Impact investments aim to solve social or environmental challenges while generating financial profit. Impact investing includes investments that range from producing a return of principal capital (capital preservation) to offering market-rate or even market-beating financial returns. Although impact investing could be categorized as a type of "socially responsible investing," it contrasts with negative screening, which focuses primarily on avoiding investments in "bad" or "harmful" companies - impact investors actively seek to place capital in businesses and funds that can harness the positive power of enterprise. — The Global Impact Investing Network
A chorus of prominent voices is calling for business to play a proactive role in addressing social and environmental challenges at scale: Bill Gates calls for 'creative capitalism', Tom Friedman calls for a 'green economy', Al Gore and David Blood call for the 'sustainable corporation', and Muhammad Yunus calls for 'social business'.
The sustainable capitalism called for by these thought leaders already exists in a fragmented form today. However, a fragmented market is not capable of growing the number and scale of companies, nor can it attract significant institutional capital. This requires defining an "impact investing" asset class and accelerating the emergence of new capital markets that support appropriate investment vehicles.
Since the 1980s the concept of socially responsible investing has taken off exponentially. SRI assets in the US rose more than 324% from $639 billion in 1995 to $2.71 trillion in 2007. The vast majority of these assets are invested in negatively screened public equities funds, allocation of capital toward companies in a given industry that have lower ESG risk, or the use of shareholder activism.
Investors are increasingly seeking impact investing opportunities or investments that generate a financial return while solving social and environmental problems. The Monitor Institute's recent report on "Investing for Social & Environmental Impact" estimates that Impact Investing has the potential to grow to about 1% of total managed assets, which would result in about $500 B of capital channeled toward social and environmental impact.1
B Lab is collaborating both formally and informally with the following organizations, which all working to build the impact investing industry:
Good Capital — US
Better World Books is a unique Social Enterprise - a triple bottom line business where creating a nursing library in Somaliland, supporting employees with profit sharing and equity ownership opportunities, and shipping book orders climate neutral are not just a by-product of doing business — they are the business. We're not a company with an add-on "cause" component. Social and environmental responsibility is at our core. You could say it's in our DNA.
TBL Capital — US
CleanFish is a company, an aspiration and a movement. We believe that by sourcing delicious seafood from people who care, we can spark a return back to healthy oceans and regenerative ecosystems. We specialize in providing top quality seafood that is delicious, safe & sustainable - fish you can trust™.
Mindful Investors — US
Founded in 1994, Indigenous makes clothing that honors both people and the planet. Indigenous is a leader in organic and fair trade clothing. Indigenous' clothing supports thousands of artisans in the most remote and impoverished regions of the world and uses the finest organic materials and traditional skills passed down over thousands of years.
RSF Social Finance — US
NUMI Organic Tea is a leading natural and specialty tea company known for its premium full leaf teas, herbal teas and innovative line of Flowering Tea. Numi's whole leaf teas are never treated with artificial flavors, colorings, or oils, making it the Purest Tea on the Planet. Numi is committed to quality, authenticity, global consciousness and sustainability in its packaging and business practices.
Acumen Fund — Egypt — Healthcare
Care with Love started in 1996 and was the first organization that trained home healthcare providers to care for the elderly in the Arab world. The organization provides job opportunities for young adults who become home healthcare providers while also offering care for the elderly and homebound. Care with Love is financially sustainable through its clients and finished repaying its debt in 2007. Care with Love was started by Magda Iskander, a female entrepreneur, who studied medicine in the US.
African Agricultural Fund — Tanzania — Agriculture
East Africa Food Network (EAFN) was set up in Tanzania in 2007 to dehydrate and export vegetables from the East Africa region to international export markets, particularly the EU, but with a view to developing longer term markets in the rapidly developing Asian economies. Investment in EAFN has enabled the company to acquire machinery in both Kenya and Tanzania, and to provide it with adequate working capital that has enabled the business to penetrate and sell fresh vegetables in major super market outlets in Kenya.
Grassroots Business Fund — Tanzania — Microleasing
SELFINA is a for-profit micro-leasing company that provides business training and other economic empowerment services to over 11,000 active clients--lower-income (mostly rural) women in Tanzania. Its micro leases help women acquire assets that create or add economic value, and which can also serve as collateral to support further business growth. SELFINA has also started offering longer term, larger leases for business expansion purposes to those women entrepreneurs who have a successful credit record with SELFINA and prospects to grow a larger business. Investment in SELFINA helped SELFINA grow, expand geographically, and attract additional investment.
New Ventures at the World Resources Institute — Indonesia — Renewable Energy
Dyna Energy, a clean technology company, fosters the use of renewable energy for small and medium sized enterprises. The company owns a number of patents for its cyclo-turbulent furnace for lignite ignition. The company is seeking investment capital to purchase additional facilities / equipment. With additional capital, the company will be able to grow its business, create additional jobs, reduce pollution, and help more companies transition to renewable sources of energy.
1 The Monitor Institute, Investing for Social & Environmental Impact: A Design for Catalyzing an Industry, 2009, pg.