2022 Global Impact Leaders Survey
by Matthew Bishop and Geoff Davis
Definition of Impact
Current State of Impact
Leaders in impact come from all walks of life, regions, industries and professional organizations. Their work spans the United Nations Sustainable Development Goals and beyond. To better understand the opportunities and great challenges these global leaders see for our world, the Sorenson Impact Center has brought together a founding group of Sorenson Global Impact Leaders This report highlights the key findings of our inaugural survey, the first in what we expect to be an annual collection of insights gathered from this curated group of world leaders.
By Matthew Bishop
Sorenson Impact Center Senior Fellow
Sorenson Global Impact Leaders believe the impact space enters 2023 at a critical moment. While the need to deliver impact remains as urgent and substantial as ever, some worrying countervailing narratives are emerging, such as increasing concerns over green and social washing and the growing politicization of the field, not least by critics of so-called “woke capitalism.”
Among the Global Impact Leaders, these factors have contributed to serious concerns about the current state of the field of impact, with 46% reporting they were either “Somewhat dissatisfied” or “Very dissatisfied” with the industry, only 34% were “Somewhat satisfied,” and none were “Very satisfied.” Yet more than two-thirds of Global Impact Leaders are hopeful that things will improve: 15% say they are “Very optimistic,” and 56% are “Somewhat optimistic” about the future of impact in terms of delivering positive outcomes and the United Nations Sustainable Development Goals (SDGs).
A lack of clear impact leadership across the social, business, and government sectors is regarded as the biggest challenge facing the field, ahead of failings of government policy and regulation and the lack of standardized impact measurement. The survey illuminates the opportunity and the need for convenings and media to bring awareness to the incredible work being done by leaders and practitioners across all sectors.
Some notable thinkers in the impact sector have worried that ESG investing may eclipse impact work, replacing it with something less substantial or, at the very least, it may be an unnecessary distraction. Nevertheless, overall, the recent rise of ESG investing is viewed as a positive by Global Impact Leaders. Some 85% believed that the widespread adoption of ESG is either “Helpful” or “Very helpful” to the impact space and achieving the SDGs, with only 2% saying it is “Harmful.”
In their comments, many Global Impact Leaders expressed concern about the recent backlash against ESG, especially in America, while at the same time seeing this controversy as an opportunity for the impact space to influence ESG investors to be more rigorous, not least by calling out green and social washing. Many in the impact space have long been focused on social impact, which makes them well-placed to help improve the quality of “S” reporting, which is generally viewed as weak compared to current environmental and governance reporting in the ESG bundle.
Some 61% of Global Impact Leaders said they agree with Sorenson’s definition of the impact space as the “cross-sector global network of people and organizations working toward sustainable solutions for peace and prosperity for all people and the planet” — a transformational goal reflected well in the SDGs. Although this may initially seem low, those who disagreed explained their opposition primarily because they wanted the definition tweaked rather than fundamentally rewritten. Also, some felt that the SDGs do not sufficiently reflect the enormity of what is needed to tackle climate change. One dissenter objected that the definition “uses inaccessible language that most people would not understand.”
Sustainable Development Goals
Goal 13 (Climate Action) is the most important of the 17 SDGs to be achieved by the target date of 2030, the Global Impact Leaders say, followed by Goal 1 (Ending Poverty). Strikingly, while mostly agreeing that this will need to be a multi-stakeholder effort, more than half of the Global Impact Leaders say that the most important institution, if the SDGs are to be delivered by 2030, is government, followed at some distance by asset owners and then business.
A Looming Recession?
If the economy goes into recession, as some forecasters have been predicting for a while, only 36% of the subset of Global Impact Leaders who are impact investors say they will carry on investing as planned, while 35% say they would cut back on the number of deals they do (including 14% who would cut by 50% or more). Yet an encouraging 29% say that in a recession, they would invest in more deals than currently expected. As one respondent remarked, “As recession bites, we are needed more,” and another commented, “Crisis = Opportunity.”
Interestingly, when it comes to the financial return they believe their impact portfolio would generate during a recession, 65% say it would be unchanged compared to non-recessionary conditions, 15% think they would earn below their current expectations, while 15% believe they would actually outperform.
Critical Needs in Impact
Two other priorities for urgent action emerged from the survey. First, the impact field has an excellent opportunity to lead in embedding diversity in every aspect of how it works and in giving meaningful voice over all aspects of what it does to those it seeks to impact positively. And second, while some Global Impact Leaders regard impact measurement as a distraction, the great majority of those surveyed think there is an urgent need for credible, broadly accepted standards for impact measurement and disclosure. There is considerable enthusiasm for efforts to attach a monetary value to impact, such as Harvard University’s impact-weighted accounting initiative.
To dig into the details of the survey and learn more about what individual Global Impact Leaders have to say about key topics, read on.
We would love to hear your feedback, which you can submit here.
Sorenson Impact Fellow and Global Impact Leaders Inaugural Chair
CEO Sorenson Impact Center
Definition of Impact
At its core, the impact investing community defines “impact” as measuring the positive or negative impact of investment capital and related activities on society and the environment. Often this definition is placed within the context of achieving one or more of the United Nations Sustainable Development Goals (SDGs). As referenced by Global Impact Leaders, the Global Impact Investing Network (GIIN) defined impact investments as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”
How do you define “impact”?
“Impact means materially improving the quality of life of humans, particularly those humans most vulnerable to a range of shocks, including climate — the poorest among us, excluded, marginalized, and overlooked.”
“Impact is a form of return on investment, where the measure is not a financial one but rather an outcome (or outcomes) that meaningfully benefit society or the environment. Impact Investing is the practice of investing in solutions to significant problems faced by society.”
“Sustainable change driven by the people closest to the issue.”
View all responses
- A change in an outcome – positive or negative, intended or unintended.
- A focus on the core activities of a company – does it provide healthcare, education, clean energy – then having a intention to address that need. I also think impact needs measurable outcomes. And providers of these services for impact should have a corporate structure that protects mission, ie they’re a B Corp or a CIC
- A measurable, long-term difference with respect to a societal challenge
- All actions have an impact, and our goal as leaders in the impact field is to assure that as many people, governments, companies and organizations as possible are assuring their actions and dollars create positive impact.
