OPINION: Give Impact Investing Time and Space to Develop
Monday, March 17, 2014
Impact investing has captured the world’s imagination. Just six years after the Rockefeller Foundation coined the term, the sector is booming. An estimated 250 funds are actively raising capital in a market that the Global Impact Investing Network estimates at $25 billion. Giving Pledgemembers described impact investing as the “hottest topic” at their May 2012 meeting, and Prime Minister David Cameron extolled the potential of the sector at the most recent G8 summit. Sir Ronald Cohen and HBS Professor William A. Sahlman describe impact investing as the new venture capital, implying that it will, in the next 5 to 10 years, make its way into mainstream financial portfolios, unlocking billions or trillions of dollars in new capital.
As this sector moves from the margins to the mainstream, it’s important to consider: What will it take for impact investing to reach its full potential? This question is hard to answer because, in the midst of all of this excitement, there aren’t clear success markers for the sector. Without those, the institutions managing the billions of sector dollars won’t be able accurately to assess the risks they are taking and, more important, the returns, both financial and social, they hope to generate.