NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, January 13, 2016

2015 was an unprecedented momentum-building year for impact investing, and we expect the excitement to continue in 2016. Here are our five predictions for what’s to come.

Assets under management will multiply significantly.

While interest in impact investing is at an all-time high, the amount of impact investing capital being deployed to date is relatively small. Yet the recent Chan Zuckerberg Initiative is just one indication of the changes to come. Twelve years ago, Omidyar Network was extremely unconventional with its “problem first, tool second” approach.” Functionally, this meant creating a hybrid model—both a traditional foundation and an LLC—to support the right changemakers, regardless of whether they were for-profit or nonprofit. Now, other prominent philanthropists are following suit and pursuing market-based complements to nonprofit social change approaches.

New waves of business investment and innovation will be home-grown in emerging markets[e1] .

Impact investing will not just flow into emerging markets, but will grow from within. For example, Unitus Capital, an impact investment-focused investment bank, expects impact equity investments in India to grow 30 percent this year. And almost half of all assets under investment in three of Africa’s most significant economies—South Africa, Kenya, and Nigeria—are being invested for good in some way, according to new research from the UCT Graduate School of Business.

Pension fund and foundation engagement will spike.

Following major policy advancements in the second half of last year, 2016 will be the year to leverage changes that enable pension funds and foundation endowment managers to pursue impact investing.