- At Elevar, our definition of impact centers around a direct impact of delivering essential services on the lives of underserved and low income customers. A perhaps simplistic way to look at it is whether the product/services being delivered increases the customers revenue or reduces its costs, to ultimately have a positive impact on their livelihood.
- At Global Ventures, we monitor our progress across five of the UN SDGs: No Poverty; Good Health and Wellbeing; Quality Education; Gender Equality and Decent Work and Economic Growth. Our goal is to create the belief and conviction that entrepreneurs are everywhere and if funded well, can solve real problems and create huge value. So far, our portfolio has had a demonstrable impact on millions of lives through its company founders creating 7,200 jobs, enabling female leadership, powering financial inclusion for over 27 million people and expanding healthcare access to over 4 million patients.
- By applying the Operating Principles for Impact Management
- Depends on your mission. So for me the impact made to dismantle poverty now and for future generations.
- Effecting positive change that benefits human lives in a way that is empirically measurable, sustainable, and with the potential to scale.
- Impact = the effect of something (or many things) on another (or many others). Impact can typically be positive, negative or neutral AND can sometimes be both positive and negative (e.g., something can have a positive environmental impact and a negative social/economic impact).
- Impact connotes the total and real effect on people and planet when considering and understanding context. Translated to impact investing, it is intentionally pursuing and realizing demonstrable positive change in one or more ways that meet the needs of people and planet. It is a dynamic notion that at its core seeks a positive change compared to the current state.
- Impact encompasses any positive or negative social, environmental, economic, or governance-related effects that are caused by our actions.
- Impact investing is intentional, transparent and accountable, aimed at delivering specified outcomes against measurable targets, which may be long term.
- Impact investing is investments that focus on driving positive social and environmental impacts, often, but not exclusively, in the private markets they can either be market rate or bellow market rate (i.e. catalytic capital.) They share objectives with the UN’s Sustainable Development Goal, of ending global poverty, addressing and reversing climate change, and achieving social equality.
- Impact is a change in an outcome caused by an organization. An impact can be positive or negative, intended or unintended. (Impact Management Project)
- Impact is a form of return on investment, where the measure is not a financial one but rather an outcome (or outcomes) that meaningfully benefit society or the environment. Impact Investing is the practice of investing in solutions to significant problems faced by society.
- Impact is achieving positive and additional environmental, social, and economic outcomes.
- Impact is the effects that we have on people and the planet, positive and negative
- Impact is the net positive change for people, community and environment as a result of our activities. At AVPN, the impact we seek is (i) increased flow of capital towards closing the SDG gaps in Asia and (ii) improved effectiveness of capital deployed by enabling collaboration, bringing to bear the field needs, knowledge and policy environment.
- Impact is the result of any action from a living organism or system
- Impact means materially improving the quality of life of humans, particularly those humans most vulnerable to a range of shocks, including climate — the poorest among us, excluded, marginalized, and overlooked.
- Impact per se is the consequences / effects of an intended action. It could be positive or negative. I usually talk about social impact, which would still be a short hand for ‘positive social and environmental impact on the (most underserved) people and the planet’.
- In terms of investment and corporate activity, I define impact as both the positive and negative, both the intentional and unintentional, of all investment and corporate decisions and actins.
- Intentional investing for double bottom line returns of social impact/s alongside financial return
- Investing in companies that driving solutions for climate change mitigation, adaptation, resilience or those addressing affordable and quality access of basic services and addressing inequities.
- Making a difference – changing the state of what would have been without your engagement
- Making a difference.
- Mobilizing people and organizations), their mindsets and capital, towards Achieve the 2030 Agenda for Sustainable Development (even if after 2030).
- Positive impact: creation of opportunities for transformation that creates development
Negative impact: Inefficient use of resources such as energy, water, materials “
- Positive progress toward specific social and environmental goals (i.e. including but not limited to the SDGs).
- Pushing forward positive change for all your stakeholders. In Novata’s case, we define our mission of impact as ‘Empowering private markets to achieve a more sustainable and inclusive form of capitalism.’
- Simply put – I think of impact as the positive or negative consequence of an action (or in some cases, inaction). Of course when we think about the “impact” space, we are typically thinking about positive impact, which starts with intent: impact is about an intention to make the world a better place for ALL people.
- Sustainable change driven by the people closest to the issue.
- The actual definition of “impact” is “a marked effect or influence”. If we want to define “Social and environmental impact”, it should be “a marked effect or influence on society and the planet”. And to define “Social and environmental impact field”, I would use “sphere of activity (including individiuals and organization actions) having a marked effect or influence on society and the planet”
- The mobilization of capital for social good
- To Align multiple sources of capital and processes with Social Outcomes
- Using the GIIN’s definition.
- We have shifted from focusing on impact at the org level to impact at the system level. Knowing that we will not “arrive” in our lifetime, we look at supporting healthier systems versus striving towards mission accomplished. A healthier system can be defined in a host of different ways based on the system we are working in.
- With respect to investing, I define it as using capital as a tool to benefit people and planet – in a way that is both intentional and measurable.
- Beneficial social or environmental impact that is measurable
- To have an effect on something or someone
Establishing the goal of impact as a field
Global Impact Leaders believe the ultimate goal of the impact field is to improve the quality of the world for people and the planet, using investment capital and innovation to drive more equitable outcomes. Many leaders stress the importance of funding scalable solutions to address climate change and inequality, proving that profit does not have to be sacrificed for financial and social good and changing our understanding of capitalism to benefit all stakeholders. Some hope that the ultimate goal of impact investing is that one day we will no longer need it.
The majority of survey participants (61%) agree with the Sorenson Impact Center’s definition of Impact.
What do you believe is the ultimate goal of impact as a field?
View all responses
- As a field, Impact should focus on authenticity, transparency and defensibility. There’s no “ultimate goal,” as the field will continue to evolve to achieve the three elements above, especially as data and methods improve.
- To improve the world as effectively as possible.
- Enabling greater wellbeing for individuals, society and planet.
- Improve the lives of individuals and the health of the planet.
- Access to education and availability of job opportunities remains limited to many, with the gap set to widen as the number of learners continues to grow and as more people come into the workforce. As a result of Covid, education and work have become increasingly remote and while it is difficult to predict what these sectors will look like ten years from now, a number of signals and trends are pointing toward a deep reconceptualization of education and a shift in thinking about the future of work to democratize access for millions. Technology solutions focused on redefining education and future of work have the potential to bridge gaps in affordability and update traditional models in ways that reflect, and are relevant to, the direction in which our world is moving.
