f

cal al pac. They are typically commercial inves-

tors who seek out subsectors that oer market-rate returns while achieving

some social or environmental good. They may do this by integrating social and

environmental value drivers into investment decisions, by looking or outsized

returns in a way that leads them to create some social value (e.g., clean technol-

ogy), or in response to regulations or tax policy (e.g., the Green Funds Scheme in

the Netherlands or aordable housing in the U.S.).

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7/16

5the uture o impACt investing

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transition requires leaders to build the collective will that can

only come rom seeing this emerging industry as a whole,

with a common belie that some level o nancial return and

social/environmental impact can be achieved together.

On the other hand, the promise o impact investing also re-

quires us to understand the dierent reasons people engage

in impact investing. The marketplace map below takes as itsstarting place that people really do tend to begin rom either

impact or nancial returns rst; they are trained dierently,

speak dierent languages, and are willing to make dierent

sorts o tradeos.

Sometimes impact rst and nancial rst investors work to-

gether in what we call yin-yang dealsthat is, deals that

combine capital rom impact rst and nancial rst inves-

tors and sometimes add in philanthropy as well. This name

is derived rom the term in Chinese philosophy describing

two elements that are dierent and yet complementary when

put together. Yin-yang deal structures can enable deals that

could not happen without the blending o types o capital

with dierent requirements and motivations.

Today, organizing these types o deals eciently is dicult,

requiring unamiliar institutions and individuals to work to-

gether by overcoming the distrust typically elt between, or

example, private oundations and investment bankers. In the

uture, this yin-yang approach could developout o neces-

sity and synergywith a blending o the two types o capita

and philanthropy through seamless networks into sophisti-

cated investment structures that create the highest leverage

o social and nancial return. Increasing the scale and regu-

larity with which these deals occur will require mechanismsor capturing learning and institutionalizing relationships, so

that the eort put into creating one syndicate or deal struc-

ture can enable the next one, ve, or 10 similar deals to be

executed more seamlessly. More yin-yang deals may resul

rom the successul development o impact and nancial rst

investor markets.

Although each o these three segmentsimpact rst, nan-

cial rst, and yin yanghas inherent risks and limitations

each can grow and succeed at scale over the next decade

In the challenging economic climate post the 2008 marketmeltdown, impact rst investors may be most likely to stay

committed to this type o investing and seize the existing

opportunities. Mobilizing the substantial capital o nancia

rst investors will require developing deal structures that

give those investors condence in the likely nancial return

But over time any combination o these segments could lead

to the ulllment o the promise o impact investing.


8/16


Detailed

descriptions o

all the initiatives

to build a

marketplace or

impact investing

including

examples o where

these activities

are already getting

tractionare

included in the

complete report.

There is no substitute or the hard work o making investments and doing what it takes

to ensure that they succeed. Without that, nothing else matters. But the emerging impact

investing industry could remain stuck or a long time in the rst phase o its evolutionuncoordinated innovationunless concrete actions are taken to build a more coherent

marketplace. Thats the only way to remove barriers and mitigate risks across the potential

trajectories, both or individual segments and or the industry as a whole.

What concrete actions are needed? There is a classic chicken-and-egg problem o balanc-

ing the tension between pumping up supply versus pumping up demand. Although we

believe an initial ocus on improved intermediation will be important, ultimately both im-

proved supply and demand will be required. Investors, entrepreneurs, and philanthropists

all have an important part to play in providing the leadership, capital, and collaboration

necessary or success in this next phase.

th Pla makplac Buld

Increasing the amount o money and the social and environmental value o impact in-

vesting will require unlocking capital by developing ecient intermediation and by

developing inrastructure to acilitate transactions. These actions will be as essential to

securing the promise o this industry as they were or venture capital. As Sir Ronald Cohen,

a venture capital pioneer in the U.K., notes, It is true in the case o social investment as it

has proved to be in that o venture capital and private equity that the supply o money cre-

ates its own demand and an increased fow o capital is thereore the starting point.

Still, this simple parallel, while persuasive, is insucient when it comes to the challengesacing entrepreneurs building businesses or impact, especially in developing countries.

It takes time to develop proven, large, investable opportunities. So action will also be

required to address the imminent barrier o insucient absorptive capacity or invest-

ment capital by supporting the development o scalable, backable business models.

