In a ‘letter from the CEO’ in the Global Impact Investing Network’s (GIIN) Roadmap for the Future of Impact Investing report, co-founder and chief executive Amit Bouri questioned whether the impact investment movement had done enough for a “better, brighter and more equitable future”.
“Although the industry has achieved incredible growth and captured widespread interest, it is still generating only a fraction of the impact required to address the global challenges facing our communities and our planet,” Mr Bouri wrote.
The report pinpointed “three specific priority areas” that required attention in order to advance the impact investing movement.
Firstly, ‘feasibility of scale’ needed to be demonstrated, the report stated.
“Over the past decade, impact investing has demonstrated its feasibility in many respects, establishing general credibility.
“As the market grows, it must demonstrate its effectiveness on an ever-increasing scale, in terms of both progress against social and environmental challenges and the ability to generate financial returns to satisfy investors across the risk–return spectrum,” the report said.
If impact investing’s effect on social or environmental issues were not felt, the word ‘impact’ would be “little more than a marketing gimmick”.
Failing to demonstrate financial returns would see impact investing sidelined to a “niche market”.
The report also pointed out that there needed to be greater accessibility to impact investment products for the movement to gain further traction.
“Impact investments must be made available to a much broader set of individuals and institutions than they are at present, which includes everyone from retail investors to large institutional investors,” the report said.
It pointed out groups within the investment industry that needed to mobilise in order to generate easier accessibility.
“Investment intermediaries — including fund managers, investment banks, and ratings providers — must move into impact investing (and be encouraged/incentivized to do so by field builders), as this will lead to the development of investment products and vehicles that are necessary.”
Finally, industry standards of impact measurement and management (IMM) needed to be established given that impact investors, scattered “around the world”, were a “diverse group” with “myriad impact motivations” utilising “a full range of investment instruments”.
“This universe lacks a commonly accepted or understood segmentation, creating confusion and opacity that constrains the deployment of investment capital,” the report said.
“An additional challenge is that the practice of IMM is currently highly idiosyncratic, restricting the ability across the field to understand, communicate, or compare performance.
“The industry needs to focus on enhancing the standardization and rigor of IMM practice, so that investors can be significantly more effective in driving toward impact goals.”