- Harnessing the capital markets to drive positive social and environmental change and being effective enough at environmental, social, and financial return to achieve scale. Universal application of the Operating Principles for Impact Management or some other universally accepted framework for the standardization that is so important in financial accounting.
- To reduce inequality globally in a sustainable fashion with clear outcomes and metrics.
- Increase the positives and mitigate the negatives.
- Optimizing the financial system for such positive progress by changing definitions of value as well as risk and returns, (for example, by ‘internalizing the externalities’).
- As Keeanga-Yamahtta Taylor states in the Introduction of ‘How We Get Free: Black Feminism and the Combahee River Collective’, “If you could free the most oppressed people in society, then you would have to free everyone”. The ultimate goal of the social impact field should be social justice and equality of opportunity, or put another way, a world free of extraction, oppression, injustice and inequality.
- Sustainable social change and ultimately a more just world.
- Addressing and reversing the causes of climate change, ending poverty and addressing social inequality, driving business and tech for good.
- To make a sustained and meaningful dent in the broad set of challenges faced by humanity, and in doing so to change the way that both routine and complex economic decisions are made writ large. That is, to prove the thesis that alignment of the profit motive with sustainability is both natural and optimal.
- Effectively to become mainstream and crowd in more capital to be able to move reach more people and/or address pressing issues. For that reason, impact investors need to show returns and crowd in more investors. At the end, impact investing should simply be good investing.
- The ultimate goal of impact as a field is to harness market forces to shift public and private capital to evidence-based practices that sustain measurable, positive changes that benefit human lives at scale.
- making the state of existence better for people and planet
- I don’t believe impact investing has a goal. I believe that impact is subjective and defined by one’s own values.
- to shift capital and activities to issues and topics that generate or cause societal and environmental benefits
- Fund scalable solutions to address climate change and inequity.
- To align financial capital, commercial strategy or non-profit focus with desired environmental and social improvements.
- To improve the ability for all people to have equitable access to the tools and resources needed to live a healthy, economically secure life; and to protect the sustainability of our planet to support those lives.
- To accelerate the rate of positive change and curb the spread of harmful forces effecting humanity and the earth.
- To drive mass adoption of the view that capitalism must serve the interests of all stakeholders =, not just shareholders.
- To channel private capital at scale responsibly and effectively to the places, people and projects that need it most, delivering both risk adjusted returns and committed outcomes. This will include (but not exclusively) collaboration across public, private and third sectors, both to grow the field and also to deliver on specific objectives towards achieving a Just Transition to Net Zero.
- To mobilize enough capital to tackle the existential threat of Climate and the justice of the SDGs. To do so for the Well being of all and to ensure the maintenance of the Multilateral system
- To allow investors to identify companies/funds delivering impact outcomes where their core activities provide a social benefit for the wider community. Its an attempt to drive capital towards meeting social or environmental needs in measureable ways. It may also challenge existing business legal ownership models – together, this movement of capital and business will help transform free market capitalism into a better model, with accountability to stakeholders
- The ultimate goal is to advance a more sustainable and equitable future.
- As a field we need to reframe the way in which we see the role of capital and how it is deployed. Money is in service of people (all people) and the planet; not the other way around. With that reframe we need to provide clear approaches for how we can deploy capital effectively and efficiently to meet the needs of people and the planet. Recognizing there is a broad universe of strategies across asset classes and geographies, it is essential for the field that we enable and support a common frame for the way in which we consider, assess and measure what is happening as a result of capital being deployed.
- To focus on decision-making and actions that improve outcomes
- To effectively reallocate capital, build capacity, and ultimately change institutions to affect a just transition towards an inclusive, sustainable society
- To prove that it possible to invest in a way that benefits people and planet without sacrificing financial returns.
- The ultimate goal is to see the majority of activity and investment contributing positively to sustainability and the SDGs and significantly more capital flowing to solutions delivering impact at scale and meeting the SDGs. This requires us to move from the dominant system being one that over-emphasises financial considerations and return to one that integrates impact.
- To create the Critical Impact in attaining financing (and the incentive mechanisms) to actually achieve the SDGs and address the existential threat of Climate but to do so in a way that addresses the needs of all societies stakeholdes
- I work at the United Nations, but having created the world’s blueprint to achieve a better and more sustainable future for all does not translate directly in leveraged resources and accelerated impact.
- To address societal needs and benefits in a scalable, self sustaining way through mobilization of mainstream capital and the investment community
- The ultimate goal of impact as a field is to enable greater efficiency. Right now, for people who want to have an influence on delivering positive social impact, it is hard. It costs nonprofits $20 for every $100 they raise and there is very little information which tells us which organizations are best, what the price should be and how to connect buyers and sellers of impact.
- As the norm. And as a shift to the outcomes of impact. “Impact” as a field has grown from boutique investors and social enterprises, to impact funds created by mainstream asset managers and impact projects developed by big corporates – and now expanding further, as impact tools, management, measurement and regulation, takes on impact across public listed assets
- ACT to have a marked POSITIVE effect on society and the planet
- That it it no longer needed.
- Prosperity, with peace and equality.
- Devising concrete and scalable solutions to materially improve the quality of life of humans, particularly those humans most vulnerable to a range of shocks, including climate — the poorest among us, excluded, marginalized, and overlooked.
Sorenson Impact Center has defined the field of impact as the following:
The cross-sector global network of people and organizations working toward sustainable solutions for peace and prosperity for all people and the planet. Collectively, the transformational goal of the impact field is aligned with the United Nations Sustainable Development Goals.
Is this a definition you support?
If no, please explain:
- I support the above, but think that it’s both too broad and too limiting.
Too broad = many people and orgs fit into the definition above, but are not really focused on the specific discipline of impact or are not driven by impact-first methods.
Too limited = I think the impact field should focus on the positive, negative and neutral results of an action(s). I also think the “people and planet” may not include other living beings that are so critical to our collective survival”
- I find this definition too broad; in short, any or all organizations everywhere could fall into this description. And while I agree that the overall goals of the impact field would be aligned with the United Nations Sustainable Development Goals, I don’t see that as being definitional. Further, the SDGs will be re-worked (or replaced) in less than 10 year’s time, so it doesn’t seem like a good foundational element to use in defining a much longer horizon field of activity.
