Targeting social, environmental and/or other non-financial benefits along with a financial return is becoming increasingly common which is why, Impact Investment has gained traction and is increasingly relevant as a method of deploying finance with double or triple bottom line objectives.
Today’s total assets in ‘impact’ management already amount to $60 billion according to the Global Impact Investing Network (GIIN). But with that investment come expectations, over 70 % of total impact investors surveyed by GIIN and J.P. Morgan report that their impact expectations are in-line with performance ; over 77 % indicate a similar alignment around financial expectations.
The tricky part then, is developing strong, transparent and financially rewarding relationships to further the impact of social enterprise.
I would argue that the development of strong tripartite cooperation between International organizations, Social Entrepreneurs and Impact Investors is essential for smart, effective impact investments, the success of social enterprises and the acceleration of the implementation of the SDGs.
Entrepreneurs offer local “on-field” presence, solid understanding of practical realities and access to bottom of pyramid clients, Impact investors bring working capital and credit lines while international organizations offer large footprint, connect with governments and support enabling regulatory framework.
Cross sector collaboration to invest and bring to scale social ventures and widen impact makes sense on paper but in practice is still not widely operationalized. Two key closely related impediments are due diligence costs and the risks connected with early growth stage impact driven ventures.
In addition, the UN and other large organizations could significantly help in dissemination and adaptation of successful impact-driven concepts worldwide.
A way forward to foster cross sector collaboration is to create a platform for a structured discussion between international organizations, investors, government and social enterprises. We need to explore together a variety of issues ranging from best formats and modalities for stakeholder cooperation, scaling up of social enterprise and its’ resulting impact, risk mitigation of impact investments and reducing the cost and complexity of impact assessment and monitoring.
The platform would be the conduit for social enterprises and impact investors to voice their needs and concerns, and for international organizations to acknowledge these issues and adjust their plans accordingly.
The opinions expressed on this blog are those of the authors and do not necessarily reflect the official position of their institutions or of AFD.