Impact investing: a solution to the world's problems?
According to an impact investment expert, the mode of investing could help to solve some of the "critical issues" of modern day life.
Fran Seegull, the chief investment officer and managing director for the nonprofit financial services firm ImpactAssets, said that impact investing could be the key to solving some of the world's most pressing problems.
"Some of the world’s most intractable social and environmental problems are in need of new solutions. From climate change to resource scarcity to exploding global population growth, the traditional levers of change, including philanthropy and government aid, are insufficient to address the critical issues of our time,” said Ms Seegull.
Seegull's firm aims to boost impact investing through creative product development and field building, increasing the amount of capital flowing into the investment class. “We see ourselves as impact entrepreneurs at ImpactAssets. I consider myself to be an impact entrepreneur. I have devoted my entire career to creating impact from philanthropy to venture capital to impact investing," said Ms Seegull.
One of the key global concerns is poverty and the accompanying resource scarcity that goes hand in hand with that. Three billion poorest people across the world live on under $2.50 per day and 80 per cent of the world’s total population survive on under $10 a day, while 805 million do not have enough food to eat. A further three-quarters of a billion people are not able to readily access fresh drinking water, and, with the population set to grow to nine billion by 2050, this situation looks set to become increasingly dire.
However, impact investing could prove to be a solution to these concerns, says Ms Seegull: "By harnessing the power of capital markets and focusing on maximising stakeholder value (not just shareholder value), impact investing addresses the systemic challenges of poverty, income inequality and climate change. Our goal is to ‘scale-up’ and ‘democratise’ impact investing."
Offering impact investments with much lower minimums than traditional investments is one way in which more people could be encouraged to inject capital into the medium. The Giving Fund is an "innovative donor advised fund" and comprises an "impact investment platform of public and private debt and equity", which would offer ordinary investors the opportunity to become involved in impact investing.
Interest in the investment class has grown following a White House meeting regarding the medium in 2014, but it is clear that barriers remain, which serve to hinder its growth. Perhaps the key challenge the investment form still faces is a lack of engagement with financial intermediaries. Ms Seegull says that the solution to this issue is to "facilitate deep impact investing — smaller private debt and equity funds — on mainstream platforms without compromising due diligence".
“Creating impact deal platforms and groups that syndicate investment in individual deals and funds could make deep impact more efficient and accessible," she added.
One of the other key concerns hindering growth is the "perceived trade offs between financial and impact returns", added Ms Seegull. It is clearly key to reassure potential investors that the two offshoots of impact investment — the social and the monetary gains — can and do co-exist happily together, without one impinging negatively on the other.
It is also clear that there has been much forward movement across the impact investment sphere in recent years and that is a major positive for the sector, but more needs to be done to ensure the medium becomes increasingly mainstream. Only then will it have the potential to help solve some of the globe's most pressing issues.