To help explore the mysteries of Social Return on Investment, we talked to Wendy Gibbs of Inspire2Enterprise. There are many preconceptions about Social Return on Investment (SROI) that make it off-putting. For many smaller organisations for example, it may be the amount of time required by a member of staff to gather and analyse the […]Read More ›
How to Create an Impact Investing Movement
Note: Originally posted at www.jocelynling.com
There is a systemic issue in impact investing that constantly resurfaces, from research papers to goals of foundations in the realm of impact investing: lack of infrastructure to help people identify and function as a part of the impact industry.
To solve this issue, we have to seriously start looking to expand the space beyond those who care about the impact value of capital, we have to create a movement of impact investing – as a sustainable and scalable platform. We have to look closely on how we can create pull-factors needed for a successful impact movement. Now, I do not think that the world of philanthropy and for-profit investing should cease to exist. What I am suggesting is that the movement’s aim is to help the general public and those in the investing world to have a third way to think about capital: a blended value of capital and impact.
So, this is my attempt to build this movement’s basic framework and my vision of what the core elements of an impact investing movement would look like.
Defining the Movement’s Core
Education is the key to the movement, and a first step is shifting people’s perspective to a third way of thinking about capital. I would like people to think of their portfolios as follows (note: the pie charts below are based on a hypothetical way to think about capital – the main point is to illustrate the inclusion of impact investments when an individual thinks of capital):
I believe the core of an impact investing movement should be two-fold:
- The choice between impact and profit should not be a binary one.
- Close the mental disconnects and isolation between the different components of the Impact chain of capital: (Input –> Output –> Impact)
Distinction of Target Groups
Just like the ‘real’ investing world, in the impact investing world, there are two distinct investors to target: Institutional and Retail. By the nature of the way that capital flows into the space, influence on the retail end is bottom heavy and personal; on the institutional side, it is top heavy and full of barriers to entry. (Sidenote: Here’s a great report to read to understand the policy-institution relationship in impact investing, written by Pacific Community Ventures & Harvard’s Initiative for Responsible Investing. See SocialFinance.ca’s in-depth interview of lead author Ben Thornley).
Another target group (and this is admittedly a harder group to penetrate than the former) would be both institutional and retail investment advisors. Straight away, the inherent challenge to create this movement is: how to create a simultaneous pressure on both ends, and in each respective group?
Since capital flows through an impact chain, the platform should act a ‘pull’ platform and simultaneously become the mechanism by which ‘push’ platforms engage. The graphic below illustrates this point using Morgan Stanley’s recently announced Investing with Impact platform. The idea is that on Morgan Stanley’s end, they can only get so far by engaging their current clients. However, if they look beyond their Investing with Impact platform, and engage in a middle ‘pull’ platform that educates the masses, their message and reach could easily double.
I believe that a successful impact investing ‘pull’ movement would contain the following practices:
1. Radically lower knowledge barriers
The landscape of impact investing is slowly coming to light. There is great research and data that heavily supports the sector. However, bite-size pieces of information are few and far in between. Investors and advisors need to understand the reason for impact investing, proof of concept, and how it would affect an institution’s or individual’s portfolio. The knowledge barrier should also include a way to disseminate authentic and real stories about impact investing and the results of the investment – a form of curated ‘entertainment’.
2. Uncover and disrupt offline analogies
Most forms of human interaction surround a pre-existing way of thinking; for example, before email, people would send letters. In the case of thinking about capital, the tipping points of where someone starts to think about money include the education system, with a focus on universities and college (typically an individual’s first experience in managing a substantial amount of money).
3. Empower key community leaders
I’m a big fan of Seth Godin’s practice of building tribes. People are more passionate about combining money and meaning than we think they are. A great organization that organically (and perhaps unexpectedly) tapped into the power of tribes is Acumen Fund. (Full disclosure: I currently volunteer with them, and this is by no means a representation of their perspective on the matter. Just my own). Acumen Fund currently has 10 volunteer-led chapters around the world that support and spread their cause. These chapters are going into local communities with a depth and reach that Acumen would not have been able to achieve just by themselves.
4. Reduce friction
Thinking about capital can be an overwhelming experience, especially on the retail side. The movement needs to create a frictionless and simple experience that catalyzes ‘pull’ for transactional activities. A great example of this practice is by LearnVest, a budgeting and advisory platform to help individuals achieve their goals. Simple and clear. I envision a successful impact investing platform to embrace a similar frictionless user experience.
5. Getting started
No single agenda or strategy is equally relevant to all target groups. I see two main engagement strategies embedded in the movement, which in some cases can be executed separately or combined.
One is a online-mass led proposition with multiple knowledge engagement pieces. The other is a high-touch with direct channel distribution. The latter would fit in more with the advisory/’push’ platform engagement target group whereas the former would fit into a engaging retail investors. The high-touch component is definitely more of a challenge as we would be looking at a target group of banks, corporations, and venture capitalists that have systems in place in order to successfully execute their business models.
There are multiple ways to continue to build out this framework. The points above are merely a starting point in the basic wireframe of this impact investing movement. All ideas are welcome. If you want to contribute, feel free to add your thoughts in the comments below or get in touch!