An ApproACh or ACCelerAting progress

We have identied a diverse and interrelated set o initiatives, all o which are within the marketplace-

building stage o industry development. They are grouped into three platorms based on the challenges

constraining impact investing:

Ulck La supply Capal by Buld ec idaEnable more investing or impact by building

the investment banks, clubs, unds, and products needed to acilitate existing interest.

Buld eabl iaucu h iduyBuild the ecosystem or impact investing, including common metrics,

language, and an impact investing network that can serve as a platorm or collective action such as lobbying or policy

change.

Dlp h Abp Capacy i CapalDevelop investment opportunities and ensure high-quality

deal fow by cultivating talented entrepreneurs and supporting the enabling environment or private sector innovation

and success in regions and sectors where investment can create impact.


9/16

7An ApproACh or ACCelerAting progress

Cb Py ia Caalyz P

O the many important initiatives above, we highlight the ve that we believe together

have the greatest potential to catalyze the industry s development:

unloCk lAtent supply o CApitAl By BuilDing intermeDiAtion

Ca duy-d ud ha ca a bac hw add

pcc cal al u.These large unds would uncover and

aggregate outstanding investment opportunities that can serve as powerul examples o

how major social or environmental issues can be addressed. They can serve as beacons

and attract a wave o additional investors and ideas, much as the Apple initial public

oering catalyzed the venture capital industry. At the same time, these unds could

stimulate the markets development by attracting talented entrepreneurs to launch

businesses and intermediaries while consolidating capital and reducing transaction

costs associated with ragmented supply. The unds could also create platorms to seedand build the capacity o new und managers and to roll out impact metrics or stan-

dards in ways that reinorce the unds nancial objectives.

Forexample:A collection o investors commit $1 billion to an impact investing und,which attracts und managers, service providers, and entrepreneurs to the eld. This couldkick o a virtuous cycle as it becomes easier or additional investors to engage in impactinvesting, which in turn attracts more entrepreneurs and creates more business or inter-mediaries.

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10/16


Plac ubaal, k-ak capal caalyc ac ucu. Fund-

ing creative models at sucient scale is likely to require some yin-yang deals that

combine impact rst and nancial rst capital. Without some catalytic, risk-taking

unding rom impact rst investors, the deals may not provide suciently attractive

returns or commercial investors; without commercial investors, it may be more chal-

lenging to invest the volume o unds required to make a dierence. As David Zellner

o the Chicago-based General Board o Pensions and Health Benets explains, TheGeneral Board will only lend unds or social impact investments at market rates. We

are oten presented with investment opportunities that require below-market unds or

them to be viable. However, many projects are unable to secure sot money commit-

ments. Hence, we are unable to participate in these types o projects. Unortunately,

these unusual mezzanine structures are likely to meet increased skepticism rom inves-

tors because o the complicated structures that have contributed to the nancial crisis.

But someone needs to go rst. Impact rst investors are most likely to act i it will

ultimately produce substantial social or environmental benets.

Forexample:Create a concessionary capital und that can nimbly match its unds with

more commercially oriented capital. The und might ocus on providing secondary nanc-ing to allow primary investors to exit while leveraging their expertise in deal sourcing.

BuilD enABling inrAstruCture or the inDustry

s duy adad cal au. Developing metrics will be an

essential way to draw attention to the results o an eective model developed by a und

or unds. Proo o impact is going to get a lot o people excited about investing or im-

pactbecause it will demonstrate that better, larger, dierent, more sustainable social

impact is achievable. As a portolio manager at a major U.S. pension und explains:

Measurement o ancillary benets is going to be an ongoing issue in impact invest-

ment. The industry needs to capture and demonstrate these benets in order to attract

more capital.

Forexample: Two sets o initiatives would help achieve this goal: developing rigorousmetrics and a standard-setting body to implement them. For impact rst investors, themost important priority is to develop rigorous metrics or assessing the relative socialand environmental impact o investments and portolios within and across the sectorsand geographies that matter to them. This would allow them to assess the results rominvestments that may be below market rate. Understanding this potential tradeo will beespecially important to institutional investors. An additional step would be to establish astandard-setting body that would help create a threshold or what would be consideredan impact investment. A basic rating system would help organize the market by making itpossible to compare outcomes o investments. It would also help protect the credibilityand reputation o the eld rom conventional investments being promoted as impact

investments. There is much to be learned rom the standards-setting activities in sociallyresponsible investing, including the ramework o the Global Reporting Initiative and theCeres Principles.