- I prefer the idea of wellbeing better than prosperity (which often is often associated with monetary growth).
- I mostly support the definition, but I do not believe that it is possible to align with all 17 of the SDGs at the same time. Studies show that there is a tradeoff between social and environmental return. Here is some of the recent research
- It’s not per se wrong, it just feels very wonky compared to how one would want to explain it to someone not in this field…
- I don’t have a problem with the definition per say, but I think that impact investing is too closely tied to the SDG’s and that can lead to some significant blind spots, specifically, for example, data privacy, access to information and the spread of miss information, which has proven to be hugely social (and environmentally)negatively impactful.
- I support the definition, but in practice think that an impact investor can define impact however she/he/they would like according to personal values. If someone thinks that a just world is pro-life, that person could pursue an impact investment that is pro-life. However, taking a pro-life stance can be interpreted by some as violent and in opposition to widespread prosperity, and therefore I don’t think it necessarily aligns with the definition provided.
- The objective is not “to work towards” but to solve – there is no alternative
- Its okay, but it doesn’t really include inclusiveness around ownership models – stakeholders including employees should benefit from the economic activities thats central to company success
- I worry about the use of the word sustainable. It is too often been narrowly construed about protecting and preserving the planet. I would suggest substituting ‘durable solutions’ or ‘real economy solutions’ or ‘lasting solutions’.
In addition, I am not sure peace and prosperity are enough in the context of the planet; perhaps peace and prosperity best apply to the people reference and protection / preservation regarding the planet. “
- Impact should be mainstream, not a separate field
- I support the focus of the definition on driving solutions for people and planet and the SDGs. However, the definition could be read as a niche group or field and part of our mission is to grow participation and deepen practice toward more impact being integrated (indeed, hardwired into design and management) across the ecosystem.
- Climate is an existential threat and is not fully covered inside the SDGS
- I do support it, but we might want to specify that we are talking about social and environmental impact.
- I support this definition.
However I feel it needs something more about the community voice, the people engaging with the outcomes of the impact. The Just Transition approach in workstream B of the G7 Impact Task Force is useful on this. “
- I like the definition. Just a few comments:
– I like that we use the word “network”, because it implies “connection”, but are we trying to say that it’s an intentional connection and also coordinated of people and organizations?
– Are we including Governments and public sectors in “cross sectors” and “organizations”? We should.
– I would change “working toward sustainable solutions for peace and prosperity” for “working on more and better prioritized and efficient sustainable solutions to achieve peace and prosperity…” or shorter “acting efficiently and coordinated to achieve peace and prosperity faster”. But I believe that it is important to add concepts like: “positive”/”better”/”more”, “faster”/”agility”, and “prioritized”/”efficiently”. Since coordination, prioritization and speed are huge issues”
- Uses inaccessible language that most people would not understand.
Current State of Impact
Satisfaction with Impact
None of our respondents consider themselves to be “Very satisfied” with the current state of the impact marketplace; 46% of respondents said they are “Very dissatisfied” or “Somewhat dissatisfied,” and only 34% consider themselves to be “Somewhat satisfied.” Despite this assessment, however, 56% of Global Impact Leaders say they are “Somewhat optimistic” about the future of impact, and 15% are “Very optimistic.”
For the most part, Global Impact Leaders are neither “Very satisfied” nor “Very dissatisfied” with the role that the three major stakeholders — the business, social, and public sectors — have played in the impact field. The social sector receives the most positive reviews, with 39% of respondents saying they are “Satisfied” (and 2% are “Very satisfied”) with the sector. 46% of respondents are dissatisfied with the business sector and 49% are dissatisfied with the public sector.
With positive global outcomes and SDGs in mind, please indicate your level of satisfaction with the current state of the field of impact.
With positive global outcomes and SDGs in mind, please indicate your level of optimism for the future of impact.
Is there anything you’d like to clarify about your responses above? Are there any specific areas of the impact space that you feel require greater growth and development?
View all responses
- Growth and development needed around:
– understanding of impact measurement and quantification of positive, negative impacts
– standards for data collection, accounting, measurement, reporting, etc.
– collective agreement to hold impact standards on par with traditional financial metrics
- Impact field is still very paternalistic, northern, western and white. How might we better enable local leaders to solve their own challenges?
- I think there needs to be more honest and open discussion about net impact, i.e., the aggregate positive and negative impacts of impact investments so that asset owners, asset managers, and the ultimate beneficiaries are clearer about the ultimate impact they are having.
- The world is going through a new wave of elections that are resulting in a less democratic/liberal world. Also The three years time with 2 years of pandemic and going to a year impacts in food security, energy prices and finance and trade are contributing to a world less capable to deliver the 2030 agenda.
- Impact investing has not mobilized public or popular support because it has not adequately articulated a “value proposition” that addresses everyday concerns.
- There is still too much whitewashing / greenwashing / power dynamics / colonial attitudes / money spent without good evidence / decisions made by those with the money vs. those closest to the problems. Lots of new entrants e.g. tech billionaires which do not necessarily in fact change this but only reinforce some of the existing issues. In the philanthropy space, thanks to people like Edgar Villanueva (+ Anand…), the renewed Black Lives Matter movement and others, there are some of these conversations starting to emerge but it’s still surprisingly early stage and barely there when we look globally. And for impact investing or CSR, I feel like these convos are even less present.
- I think there has been a broad uptake in the general teams and objectives of impact investing, arguably more successful then could have been anticipated 10-years ago, but as a society we face massive headwinds and impact arguably is not doing enough to tackle those headwinds.
- There is a growing cynical backlash against the aims of the impact space. That backlash is motivated and driven both by incumbents and opportunists, and is now politically expressed. This is to be expected in some ways as power is actually shifting, but I feel that the impact community is ill- prepared to counter this backlash.
- It seems that the current state of the field of impact involves too many buzzwords and not enough empirical measurement. I’m confident that will change over time.
