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

Impact — a buzzword constantly splashed across marketing material and in conversations worldwide — is a misunderstood concept hearkening to a nebulous, fungible arena: people’s values and their desire to make the world a better place. Spurred by millennials, a values-driven generation, impact investment has undergone colossal growth in the past few years. However, the impact investment industry has unsolved issues regarding its definition, its scope, and how impact is even measured. High-minded ideals are contrasted with accusations of whitewashing as the hazy segment struggles to mature and coalesce. As the sector approaches an inflection point, the time is ripe to bring some structure to the field.

While investing in the social welfare existed long before the name impact investment came into use in 2007, it was not until then that various forms of investment revolving around social impact — focusing on areas such as clean energy, microfinance, poverty reduction, public health and education — were brought together under one umbrella. The industry has since grown immensely, with a GIIN survey in 2020 placing the market size at about USD 715 billion, up by 42.4% from 2019’s estimated USD 502 billion. In spite of its astounding growth, the developing impact investment field is awash with confusion over what it entails, how it should be measured, and which players are part of the game.

Photo courtesy of Pablo García Saldaña.