An Investment That Mixes Profit With Philanthropy
Monday, April 25, 2011
The grey zone of impact investments – which are neither philanthropic grants nor simple for-profit investments – is potentially huge.
A report from JP Morgan late last year suggested the potential over the next 10 years, in just five sectors of services for the global poor, was for invested impact capital of between $400bn and $1 trillion, delivering profits of between $183bn to $667bn.
Perhaps even more significant was the analysis of financial returns at existing impact funds, which showed some achieved performance matching or exceeding their mainstream counterparts. Antony Bugg-Levine at the Rockefeller Foundation, which supported the report, says: “Impact investors don’t need to make a trade-off between social and financial returns. That was the headline finding of the JP Morgan research. It’s not either, or.”
It may be that some impact investments deliver a limited return, or no return at all, particularly when providing services to the very poor. But others may produce commercial or better financial performance.
By recycling this capital, and allowing government grants and philanthropy to be focused on the most needy cases, those in the sector talk about “leveraging” the potential for impact more broadly.