- We need to dramatically and rapidly improve the state of our systems and our coordination towards achieving that change
- Impact investing is often evaluated at the portfolio company level, assessing operations, products, and services. However, fund managers can have negative impacts, for instance by: 1) exacerbating inequality through their own compensation structures (many mega-fund PE executives are paid multiples higher than the average corporate executive, thereby working in opposition to SDG 10) 2) engaging in financial engineering or blitzscaling of companies, thereby depleting companies of the resources they need to operate sustainably and with long-term vision 3) structuring tax avoidance strategies, thereby contributing to the deterioration of public institutions 4) lobbying and political spend in contrast with stated values 5) expecting the same returns as historical financial benchmarks, even though historical financial benchmarks are based on decades of cheap or free human and natural capital and are therefore likely inflated
- I believe the intention for generating impact is genuine and urgent, however this intention is not sufficiently activated
- Capital is moving but outcomes and impact still largely unknown for most capital
- Impact investing itself has defined a relatively small niche of the financial sector, even at a time when ESG investing and corporate social responsibility have become de rigueur. That may be starting to change, but believers in the importance impact still need to find more ways to embed it in these broader financial and corporate movements.
- I often say “I’m frustrated, but optimistic” – the SDGs were set out as ambitious goals, but it does feel like the pace of change is moving much more slowly than what is required to preserve the stability of our planet. That said, I’m also constantly inspired by the energy and innovation continually happening in this space – including amongst a group like the Sorenson Global Impact Leaders.
- There has been significant growth in impact. However, the lack of clear definitions, consensus on what ‘good’ looks like and a confusion of the term with ESG and ‘woke capitalism’ are hampering scale and pace of growth.
- Despite claims of mobilisation and substantive capital being aligned – the reality is that we are on course for 1.5 degrees by 2030 (US Intelligence); The SDGs are 20% behind where we started in 2015 (and its not just COVID despite the spin) and Inequality has gone from 66 million people own the same as the bottom 3 bn to just six people
- Impact funds using LP/GP replicate 2 and 20 carry models and tax opportunism that is classically from the private equity world. This doesn’t work. And employees are treated arms length instead of central to company success, ie where are the ESOPs
- We’ve made a lot of progress and there’s a lot of new energy and momentum which we are very excited about. There are some bumps to figure out, such as differentiating from risk mitigation and greenwashing, and in some cases too rigid adherence to developing common metrics that apply to every stage of impact investing/work and type of actor.
- My view is split between the active participants of the impact field where my views are more positive and those yet to become activated. Given the size of the latter group (in absolute number and control of capital) I remain disappointed by the level of engagement and the leadership to take bold actions
- There is too much talk and not enough action. Also, too many organisations promoting their own roles in the market instead of working collaboratively and looking for opportunities for convergence in the market.
- Though growing as a field, impact investing overall remains small relative to the total private sector financing gap for SDGs, and it will likely remain that way as long as conventional investors are frightened by the idea that impact is concessionary. A mostly untapped opportunity for impact to reach a massive scale is in bridging the current ideological divide between impact and ESG. ESG investing is increasingly trickling through all asset classes and is popular among non-impact investors, but has much room to mature in practice. Many of those working on ESG field-building in asset classes where ESG is nascent, such as in venture capital, share similar goals to impact investors. Collaboration in asset classes where ESG is developing to help bring ESG along in practical rigor and long-term thinking could help to create a more fluid ESG-impact spectrum of investors over time. Helping conventional investors more readily see the ROI potential in what are currently perceived as almost exclusively concessionary opportunities could cause a huge reallocation of capital, such as that currently seen in climate tech venture capital investing.
- The process of change underway is messy and there are a range of vested interests, frameworks that limit opportunities and power dynamics. I would like to see the impact practitioners work more consciously together on how we can amplify calls to action, demonstrate what good looks like and empower colleagues. While we cannot let the perfect be the enemy of the good, we need to keep our collective compass set due north and encourage others to that orientation.
- The SDGs are going backwards, the Climate is well on course for 1.5 by 2030 and Inequality has soared since 2008. The current paradigm will fail – maths, not opinion – the solution is in collaborative systems thinking addressing the cost structure and secondly in the value created by sequenced collaborations in scale
- Pandemic, conflict and economic environment are playing negative forces toward development
- Impact measurement and reporting harmonization and adoption
- Right now we the impact field is remarkably inefficient and ineffective, but I have hope that there are many in the sector who have innovative ideas to improve the space.
- I’m both satisfied of progress, and dissatisfied about the mountain still to climb!
- I believe we need to prioritize efforts and resources to be more efficient in our actions, but I´m optimistic about the future, since there is increasing global awareness on the social and environmental issues
- Democratisation of impact where ordinary people can make an impact.
- Low level of satisfaction given uneven endorsement to the SDGs by countries, companies, and the investment space, and given underperformance of MDB/DFIs, all due to personal interests/politics. Optimistic due to the growing influence from thought leaders and the right mindset brought by youth.
- Having worked in this space for more than 35 years, I believe we’re at an historical moment where the impact field has an unprecedented opportunity to flourish, given a much broader range of stakeholders indicating their committment.
Indicate your level of satisfaction with each of the following sectors:
Top Challenges in Impact
The top three most important challenges to the world of impact today are considered to be: “lack of clear impact leadership among government, business, and social sector leaders,” with 24% of respondents ranking this as most important; “insufficient or ineffective government policy, regulation, and enforcement,” receiving 20% of first place votes; and “lack of standardized impact measurement methods,” which 15% of respondents ranked first. Only 2% of respondents thought that “insufficient institutional-grade impact investment management firms” was the important challenge impact faces today.
When it comes to improving diversity and inclusion in the field, the Global Impact Leaders had some strong recommendations. These included intentionally including underrepresented voices at the table and shifting the nexus of decision-making authority and power to be more inclusive. Some practical suggestions included loan repayment programs for underrepresented leaders looking to enter the impact industry and other efforts designed to expand the talent pipeline. Leaders also stressed the importance of truly listening to different voices.
Other challenges respondents identified in the impact space include: the politicization of ESG and impact investing; tax policy and the democratization of capital; lack of scalable products among asset classes; and global macro headwinds.
What are the most important challenges facing the field of impact today? Results are ranked by percentage of first-place votes.
