It’s been a decade since the term ‘impact investing’ was coined by the Rockefeller Foundation to describe financial investments that put a focus on delivering social or environmental impact alongside generating a financial return. The sector was estimated at $60 billion in assets under management in 2015, and steadily growing as more players enter the game. But despite the relative youth of the ‘impact’ sector, the idea that making a profit should go hand in hand with making the world a better place is nothing new. Indeed, many advocates of unfettered capitalism push their agenda in the belief that investing in economic development is the most efficient way to lift people out of poverty and foster social development.  There isn’t a clear line to be drawn between ‘impact investing’ and the more traditional type, but the broad spectrum of impact is becoming better understood by those in the industry.

At the beginning of December, experts from across finance, development, social affairs and academia came together for one of the industry’s largest conferences: the annual Impact Investing Summit in London. Conversations and presentations at the summit focused on finding the balance between social returns on investment with cash profit, defining the roles of players from different sectors, and developing new financial instruments to make investing for social impact more accessible to institutional investors and individuals looking to invest. This piece explores the conference’s major themes: impact definitions, impact measurement, and the partnerships needed to create the change the movement is pushing for.

Building a shared vocabulary

Flick through the Financial Times or the Wall Street Journal and the average reader is bamboozled by the jargon plastered across the pages, with bond yields, share indices and foreign exchange rates that dance like leaves in the wind. But what reads as nonsense to the uninitiated has unambiguous meaning to those in finance, allowing those in the know to communicate clearly with one another. A common language allows for common understanding and for the financial community to work towards common goals, often to maximise cash profits. That such a shared vocabulary is currently lacking in impact investing, and the consequences of this for the movement, was ably articulated by Amanda Feldman, a director at Bridges Impact+ (part of Bridges Ventures, a London-based impact investing firm with over £1billion under management) and lead on the Impact Management Project, a cross-industry campaign seeking to fill the gap in vocabulary and understanding.

The Impact Management Project make a suite of their own resources and those from others across the sector available online. Judging from conversations at the conference, there’s still a way to go before everyone is as comfortable in describing the social impact of their work as they are describing the financial opportunities, but it’s top of the agenda and the Impact Management Project has the important industry players on their side. As one conference attendee told me, “It’s difficult to compare apples and oranges, but with words to describe them, we can give it a good shot.”

Measuring your impact

As with the precision lexicon shared by those in the financial industry, there is one master metric for the value of an investment: money. For social value, defining that golden metric isn’t quite so easy. Should impact investors be looking to maximise the number of people their investments reach, or is the quality of those impacts more important? To what extent should investments be adding value that would otherwise go un-provided by others in the market? How could we measure that, and does it even matter?

Understandably different organisations have different answers based on their different priorities, resulting in a proliferation of tailored approached for different investors and different funds. Clearly, how you define what you’re trying to achieve shapes what you measure and how you measure it. A philanthropic foundation seeking to maximise social value in affordable housing naturally uses different metrics to a private equity firm managing billions of pounds of assets in ESG (Environmental, Social, Governance) funds. These priorities must be aligned to the organisation’s goals and be manageable within their budget. Acumen’s lean data approach is a great example of impact measurement innovation, generating data on the social returns of an enterprise while also providing insights useful to those running the business to fine tune their revenue generating strategies. Nesta, the innovation foundation, make a range of tools available to aspiring entrepreneurs and investors to understand how to think about and measure the impact of their work, such as their Standards of Evidence for Impact Investing Guidelines.

At the end of the day, it may be foolish to expect a commercial financial institution to put as much effort into measuring the social impact of their work as would UN agencies or the World Bank. To an extent, there’s a trade-off between the money invested in creating impact and the money spent measuring it, but there’s only so far you can go with this argument. But if newcomers to the field want to understand the social value they create – both to ensure they are on track and to avoid accusations of ‘social washing’ their usual business dealings to tap into an increasingly lucrative trend, impact measurement needs to be a key part of their operations.


Partnerships for development are at the heart of the UN’s Sustainable Development Goals, ratified in September 2015. Such partnerships, incorporating public, private and non-governmental entities, span the whole gamut of development priorities, but at the top of the pile must come partnerships to provide the capital needed to hit these ambitious development goals.

Estimates put the cost of achieving the SDGs at between US$5 and US$7 trillion, with an investment gap of around US$2.5 trillion in developing countries. Many of the speakers at the conference discussed the partnerships and new financial instruments their organisations have developed to leverage capital from outside traditional social development funders. Toby Eccles of Social Finance talked about the bureaucratic acrobatics needed to create the Peterborough recidivism social impact bond (‘SIB’) – the first in the world – seen by many in the sector as a success, with the model now being adapted across the world. Funding mechanisms that bring together public service providers, financial institutions and service delivery experts are increasingly being welcomed in some spheres as the future of creating public goods.

There are now dozens of SIBs and development impact bonds (‘DIBs’) up and running around the world and many more under consultation. Alison Bukhari of Educate Girls, a not-for-profit that has employed a social impact bond model funded by the UBS Optimus Foundation to improve educational outcomes, presented their strategy, working with advisors from Instiglio to optimise targets and incentives to hit the targets needed to achieve the desired outcomes and ensure the funder gets a pay out.

Taking a different approach, UNICEF Uganda spoke of their efforts to set up a social impact fund, from which the interest earned on the principal investment will be used to fund child protection programmes. Unsurprisingly, this approach has received a lot of support from the Ugandan government because fewer resources will be needed from them directly. For governments with small budgets and a multitude of pressing social problems to address, generating financing like this is undeniably useful. While recognising their utility, however, it is important to consider the bigger question of who should be responsible for funding public services and social protection. Will handing the reins over to financial institutions, NGOs and private service providers lead us into an accountability crisis in providing social development? The UK, a pioneer in hybrid public-private partnerships, has experienced high-profile failures when outsourcing companies fail to live up to the contracts they have signed. The on-going Carillion debacle is just one example in a string of crises that includes many of the biggest providers: G4S, Serco and Capita.

Where do we go from here?

The growing momentum in impact investing is a positive sign, but the sector needs leadership and, as the assets under management grow, will become the focus of greater regulator scrutiny. Governments are taking note of impact investing as more than a faddy fringe movement, hoping to promote its double bottom line of economic growth and social development. It will be interesting to follow the trajectory of the industry as ‘millennials’ start to invest their assets, but we’ll probably only begin to understand the large scale effects of impact investing in a decade or so, when the evaluation of private financial contributions to achieving the SDGs becomes a priority.


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Joshua Eyre is a second year LSE MPA student and a ex-lead editor for the Public Sphere Journal online. Outside LSE, Josh consults with a range of businesses and charities to help them define and refine their impact.

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