Billions of dollars are now invested to create social impact as well as financial return. But with powerful new players such as Goldman Sachs and the Ford Foundation striding into this maturing market, will the sector’s original values be lost?
The impact investment sector as we know it was born in the second half of the 20thcentury, fathered by traditional financial investment and mothered by the emerging social consciousness that marked these decades. The sector was then almost exclusively driven by a handful of philanthropic organisations, foundations and the like, which had collectively an undeniable energy and pushed to redirect traditional financing towards the fulfilling world of doing good.
The first steps lacked formal organisation, those institutions tended to be quite shy to reach outside their standard market of operations, and managed volumes so small that they did not garner much attention within the highly numbers-driven commercial financial sphere. The term “impact investment” didn’t even exist.
The sector gained good traction during the following decades leading up to the 21stcentury. Impact investors, as teenagers, progressively scaled up their range of motion and operations, diversified into other sectors, and, more importantly, grouped together. Slowly but surely, social-oriented investment learned a lot, project after project. Only then the term impact investment appeared, to refer to those investments seeking social outcomes and not only financial return.
A cornerstone in this constant evolution, the Global Impact Investment Network(GIIN) was launched in 2009. This worldwide group of impact investors and leaders is a good example of the maturity gained by the sector: building a structure and joining forces was then seen as key before aiming towards bigger and better things.
And wishes seem to have come true, at least in terms of volumes. In the past ten years the sector has received tremendous attention from the commercial sphere which has instilled in turn a lot of energy and money into sustainable social projects. It is tough to measure how fast impact investment has grown since 2010, but a study sampled some of GIIN’s members and showed an increase in their assets from USD 25.4 billion to USD 35.5 billion in just two years (2013-2015), which gives a good idea of the healthy growth curve of the sector.
Even more symptomatic of the impact investment sector’s growth is that new impact investment funds have been continuously emerging, increasingly specialised in specific sectors such as green energy, women-owned SMEs and forestry.
Today the sector is a young adult. Latest GIIN data reports USD 114bn in impact investing assets by 208 impact investors. We are in the second decade of the 2000s and not only has the sector become an independent and self-sufficient entity, but it has also started having a big influence on the world around it.