services firms Impact Assets and Mission Markets (see
the Charticle on pages 71–77 for a description of these
groups) becomes an important part of creating the infrastructure needed to allow mainstream capital at both
the individual and institutional levels to flow into impact investments.
Getting too complacent by operating under the radar or through work-arounds is not sustainable. Getting policy right will be crucial.
But it will not be easy. The examples of impact investing in this issue alone illustrate the challenging
questions that traditional regulatory systems are hard-pressed to confront.
The bifurcated world will certainly linger for a long
time. For many people, separating investing and charity will no doubt continue to make sense.
But some established systems will need to adapt to
the new aspirations of impact investors. Others will
become increasingly isolated as they fail to adjust to
the new conditions.
In the meantime, the impact investing industry is in
a fragile, emergent state.
Industry actors understandably focus on the difficult
task of helping enterprises, investors and funds succeed. Few have the time or mandate to step back from
this day-to-day struggle to consider the collaborations
necessary to build the new systems that will eventually make their work easier and the industry accessible
to more people.
» If a microfinance loan to a Mexican fruit seller is
a better way to lift her family out of poverty than
a gift would be, should an investor receive a tax
break to lend to her?
» How do regulators protect the interests of
investors in a venture capital fund like IGNIA who
want the fund managers to pursue both financial
returns and social impact?
» Should Root Capital be allowed to maintain its
nonprofit status, and the tax break that comes with
it, if it raises commercial investment to fund its
» Should government-created entities like
OPIC subsidize microfinance companies like
Compartamos when the latter may end up making
millions of dollars in a public stock sale?
This agenda cannot be left
to any one segment or institution. New systems to
sustain impact investing
will emerge from the engagement of investors, entrepreneurs, policymakers
and customers as well.
What will result from
the present and growing
interest—some might say
investing? Will it undermine support for philanthropy and draw resources away
from more productive investment? Will it bring the renewal and energy that enable us to tackle the seemingly
impossible challenges we face? Or will it simply fade,
as so many other development fads have in the past,
before making much difference at all?
The answers rest on our ability to recognize impact
investing as a systems-challenging movement that will
require more than just great entrepreneurs creating interesting anecdotes about inspiring entrepreneurs.
Realizing the full potential of
requires going beyond rhetoric
to build the supporting systems.
The disruptions to the microfinance industry in India
in 2010 showed that everyone who cares about the future of impact investment has a stake in creating a more
supportive operating environment to ensure its success.
In the Indian state of Andhra Pradesh, inattention to
these questions by commercial microfinance practitioners led to a catastrophic run-in with politicians able to
mobilize public anger against an industry that largely
ignored the need to measure and communicate its social value and proactively develop supportive regulation.