What's Impact (Investing) Got to Do With It?
Last week came the incredible opportunity to participate with the Tobias Leadership Center's LEAD Conference: Investing to Change the World by 2050. Visionary leaders from the Case Foundation, Lumina Foundation and Carlysle Group shared their perspectives about the intersection of philanthropy, nonprofit development, corporate social responsibility and impact investing.
For those new to this space, a quick definition: Impact Investing is a method by which private equity groups, individual investors, and now non-profit groups are investing in organizations that put equal weight on profitability and social impact.
Impact investing is gaining rapid momentum globally and now in the US. From Laurence Fink's letter to Blackrock's companies sharing that they are now expected to consider social impact alongside profitability, to recent reports that Impact Investing Industry is likely to be worth $750 Billion, we as leaders cannot ignore this opportunity.
Here were a few of my favorite takeaways from the event:
- Jean Case compared the current state of impact investing to the early days of AOL when only 3% of the population had internet access, and it was used only one hour per week. In other words, the expansion of this space is accelerating and will likely become as innate to us as the internet is today.
- David Rubenstein listed Social Impact as third most likely category Private Equity investors will consider over the next 10 years (after alternative energy sources and artificial intelligence.)
- Holly McKiernan demonstrated the process Lumina goes through to identify which organizations are a fit for impact investing within Lumina's mission, as well as the process for due diligence and management of profitability and impact metrics.
- Deal flow was cited over and over again as a challenge to this industry. The money is available: but there are not yet enough social impact businesses prepared to take investment, and to prove both financial and social returns.
Our Hoosier tendency is to expect businesses to build profitability while the nonprofit community handles our social issues. And let me be clear: I'm incredibly proud of our communal sense of responsibility and philanthropy.
But if philanthropy as a singular approach worked, then Indiana, bastion of philanthropic learning and community innovation should be leading the country in our ability to create equity and resolve the systemic issues that impact quality of life. According to most national rankings, we're not.
We have made significant inroads into building an ecosystem for entrepreneurship. As a community, we'd be wise to pay attention to impact investing as a way to increase economic momentum and position ourselves as a community that welcomes, advances the opportunities for social entrepreneurs, and invests in social impact.
What could we accomplish if we had an ecosystem of social entrepreneurs - creative and diverse individuals who desire profitable businesses that just happen to make the world a better place? It's a question worth asking.
After all, there's $750 Billion dollars on the line. And even more important, 6.5 million individuals, many of whom might benefit from being on the front line of social innovations.