When I was down in Africa last week, there was quite a bit of interest among local institutional investors in the idea of impact investing. Why? Well, the African investors in room were acutely aware that their countries were starved of capital and their funds could spur local development by investing locally. As one individual said, We need to rethink the business of investing; Africa is different.
Pie-in-the-sky-thinking, right? Maybe not. A new report published by the Initiative for Responsible Investment at Harvard University tries to think through the ways in which traditional commercial investing (and in particular fiduciary duty) can be married with what they call impact investing. Its quite an interesting and thought-provoking read. First, heres a definition for you:
Impact Investment investment with the intent to create measurable social or environmental benefit in addition to financial return - has received increasing attention in recent years. This includes interest from policymakers drawn by both the promise of leveraging private capital to support public purpose and the opportunity to make better use of scarce resources to support important social benefits.
Thats pretty much exactly what the African funds were talking about. Anyway, the report, which is authored by David Wood, Ben Thornley, and Katie Grace, is entitled Impact at Scale: Policy Innovation for Institutional Investment with Social and Environmental Benefit. Heres a blurb:
Institutional investors are governed by rules and norms that can impede their participation in new or innovative investment vehicles; and institutional participation in impact investment markets is invariably tied to those public policies that shape and promote investment opportunities. Policy and regulation while in and of themselves not a silver bullet can play an important role in unlocking more institutional investment capital for greater social and environmental impact...This report combines several elements that we believe must be part of a discussion about the role of public policy in unlocking institutional investment for impact. This includes an exploration and analysis of the unique opportunities and constraints faced by U.S. fiduciary investors, including relevant regulations. We also examine the different roles that policy can play in accelerating the development of impact investing practices and products. And finally and most informatively we offer insight and case studies about the current practices of institutional asset owners and service providers.
Have a nice weekend!