Impact Investing

Investors have sought to balance their desire for financial return with their values and social priorities for centuries. In 1604, a Mennonite shareholder of the Dutch East India Company—upon learning that the company was engaging in piracy as a way to boost profitability in their trading operations—divested his stock to signal that such practices were not aligned with the values he had agreed to when he originally invested.¹ In 1848, the Oneida community in upstate New York grappled with how to operate a successful silversmith business for the purpose of funding a utopian community.² As Jed Emerson, Senior Impact Strategist at Impact Assets, explains, “Impact investing is part of a historical arc that goes back centuries and will project itself into the future for centuries to come.”

The term “impact investing” was coined in 2007 at a convening hosted by the Rockefeller Foundation.³ The Global Impact Investing Network (GIIN)⁴ defines impact investing as “investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return.”

The past fifteen years have seen a substantial increase in the infrastructure, standards, and momentum of impact investment as a field. The Council on Foundations-Commonfund Study of Responsible Investing: Foundations Survey 2016 reports that of the 186 philanthropies surveyed representing $40 billion in endowment assets, nearly a quarter of them have implemented mission-related investments.⁵

The 2016 U.S. Trust Insights on Wealth & Worth of 684 high net worth individuals revealed a 40% or greater increase in impact asset holdings among women, millennials, Gen Xers, and ultra-high net worth individuals from 2014 to 2016.⁶ Articles and reports from McKinsey & Company, the World Economic Forum, Forbes and the Stanford Social Innovation Review proclaim that impact investing has gone “mainstream.”

Over the last twenty years, impact investment has evolved.  What started out as a general set of intentions to align “doing well” financially and “doing good” in the world has turned into a wide range of dedicated products, funds, and strategies intended to allow investors to align their capital with the specific issues they care most about. As the field has developed, impact investors increasingly have opportunities to target their capital to the things they care most about including microfinance, clean energy, and sustainable agriculture.