- Lack of clear impact leadership among government, business and social sector leaders (24%)
- Insufficient or ineffective government policy, regulation and enforcement (20%)
- Lack of standardized impact measurement methods (15%)
- Insufficient impact capital (12%)
- Insufficient or unrepresentative voices at the table (12%)
- Corporate green-washing/impact-washing (10%)
- Myths and negative press (2%)
- Insufficient research, data and analysis (2%)
- Insufficient institutional-grade impact investment management firms (2%)
What concrete steps can the field of impact take to improve its diversity and inclusiveness?
View all responses
- 1) increase representation of impacted communities at the table, esp when discussing policies, investment strategies, ratings, etc. 2) ongoing monitoring and “”voice collection”” amongst impacted communities
- It’s actually quite simple: (1) Diverse leaders hire diverse staff. And, (2) funders need to trust, empower and listen to those diverse leaders.
- Focus on who is around the table and who is making decisions. Look at the structures around how we allocate capital to determine their biases.
- Emerging market founders are continuing to bring innovative solutions from the region to the global technology stage. Casting light on these success stories is key to raising the capital required to drive impact. One of the main obstacles is illustrating that financial returns and social impact are not mutually exclusive, and that it is possible to do well and do good.
- The diversity rider is one step that helps to diversify the capitalization table, which is a fit for the early stage investing in impact investing. Ensuring diversity of governance (investment committee) and investment teams should lead to diversity in the portfolio.
- Intentionally invite underrepresented voices from regions like Asia and Latam to key decision making tables.
- Include and provide training to the current generation that was trained with different frameworks of success.
- Shift decision-making power as well as capital (financial, human, social, natural) to communities more proximate to the challenges (and opportunities).
- Open calls for application, open selection process which include community leaders not just program officers or philanthropic founders, unrestricted grants, community based trusts / banks / giving circle models which put decision making in the hands of those closest to the problems / experiencing themselves. If you have capital to give or invest out, HOW you do it matters immensely and seeing yourself not as an expert but as a facilitator would be best but very few in the end do this. That does not mean there should not be money put aside for measurement and evaluation and other pieces. Dedo and Katie wrote an article in the Guardian about how 98% of aid to Africa still goes to US and EU based institutions…should be the opposite.
- At Devex we’re focused on what we call the “SDG Talent Gap”. We see a big opportunity to address a broad gap in impact professionals and to use that focus to increase diversity and inclusion.
- Include people from different social and economic backgrounds at the table in real and meaningful ways.
- The impact field is relatively more diverse and inclusive than its counterparts in the “legacy” industry. But capital, and the power and voice that comes with it, is still concentrated in the same circles it has been for centuries. To make real change, that power and voice, along with genuine opportunity to create wealth, needs to be opened to those historically excluded members of our society.
- Begin with measuring it, share best practices, inspire and have a movement at the levels of LPs and Investors for it to be a priority
- I’m worried by the right-wing fixation with attacking ESG measurements and goals from investment firms. The Utah State Treasurer, following the trend among other far right elected officials, is moving state investment dollars out of investment firms who have stated ESG goals. Right wing media is fixated on this movement and eschewing ESG goals is a rallying cry among a growing number of politicians. I believe pushing back on this fearmongering is important to the future of the field of impact.
- Just do it. Seriously it’s not that hard. Work harder to find candidates and stop making excuses and then, once they are there, listen to them
- 1) Produce content that speaks to civil society 2) Value interdisciplinary and Global South perspectives 3) Consider multi-stakeholder governance models 4) Require grievance mechanisms in all investments 5) Support freedom of association and collective bargaining
- Provide/subsidize education and incubation resources for underrepresented and excluded populations.
- Continue to focus on customer centric approaches and needs of those being served.
- To ensure that informed global voices are heard in debates on global challenges.
- – Bring new and more representative voices onto boards and investment committees – Eliminate “warm” introductions, highly restrictive grants and other structures that give preference to those with privilege (and networks) – Build new types of decision making structure – look at participatory models
- Loan repayment assistance programs for underrepresented leaders who wish to go into the field of impact would be huge as the sector pays less than private firms which steal top talent
- Work with universities and colleges to develop educational programs for students.
- More engagement with, and agency for the communities and enterprises on the receiving end of impact capital such that their voices are heard and respected. Explicit inclusion and capacity-buildling initiatives for these groups.
- Communty Feedback Loops; Look to sources of capital beyond VC and Blended Value; Apply the technology revolution to Development at a Systems level; Creation Aggregation and Scale; Apply systems planning; Leverage existing Innovation not reinvent in Silos; Align the core capital of Foundations by tax policy; Price aggregated value of externalities recognizing the value also of Positive externalities but also the value of Collborative Sequencing faciltated by technology
- Employee ownership participation in GPs More allocation to first time GPs including minority led firms
- Programs that overcome barriers in the talent pipeline, such as Impact Capital Managers’ Mosaic Fellowship for impact venture capital firms, are one effective concrete step.
- Each member of the community should commit to ceding a chair we occupy at one table of decision-making over the coming 12 months to an as yet unrepresented voice Every board of an impact fund and/or investee should be assessed on community voice and engagement Lessons from the CDFI (US) requirements, BEE (SA) and similar initiatives where regulation has required various levels of community engagement should be extrapolated and shared (positive and negative) Every convening of our field should ensure that at least 10+% of the participants represent people and places that are within the stated scope of the capital around the convening. Proactive use of survey instruments (eg. 60 Decibels)
- Reach out to a broader set of stakeholders
- On an internal level, at the most basic starting point, utilize DEI hiring best practices, and then do the hard work of learning how to retain and engage URM staff, then mentor and train them to become leaders. From a field-building perspective, efforts by traditional investing funds with URM managers to split alter wealth distribution are compelling. For example, Base10 partners manages a growth equity fund that splits carry 50/50 with HBCUs to build their endowments.
- Pro-actively manage for this and invite different voices to the table and amplify voices that need to be heard Reinforce and require diverse voices as a hallmark of good impact practice
- 1 – Apply the lessons of technology that has been applied to every other sector of the Economy 2 – Hard wire the social mission in collaborative legal frames 3 – Do what the bankers did themselves on restrucrinng from product to customer – in our sector from INput and output models to outcomes 4 – Develop sysytems planning
- Impact professionals stop being mesmerized by celebrity limelight seekers and empower impact professionals that live to create positive transformation
- Greater support for new diverse funds and fund managers
- Listen to voices of those on the ground, doing the work, not the ones with all the money.
