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

Monday, November 6, 2017

The field of sustainable and impact investing has shown tremendous growth over the last few years. But there are still too many asset owners sitting on the sidelines, interested in making an impact but not yet investing for it.

To paraphrase U2’s Bono – a recent high-profile convert to the cause – it seems that many “still haven’t found what they’re looking for”.

So why does interest continue to outstrip activity? One reason is a dearth of suitably scaled investment products. But there’s another problem: We still lack a common convention for measuring the impact of impact investing.

To address this problem adequately, we need to examine the larger process of impact management.

In standard financial management, an investor’s goals are derived in part from their return expectations, risk appetite, time horizon and liquidity needs.

Similarly, impact management is the process by which asset owners understand and articulate their impact goals – where they want to invest, who they want to reach, what problems they want to solve, what risks they want to take – and then translate these into specific investment decisions.

Photo courtesy of Véronique Debord-Lazaro.