Lbby pcc plcy/ulay cha. Policy change has been a common

ingredient in the evolution o many other industries, including venture capital and pri-

vate equity, and will be an important way to create incentives to draw an even broader

range o investors to engage in investing or impact. As Kyle Johnson, an investment

p

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11/16


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advisor at Boston-based Cambridge Associates, describes, I cannot underline how

important the policy piece is in driving change. . . . When market behaviors are not

aligned with positive social and environmental outcomes, a key question to ask is

Why? I the answer is that there is some orm o coercion present in the market,

such as the externalization o social or environmental costs, then working to change

public policies to help realign market incentive structures is a really important ap-

proach to consider. Substantive change oten begins in a crisis, and the nancialcrisis may create just such an historic opportunity. Sweeping legislation is coming in

the orm o scal stimulus and nancial oversight. It can be done well or poorly, in

ways that encourage investing or impact or discourage it.

Forexample:Policy mechanisms could include anything rom a reduced capital gainstax on impact investing products to scrutiny and clarication o the meaning o du-ciary duty or the development o a und to catalyze impact investments similar to theCommunity Reinvestment Act, but or a broader set o social and environmental issues.Governments could also leverage their role as large-scale purchasers by providing an-chor demand or promising enterprises, enabling them to prove and scale their businessmodels.

Dlp a pac wk. For these initiatives to come to ruition,the creation o a network or the industry will be essential to developing the relation-

ships, tools, inrastructure, and advocacy required. The network can enable impact

investors to share experiences, pursue investment opportunities, and orge partner-

ships, and can serve as a source o inormation or organizations committed to eld

building. The network would be particularly valuable or deals that mix impact rst

and nancial rst investors.

Forexample: Investors build a global network or the impact investing eld that servesas a hub or collaboration and a platorm or setting clear denitions and standards.Investors develop relationships or sharing inormation, co-in-vesting, and engaging in new projects. The network also providesthe community with a common voice in policy advocacy eorts.

Depending on the specic geography and sector, success will require

some combination o these ve high-priority initiatives as well as

the other initiatives listed on page 7and undoubtedly others as

well. Some actions will come to ruition quickly and help alleviate

constraints in the marketplace, while others will lay the groundwork

or the uture structural shits needed to broaden the market and

transorm the ecosystem to support a new kind o investing.

Together, these actions can help guard against the risk that in-

vesting or impact might become too easyenabling rigor,

discipline, and high standards by creating, or example, metrics

that dene what qualies as impact investing. They can also help

address the risk that this new style o investing stalls because it

remains too hardby building the necessary intermediation that

can help avoid hype and sloppy execution.

A tw Bab:t C ud

Socially Responsible Investing

Blended Value

Impact Investing

Mission-Driven Investing

Mission-Related Investing

Triple-Bottom Line

Social Investing

Values-Based Investing

Program Related Investing

Sustainable and Responsible Investing

Responsible Investing

Ethical Investing

Environmental, Social, and GovernanceScreening


12/16


Wha rqud succ:Ladhp, Cda, ad Capalza

Taken together, these initiatives have the potential to help build the marketplace and ensure

the promise o impact investing. But the initiatives outlined will only become a reality i

leadersinvestors, entrepreneurs, and philanthropistsemerge to advance them. As

Chris Foy o Sainsbury Family Investments explains, Impact investors need a collective,

legitimate voice to advocate or this type o investing and recruit other investors to orient

themselves toward impact. It is also important to have pathnders who demonstrate the

viability o this approach so other investors understand its potential.

Actions need to be taken to build the marketplace as a whole, seeing investing or impact

as one industry with a common value chain and clear, shared challenges, regardless o

geography or sector. At the same time, actions also need to ocus on enabling the distinct

segments o impact rst, nancial rst, and yin-yang investors to develop successully in

their dierent regions and sectors.

Leaders who understand what is at stake will need to consider how others can leverage

the time and eort they have put in. These pioneers will come rom many places, do di-

erent things, and use dierent types o capital; they will include large-scale amily oces,

institutional investors, pension unds, investment banks, wealth managers, and private

oundations.These leaders have an opportunity to take a more active role in driving the

evolution o investing or impact, as they can steer billions o dollars o capital, support

collective action, command the authority to set standards, and back new businesses and

unds that can ll in the gaps in the impact investing ecosystem. And those who are just

getting started will need to look to the leaders who have gured it out to see what can be

learned rom their experience so they dont reinvent the wheel.