- A greater focus on the Just Transition approach, to engage with community voice Taking it beyond Europe and the Americas – Asia is far behind on this, and Islamic Finance is not yet connected to impact
- Is diversity and inclusiveness in the impact field one of the main issues to be addressed?
- Make impact accessible and understandable
- Add more representative voices at the table (and remove representation that is ineffective, lack the necessary knowledge, and/or manage personal agendas).
- Invest in bringing more diverse voices to the table and actually listening to those voices, which might mean taking the time to understand people for whom English (or French or Spanish or any other Western language) is not their first language. We need to be much more patient
Are there any challenges you believe aren’t captured here?
View all responses
- Accountability mechanisms to counter/prevent/penalize greenwashing and other bad behavior
- In the US, we have some very limiting mindsets and values:
– individualism and self-interest (vs collective well-being)
– masculine (power, dominance, sexy) over feminine (collective, rest, care)
- Lack of scalable products along asset classes.
- In the wake of the pandemic, countries around the world are battling deep economic crises that are contributing to a sharp increase in global poverty. Wealth inequality and the discrepancy between the top 10% and bottom 10% is likely to increase. One of the greatest challenges in global impact by 2030 will be the reduction of the poverty gap.
- I think it’s no longer realistic for asset owners to build net zero by 2040 portfolios. That will lead to overallocation to strategies that assume a rapid transition and underallocation to strategies that assume a slower transition. It’s not as sexy, but I think net zero as soon as practical and plausible is a more realistic way to invest and more aligned with fiduciary duty.
- Bringing in mainstream capital – through primary and secondary market investments.
- The age and inability to adapt from multilateral and intergovernamental entities staff.
- Thomas Piketty….Tax policy i.e. both ensure more taxes are in fact collected from the richest among us including from capital gains and financial transactions. And also if you get tax deductions, what counts as charitable in the US is extremely wide, and some of it is clearly harmful.
- Global macro headwinds (e.g. war in Ukraine, rising energy prices, inflation, tax policy.) Political unrest and the rise of right win popularism and nationalism. Campaign finance/ spread of propaganda and disinformation. Transformation and fragmentation of the news media landscape, loss of objective “truths.”
- The politicization of impact/ESG, and the related weaponization of regulation and governmental programs.
- An overall lack of understanding of the potential, resilience and tenacity of low income communities globally.
- 1) Distribution of returns and value created 2) What defines risk and value 3) Investor-level issues https://impactfrontiers.org/work/investor-contribution-2.0
- Regulations with both carrots and sticks to cause the largest pools of capital (endowments, pensions, sovereigns, etc) to increase their capital allocation to impact.
- Poor communication/marketing: “impact” should not be a niche idea; it should be a central demand from any investor in a fund or corporation.
- The importance of quality data is essential. You cant change what you cant measure.
- Mind set that allows myths to gain credence. Lack of policy conviction to prioritise longer-term policies and initiatives at the expense of those that are short term (and vote winning). Current macro [economic] environment (eg inflation, cost of living, supply chain challenges and energy supply). Polarised political parties that reduce scope for cross party collaboration. State of indebtedness of many countries post COVID.
- Most of the above – the reality is that the current paradigm will fail – Maths not Opinion
- Lack of capital allocation from mainstream wealth managers/advisory firms, obession with third time funds, avoidance of funds focused on the global south No visible RFPs from asset owners who claim to be interested in impact Problem of public equity firms claiming impact, when theyre just simply ESG
- Public – private market interplay Regional differences including when it comes to regulatory issues (E.g. pension fund regulation)
- Action, decision-making, collaboration. “Lack of leadership” is very unclear and does not necessarily capture these key elements.
- Impact investing at the fund, portfolio, and project levels could benefit from ESG integration. The most public recent case study for this was Tesla’s removal from S&P 500’s ESG index – despite being a compelling investment from a climate adaptation perspective, the social and governance practices at the company are questionable at best, and there are many potential environmental issues in production. Another example I often share is of a solar project I considered financing in Sub-Saharan Africa until it turned out that the desired solar panels had been produced under questionable labor conditions in China. For impact to reach its greatest potential, we need to ensure that we are not externalizing problems outside the specific impact focus. This starts with making sure great teams are doing the work in effective ways, supported by strong governance structures (including policies and controls for buyers and suppliers) and values-aligned leadership. It is also important that the investors backing those companies, projects, or even nonprofit programs, operate according to similar expectations and understand the full breadth of what they should expect from their investees.
- Directing capital and backing to impact managers and entrepreneurs with robust and reinforcing models (often they need to step out of the established firms and then fall into first time manager and/or are active in markets where it is harder to direct capital) Resourcing and backing the market builders
- The problem is not capital or Innovation – it is the current Intermediary framework – Impact Investment is being driven by a VC Agenda and a blended model – we need to widen the Financial tools and create aggregation and cost efficiency based not just on tackling negative externalities but also the positive ones and the sequencing of innovation and stakeholders – now enabled by technology
- Politicization of ESG and Impact Investing
- A need to look at the space in a fundamentally different way.
- Urgency. The 2050 mantra is unhelpful, as it suggests we have a generation to sort things out – but 2022 has shown that the climate crisis and its social impacts is here right now.
- One of the challenges that (if solved or improved) could make a big difference is public-private sector coordination around a clear and prioritized list of issues, based on “impact vs efforts/resources”, based on research, data and analytics
- Democratisation of capital
- Relevant representation in the table that lack the necessary knowledge and/or manage personal agendas
- The problem with capital is not that there’s “insufficient impact capital” per se. It’s the mismatch in terms of the right flavor of capital that’s actually needed by social/impact entrepreneurs and the fragmentation of the ecosystem that makes it very difficult if not impossible for most entrepreneurs to navigate. This patchwork of siloed service and capital providers contributes to a vicious cycle where only those entrepreneurs already connected to the ecosystem can find the support they need, which tend to be white Western males.
The majority of Global Impact Leaders ranked “Climate Action” and “Ending Poverty” as the most important Sustainable Development Goals (SDGs) to address in order to effectively move the needle by 2030, with “Partnerships for the Goals” and “Peace, Justice, and Strong Institutions” considered to be the most important by 15% and 12% of recipients respectively. 56% of recipients identified the government as key to achieving the SDGs by 2030, with only 2% of respondents listing not-for-profits and foundations as the most important actors in this regard.
