“Impactful” Investments? Will investments change lives or just bottom lines?


Needs are growing in the developing world and blended finance, including Impact Investing, with the “intention to generate positive, measurable social and environmental impact alongside a financial return” could help amid pressures on philanthropy [1][2]. Investments look to fill the $4 trillion annual funding gap to fulfill the Sustainable Development Goals by 2030, as current donations to aid programs can only meet so much need. Such investment is rising. In 2018, investors interviewed by GIIN, an industry thinktank, managed over $228 billion in impact investing assets and more are aimed at SDGs. The Sustainable Development Goals (SDGs) are “a call for action by all countries – poor, rich and middle-income – to promote prosperity while protecting the planet. They recognize that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs including education, health, social protection, and job opportunities, while tackling climate change and environmental protection.” SDGS are to improve basic needs, natural capital, address climate change improve peace, equity and sustainability through a range of governance and empowerment interventions.



Impact Investing comes from a decade of ESG investments reorientation, based on these assumptions: “If environmental, social and governance (ESG) factors are ingrained in investors’ thinking, then a triple-win will follow – more valuable companies, more value for end-investors and, ultimately, a more sustainable system“ [4]. While there is a new focus on the 17 SDGoals by investing in enterprises in sectors such as agriculture, microenterprise, health and environment, investing broadly into sectors does not mean intended grassroots results are achieved (e.g. no poverty, no malnutrition). Far more tracking of the effects on the lives and livelihoods of those the SDGs aim to help is needed.

There is so much good business news, from companies investing in their own ‘circular economy’ in Asia to decrease waste, and carbon-neutral or forest-positive or health & justice initiatives and incubators in the USA, Europe and Africa [5][6][7][8]. There are positive clean energy examples such as large global investors in solar power which seem to have local effects [9]. A range of grassroots for-profit social businesses such as Greenlight Planet and Solar Sister, tangibly help address ‘energy poverty’ of two billion people with scarce access to basic and reliable electricity in developing markets [10]. Some crowdfunding is emerging through outlets such as Trine where micro-investors get a return for loan investing in poor communities’ solar projects which have proof of at least access to electricity [11]. Unfortunately, the depth of coverage is not sufficiently growing to reach the two billion given the climate change needs. Forbes reported that Toniic impact investor members have “$2.8 billion of impact investments, which are up from $1.65 billion in 2016 but the hype can be louder than proof of lives changed [2].

The funding is not yet living up to its promise as most investors are unwilling to sacrifice immediate profits for later returns, and what is called ‘patient capital’ with below-market returns may be needed to nurture those businesses in Asia, Africa and Latin America incurring some early losses while business models mature. GIIN in 2016, an industry tracker, notes that many investors lament risks being too high and businesses not having enough of a track record to justify investments [12]. Expertise from (I)NGOs working in global development can help. There is a growing risk of impact investment funds being more willing to invest in safe markets in North America and Europe, compared to higher risk emerging markets like Africa [13].

More perniciously, investments sold as being ‘impactful’ and addressing environmental sustainability, can include some wolves in sheep’s clothing (see italics): Axios 2019 revealed the following about “Green bonds” and an investment aimed at funding to help Ebola ravages:

  • “A recent World Bank bond was ostensibly designed “to raise awareness for the importance of investing in women and girls.” There’s no obvious way in which it does that, and it’s a minuscule $4 million in size — a drop in the bucket, compared to the Bank’s annual $50 billion in bond issuance….” [14]
  • “US municipal green bond issuance fell to $4.9 billion in 2018, per S&P Global Ratings, down more than 50% from $10 billion in 2017. Development banks also saw their green bond issuance fall. But for-profit banks, largely in China, took up a lot of the slack. They issued $48 billion of green bonds in 2018, up from $23 billion the previous year. The real impact: A lot of people who think that they’re making socially responsible investments are really just buying Chinese bank debt” [14]
  • “The World Bank’s Ebola bond was, it said, “a momentous step” that would “serve the world’s poorest people.” The idea: Were Ebola to flare up again in west Africa, investors’ money would be used to address it. Investors so far haven’t lost a penny, despite the outbreak of the 2nd-largest outbreak of Ebola on record.” [14]

What are the aims of impact investing if not tangibly having a social and environmental impact? Instead, a 2018 finance article, the drivers for investors are 1) risk management, 2) return potential, 3) mission alignment and 4) constituent/ stakeholder demand [15]. Much of the focus is on funding ‘checking the box’ of the 17 goals rather than showing results that funding changes people’s lives. While 76% of GIIN’s investors claim to “track their investment performance to the SDGs or plan to do so in the future,“ there is little data on how much their investments have decreased poverty, hunger, or increased literacy [16]. Sites like B-Analytics ‘track impact’ but actual changes to lives are assumed; Key Performance Indicators (KPIs) focus on business performance not on grassroots improvements [17].

