Impact investment gets a $1.5bn boost, but it's not all roses
A whopping $1.5bn investor commitment to ventures creating social value has been announced in the US. It coincides with a string of recent announcements in the UK. But as a fraction of the money flowing around the globe, the space for impact investment is still tiny.
Just over 20 corporations, banks, foundations and individuals committed to invest more than $1.5bn into social ventures at the latest White House roundtable on impact investing.
The new string of US social investors includes: Prudential, Capricorn Investment Group, Omidyar Network and renowned family foundations, McKnight and Rockefeller.
At the same time, numerous US government agencies, such as the Small Business Administration and the US Agency for International Development, pledged to renew or launch impact investment programmes providing financial support to aspiring social entrepreneurs and social enterprises.
The announcements follow the UK government's recent commitment of £60m to get more social ventures investment ready, and bolster a market now growing by 20% each year according to the 2014 government progress update.
Around $46bn worth of social impact money is currently under management, a report from the Global Impact Investing Network (GIIN) and J.P. Morgan found through a survey of GIIN members.
But, through a global lens, the impact investment market is still just 0.02% of the $210 trillion currently circulating in global financial markets, according to a report from the National Advisory Board on Impact Investing (NAB). “How do we change that?” tweeted the Omidyar Network, which bolstered the $1.5bn pledge committing $100m to social ventures working in financial inclusion, education, and consumer Internet and mobile technologies.
Recent reports in the UK and US have sought to address policy and legal barriers to growth. Proposed changes to UK law could make it much easier for big charities to make social investments.
A report from the City of London Corporation also finds regulatory rules around investment suitability and the Financial Promotion Regime are alienating retail investors and inhibiting the growth of the sector.
Adressing policy constraints in the US, the National Advisory Board on Impact Investing (NAB), a group of 27 leaders from across the investment, business, foundation, academic, and non-profit sectors released the Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing report, which sets out a framework for how federal policies can support impact investing.
“The presence of both investors and policymakers committing to support businesses that are using market forces to create social change is a great signal for the space,” said Jean Case, CEO of the Case Foundation, in the Huffington Post. A NAB member, the Case Foundation contributed $50m to the pledge.
Following the string of announcements President Obama described the current time as an “all hands on deck moment”, as impact investment looks for a bigger share of the global market.