These initiatives will also need to be well executed with a range o coordination and capi-

talization.

CdaMany o the initiatives we outline will require a signicant level o

coordination or collaboration. Success will require a fexible philosophy because col-

laboration may require a bit o compromise. It will not be possible to build a market

i everything investors want is idiosyncratic and they all insist on getting exactly what

they want.

CapalzaSuccess will require people who will put their money into impact

investments as well as people and institutions who will help capitalize the industry

through intermediary and inrastructure development.

The table that ollows maps the initiatives based on the minimum amount o coordination

and capitalization required or them to be eective broadly. In the lower let-hand corner are

immediate entrepreneurial opportunities that require less coordination and can be unded

through short-term prot or medium-term development unding. In the upper right-hand

corner are initiatives that require both subsidy and industry level coordinationnotably,

this is where three o the ve high priority initiatives all. This mapping can help actors

consider what action they want to lead or participate in. For example, philanthropy may

A group o

investors is

starting the

Global Impact

Investing Network

or leaders towork collectively

toward the

maturation o the

industry.


13/16


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have a particularly important role to play in the upper right-hand corner, building some o

the inrastructure that will require a high degree o subsidy and coordination.

As this table indicates and the history o other industries teaches, potential leaders will

need to do more than just their day jobs in order to overcome current challenges and

mitigate uture risks. Many entrepreneurial eorts operating in parallel, without some

coordination, run the risk o re-creating the very problems o ragmentation, duplication,

and underleverage that they are attempting to solve. Value could be let on the table, with

a greater likelihood that the industry will succumb to the challenges and risks we have

outlined.

Investors, entrepreneurs, and philanthropists thereore all have an important part to

play in providing the leadership, capital, and collaboration needed to catalyze invest-

ing or impact. The industry will need stewards to marshal the collective action required

to develop public goods inrastructure and to support those initiatives that may require

coordination and at least an initial subsidy.


14/16


A vision o what

impact investing

could look like

as a mature

industryand

some potential

paths to the

utureare

described in the

complete report.

Building an industry is challenging in any context, much less in an economic climate that

has evoked comparison to the Great Depression. Nevertheless, we are optimistic that some

investors will keep insisting that their money be used to create social and environmentalimpact. The crisis in the nancial markets could slow these investors down, or it could

speed them updepending on how governments and intermediaries respond. But it wont

stop them. The visible need is too great, as is the impatience with the models o the past

that orced those with money to choose only between looking ater others (philanthropy)

or looking ater themselves (investing to grow capital).

Our research has led us to conclude that the best way to guard against these risks is to

be explicit about them and then to take action to build the inrastructure and practices

that can enable rigor, discipline, and high standards. Investors, entrepreneurs, and phi-

lanthropists all have an important part to play in providing the leadership, capital, and

coordination needed to seize todays opportunities. Through eective execution o thestrategies in this report, the groundwork o intermediation and inrastructure could be laid

to mitigate the risks that impact investing becomes too hard or too easy. I all this happens

soon, within the next ve to 10 years, the industry could start to be recognized as a coherent

whole, beyond the important geographical and sectoral segments that are its components.

Because this new style o investing is diverse and in a nascent stage o development, there

is no way to tell exactly how big it really is, let alone how big it could become. But given

the size o todays existing screened social investments, its certainly plausible that in the

next ve to 10 years investing or impact could grow to represent 1 percent o global assets

under management in 2008. That would create a market o about $500 billion. Such scale

would create an important supplement to philanthropy, nearly doubling the amount given

away in the U.S. alone today (global gures are not available).

Even i this uture comes to pass, and investing or impact achieves its ull potential, it

will not become a substitute or philanthropy or government, nor should it be seen as one.

Rather, the market will become ever more sophisticated and precise about which unding

vehicle best suits which problem. Success will mean creating a meaningul and viable alter-

native and complement to existing approaches.

Investing or impact can have a powerul new role in the world. With commitment and

rigorous action the perils o this moment can be avoided and the industr ys promise can

be realized, applying the wealth o our era to address some o our most troubling social

and environmental challenges.

WhAts At stAke: A CAll to ACtion


15/16

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