I wanted to be delighted by Rockefeller Foundation’s Impact Investment Management (IIM)’s asset management platform that “aims to tap into mainstream markets and investors, scaling up investments into promising new finance vehicles that help to close the (SDG) funding gap” [17]. Yet they typify how impact investors misuse terms like ‘impact’. It is not synonymous with generic ‘results’, especially surprising given the strength of their M&E. IMM touts “Impact: The Rockefeller Foundation’s investment is expected to directly support 2,500+ loans to students“ [18]. As any monitoring & evaluation person knows, giving a loan is an input into their lives and is not an indicator of success. Recipients could drop out of school or fail to graduate, default on the loan, or conversely wildly succeed. We do not know ‘impact if we do not measure properly [19].

For those of us who care about results on the ground, among people in the ‘developing world’, so far ‘impact investing’ is still miles from outcomes and impacts that meet the aims of the SDGs, and more than ‘intent’ is needed in the 11 years until 2030. One think tank GALI screens results by headquarters location and “Impact Orientation: Indicates whether the organizations have the explicit intent of supporting ventures with social or environmental objectives” [20]. As a new Impact Investor Network Map notes, “a primary characteristic of “impact” is intentionality – the explicit pursuit of social impact“ and similar to the loan example above, ‘Access to Financial Services’ is the most frequently reported impact objective by investors“ [21]. Another source found that financial accelerator projects tracked are funded only 1-12 months, so those of us in global development wonder how much sustained impact could be generated in such a short time. Instead, some celebrate intermediate steps such as (good) new principles to foster environmental sustainability such as in the wild fisheries sector, and funding for U.S. forest restoration bond, which focuses on inputs/outputs only and principles are voluntary.

We at Impact Guild believe international and national non-profits and experts like us can fill this measurement expertise gap were funders interested. A recent report by Amplify, an international non-profit (INGO) consortium shows how these two communities can help each other to change lives [22].

While some impact investors are saying there aren’t enough viable investments with returns and track records, the INGOs are looking for that funding for the projects they know do work that affect lives on the ground. Challenges were: “identifying and acquiring funding’, ‘legal (and regulatory) barriers’, ‘communicating strategy’ and ‘organizational staff capacity’ to work in a for-profit manner to show ‘impact measurement’. As over 40 INGOs involved all indicated that delivering technical assistance was their favored approach, with ecosystem building and establishing social enterprises also considered by a majority, tracking results on the ground to fill this significant gap in current impact investor expertise is a logical bridge. As Mercy Corps Ventures said: “Early-stage businesses need more than just capital to grow and scale up their impact — they also need business and technical support to realize their vision. INGOs have unique assets that make them well-placed to provide such support. In fact, the real value INGOs add to investees comes through their post-investment engagement” as well as M&E expertise. So too do national research institutes, building real, national capacity for sustaining results.

Impact investors will need to create funding vehicles that have more ‘patient’ and smaller infusions of capital, and INGOs will need to focus assistance on enterprises and projects that are remunerative to investors. Further, INGOs noted the absorptive capacity of local ‘impact’ investments, as a median of only $37,000. Is this cost-effective for the for-profits to lend so little, even when ‘bundling’ investments into funds? Time will tell. While Development Impact Bonds supported by bilateral donors can fill a gap in confidence in more local, even riskier investments, the industry needs to focus on results on the ground before making claims of impact. Such funders, e.g. DFID and the new US government Development Finance Corporation (DFC) launching late 2019 can be the key [23]. Sorting out how much the investments will focus on poor countries, what will “development assessments” include, and how will USAID M&E expertise be used to look at actual, not just intended, “development impact” is vital.

Impact Guild remains hopeful that the for-profit sector, even aided by INGOs, can have actual grassroots impact. As Exponent Philanthropy said in 2016, “So much time and effort is focused on getting an impact investment closed and the funds disbursed. However, executing an agreement isn’t the finish line and, in fact, it may not even be the halfway point. Post-closing, there is still a lot of work to do in monitoring the performance of an investment to ensure financial health and intended impact” [24]. An array of metrics are being collected but often only to inform front-end due diligence on the investment bottom line rather than sustainable development results of lives changed. That gaping hole must be acknowledged and filled to start to meet the SDGs.

Do you agree?




