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

Monday, June 11, 2018

The impact investment industry is growing rapidly, a fact that many of us in the field celebrate. In 2010, J.P Morgan projected up to $1T in investment would be deployed this decade — which would make impact investing twice the size of official development aid to the world’s less develop countries (as defined by the United Nations), presuming historic levels of aid stayed constant since 2010. Many of us are starting to envision a day where we can drop the “impact” moniker and just assume that investments take into account social and environmental factors.

But are we scaling the right model? How do we make sure that the blossoming impact investment movement — especially as it starts to supplant traditional aid — actually leads to improvements in outcomes for the people and communities it is supposed to benefit?

Impact investors over the past decade largely focused on proving that impact investments could achieve a “market rate” or above return profile. Making something wildly profitable will of course attract the attention of financial markets, and thus increase the chances it will scale effectively.