GIIN Forum: Three steps to go big on impact investing
Impact investing has hit a “fork in the road” and could easily lose momentum in coming years – unless the entire investment industry gets behind the movement.
Opening the Global Impact Investing Network (GIIN) Forum in Paris yesterday, GIIN CEO Amit Bouri (pictured) shared a vision of two parts. Either the initial “surge of interest” in impact investing would die down, he said, with deals continuing but growing more slowly and remaining niche or “folded into the status quo – a footnote in the history of the financial markets.” Investors would create only “create pockets of impact... In other words, the market grows, but we fail”.
The alternative, he argued, was “market transformation”, where every investment accounts for social and environmental impact. “In this second possibility, we pull the rest of the financial markets along with us, raising the bar for all investments and establishing a new way of doing business,” Bouri said.
In this second possibility, we pull the rest of the financial markets along with us... establishing a new way of doing business.
The GIIN Forum, billed as “the largest gathering of impact investors ever assembled”, was attended by over 1,200 delegates from some 80 countries – from pension funds, family offices, development finance institutions (DFIs), asset managers, banks, financial institutions, advisory firms, government and NGOs.
Despite this apparent groundswell of interest, Bouri warned that business as usual was the more likely outcome – and the only way to fight this would be not just to offer an alternative, but a “systemic change” in investing.
Many in attendance spoke of progress already made. Sir Ronald Cohen, chair of the Global Steering Group for Impact Investment, pointed to the significant growth in dollars – impact fund managers now manage a record $228 billion of assets, according to one estimate – and the growing interest among consumers, pension fund contributors and employees in their footprint on the world. Impact investing had made the leap from “a field” to a “movement”, Cohen continued, with increasing awareness of the private sector’s potential role in the new economy. Awareness, though, is clearly not enough: acknowledging that his message could be a case of “preaching to the converted”, Cohen responded: “Well, the converted need to get going!”
Bouri set out three ways to start. First, more capital: bringing in more investors to unlock more money and engaging everyone, from boutique firms to large global institutions, and from high-net-worth individuals to retail investors. Second, safeguarding what he called “the integrity” of impact investing: “We need to establish strong values and expectations for impact investors... to ensure that we achieve impact at scale, not just capital at scale.” And third, building a wider movement for impact investing and changing mindsets: “We need to empower every person with the knowledge that their capital can help to build the world they want to live in,” he said.
We need to empower every person with the knowledge that their capital can help to build the world they want to live in.
Another voice that stood out among the more measured reflections on investing – many attendees were from mainstream firms relatively new to the “impact” space – was that of Jed Emerson, who co-authored the first book on impact investing. Questioning the focus on the detail of strategy or metrics, or on scaling up, he called for a much deeper rethink. “Is the purpose of capital simply to self-replicate, so we can do something else? I reject that idea,” he said. “Capital is a social construct that we’ve evolved – we can move beyond that.”
Whether impact investors will heed Bouri’s call to take responsibility “beyond our own deals and our own portfolios” remains to be seen. There may not be an option, though. As Bouri put it: “What does success mean for impact investing… if the broader system is failing?”