[1] OECD. (2017). The Private Sector: The Missing Piece of the SDG Puzzle. Retrieved from http://www.oecd.org/dac/financing-sustainable-development/development-finance-topics/Infographic%20-%20The%20Private%20Sector%20-%20Missing%20Piece%20of%20the%20SDG%20puzzle.pdf

[2] Dallman, J. (2018, December 31). Impact Investing, Just A Trend Or The Best Strategy To Help Save Our World? Retrieved from https://www.forbes.com/sites/jpdallmann/2018/12/31/impact-investing-just-a-trend-or-the-best-strategy-to-help-save-our-world/#3828adf775d1

[3] MSCI ESG Sustainable Impact Metrics. (n.d.). Retrieved 2019, from https://www.msci.com/esg-sustainable-impact-metrics

[4] Fraser, I. (2018, July 17). How ESG investing entered the mainstream. Retrieved from https://www.raconteur.net/finance/esg-investing-enter-mainstream

[5] Cheam, J. (2015, March 10). The rise of the circular economy in Asia. Retrieved from https://www.eco-business.com/news/rise-circular-economy-asia/

[6] Edie Newsroom. (2019, March 20). HP Pledges to Make All Printed Pages ‘Forest Positive’. Retrieved from https://www.edie.net/news/5/HP-pledges-to-make-all-printed-pages–forest-positive-/

[7] Edie Newsroom. (2019, March 19). Energy Catapult launches SME support for low carbon heating and cooling. Retrieved from https://www.edie.net/news/6/Energy-Catapult-launches-support-for-low-carbon-heating-and-cooling/

[8] Mpala, D. (2019, January 31). Here are 8 accelerators, incubators African startups can apply for in 2019. Retrieved from https://ventureburn.com/2019/01/accelerators-incubators-african-startups/

[9] CB Insights. (2017, December 6). The Solar Industry’s Most Active Investors. Retrieved from https://www.cbinsights.com/research/most-active-solar-startup-investors/

[10] Vella, H. (2018, July 19). Financing sustainable energy for developing economies. Retrieved from https://www.raconteur.net/finance/financing-sustainable-energy

[11] Lu, J. (2019, February 13). Crowdfunding the Sustainable Development Goals. Retrieved from https://www.undispatch.com/crowdfunding-the-sustainable-development-goals/

[12] Mudaliar, A., Pineiro, A., & Bass, R. (2016, December 7). Impact Investing Trends: Evidence of a Growing Industry. Retrieved from https://thegiin.org/research/publication/impact-investing-trends

[13] SGG Group. (2018, September 21). Impact investing in Africa. Retrieved from https://www.hvst.com/posts/impact-investing-in-africa-ERrTdDm3

[14] Salmon, F. (2019, March 17). Bill McGlashan’s firing exposes hypocrisy in impact investing. Retrieved from https://www.axios.com/tpg-capital-bill-mcglashan-impact-invsting-06828a4f-7390-46d8-b7e4-c6d3f7fbc7c7.html

[15] Digard, R. (2018, September 10). SDGs: Financial centres take cue from UN on sustainability. Retrieved from https://www.raconteur.net/finance/sdgs-financial-centres-sustainability

[16] Global Impact Investing Network. (2018, June 6). Annual Impact Investor Survey from the Global Impact Investing Network (GIIN) Shows Evidence Of Dynamic And Diverse Impact Investing Market (Press Release). Retrieved from https://thegiin.org/assets/2018%20Annual%20Impact%20Investor%20Survey_Press%20Release.pdf

[17] B Analytics. (n.d.). Demonstrate Your Leadership with a GIIRS Rating. Retrieved from https://b-analytics.net/giirs-funds

[18] Rockefeller Foundation. (n.d.). Impact Investment Management. Retrieved 2019, from https://web.archive.org/web/20190623144658/https://www.rockefellerfoundation.org/our-work/initiatives/impact-investment-management/

[19] Simister, N. (2015). Outputs, Outcomes and Impact. Retrieved from https://www.intrac.org/wpcms/wp-content/uploads/2016/06/Monitoring-and-Evaluation-Series-Outcomes-Outputs-and-Impact-7.pdf

[20] GALI. (n.d.). Accelerator Directory & Survey Methodology. Retrieved 2019, from https://www.galidata.org/accelerators/methodology/

[21] Impact Investing Network Map. (n.d.). Retrieved 2019, from https://impactinvestingmap.com/insights/

[22] Dente, T., Libby, S. B., Turpin, S. M., & Sharma, S. (Eds.). (2018, December 5). Amplify Impact Investing 2: The Next Mile of Impacting Investing for INGOs. Retrieved from https://www.humentum.org/impact-investing

[23] Saldinger, A. (2019, March 19). New US development finance institution edges toward launch. Retrieved from https://www.devex.com/news/new-us-development-finance-institution-edges-toward-launch-94497

[24] Velasquez, C. (2016, December 2). Impact Investing: Impact Measures and Monitoring Tools. Retrieved from https://www.exponentphilanthropy.org/blog/impact-investing-impact-measures-and-monitoring-tools/


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