What are the most important SDGs to achieve in order to effectively move the needle by 2030, listed by percentage of first-place votes:
Leaders in Impact
When asked to identify institutions they view as leaders in the impact space, many Global Impact Leaders mentioned top grant-giving organizations, including the Bill & Melinda Gates Foundation, Ford Foundation, Rockefeller Foundation, MacArthur Foundation, McKnight Foundation, Hewlett Foundation, and Omidyar Network. Many respondents referenced the work of the Global Impact Investing Network (GIIN), some highlighted the Sorenson Impact Group’s work, and some mentioned the impact investing news organization ImpactAlpha.
Sir Ronald Cohen was noted for his pioneering work, as were stand-out family offices, including the Blue Haven Initiative, Emerson Collective, Capricorn Investment Group, and Kapor Capital. Others pointed to government initiatives such as the work of the G7 Taskforce, university programs including Saïd Business School at Oxford University, Bertha Centre at Cape Town University, the Grunin Center for Law and Social Entrepreneurship at New York University, and development banks. Commercial asset management firms received fewer mentions but included DBL Partners, TPG’s Rise Fund, Bain Capital Double Impact, KKR Global Impact, LeapFrog Investments, and Elevar Equity. Others included verification, framework, rating, and standard settings such as the International Integrated Reporting Council (IIRC), the Sustainability Accounting Standards Board (SASB), and BlueMark.
What institutions are key to achieving the SDGs by 2030? Results ranked by percentage of first-place votes:
- Government (56%)
- Asset owners (pension funds, family offices, sovereign wealth funds, etc.) (22%)
- Business (including public, private, and small/medium enterprises) (17%)
- Nonprofits, foundations and NGOs (2%)
- Other (2%)
Who do you view as leading institutions in the field of impact? List as many as you would like.
View all responses
- Standards: GIIN, B-Lab, BlueMark, PRI, PRIME
Investing: Closed Loop Partners
Non-profit: Rockefeller Foundation, Sorenson Impact Center
- The Omidyar Group, Ford Foundation.
- GIIN, Bluemark, Calvert, Roots of Impact, GSG, The ImPact, Leapfrog, Impact Alpha, Align Impact, Toniic, Bridges Fund Management.
- GIIN, IFC, Ford Foundation, Kresge Foundation, Kellogg Foundation, Unitus Capital, Sorenson Impact Center, ACCION, Quona, Elevar, Dalberg
- GIIN, AVPN, IFC, ADB, DFAT, World Bank
- It is sad, but none comes to mind!
- Innovative fund managers, leading family offices, various catalytic foundations (Ford, Rockefeller, Omidyar), IFRS Foundation’s International Sustainability Standards Board + SASB.
- Overall democratic governments probably still should be the prime leading institutions in the field of impact. Some are doing way better than others in terms of democracy and impact….
- Gates Foundation, Bloomberg Philanthropies, GiveWell, OpenPhil, and (on the other side of the ledger) trust-based philanthropies like MacKenzie Scott
- Sorenson Impact Group IFC IDB Gates Foundation Ford Foundation Rockefeller Foundation MacArthur Foundation McKnight Foundation Omidyar Network Impact Engine Capricorn Investment Group Case Foundation Generation Investment Management Kapor Capital Sir Roland Cohen
- Open Road, The Walton Family, Blue Haven, Chan-Zuckerberg, Skoll, Ford Foundation, the Scandinavian DFIs (Finnfund, Swedfund, Norfund), NYU Grunin Center, Saiid Business School, Sorenson Impact, SOCAP, ImpactAssets, Align Impact, Nuveen,
- Ford Foundation, Gates Foundation, Omidyar Networks, Nuveen Impact. Elevar Equity, LeapFrog Investments (…many more)
- Social Capital Partners, HCAP Partners, Kauffman Foundation’s Capital Access Lab ecosystem of partners
- GIIN, Apax, TPG’s Rise Fund, Bain Capital Double Impact, KKR Global Impact, ImpactAlpha
- Mackenzie Scott Foundation Gates Foundation (certainly a lot that isn’t perfect, but they certainly have led the field) Social Finance Co-Impact Sorenson Impact Foundation & Impact Center Blue Haven Initiative
- Gates Foundation, Rockefeller Foundation, Ford Foundation, Mackenzie Scott, Schmidt Futures, Case Foundation
- Ford Foundation, GIIN
- Hard to do as this is such a broad field but the G7 Taskforce work, and continuing just transition challenge by the Impact Investing Institute provides a platform to build on as a tangible means to mobilise capital
- I make a distinction between those leading and the probability of their success too many institutions are leading in their silos, much of the UN is not fit for purpose, and the Impact community is being driven by a PE / VC and Blended mind set, – they have their role but ultimately see themselves as Principals in a strategy that cannot mathematically work.
- Too many to count! We would consider ourselves, DBL Partners, as a leader that has helped to put impact investing on the map. There are innumerous entrepreneurs and employees creating cutting edge impact companies such DroneSeed or Farmers Business Network. We’re also inspired by regulatory agencies such as the California Air Resources Board and companies such as Shopify and Stripe for supporting innovative impact technology development.
- Would put them into categories: Networks: Constellation of National Advisory Boards (the NABs), GenderSmart Foundations: McArthur and members of the C3 consortium DFIs: BII, DFC, FMO Advisors: BrightLight Group Verification providers: BlueMark Note: I have not included specific asset owners and managers but can do so if you would like.
- The market has grown and is shifting from niche to mainstream so I think we need to see some new types of institutions leading the market going forward.
- Many of the largest philanthropies with intersectional commitments to climate and social justice are doing increasingly interesting work, such as Ford and Hewlett Foundations, though I know CIOs and programmatic leaders don’t often see eye to eye. Family offices are also doing really meaningful work in offering a variety of solutions that attempt to meet ecosystem-level needs. A couple of selective names would be Blue Haven Initiative and Emerson Collective, though there are definitely others. Finally, incumbent climate tech investors that have paved the way for a new generation of more conventional investors to follow in their footsteps have set a new standard of what impact investing can become. Generation stands out in this regard, though again there are others.
- GIIN US Development Finance Corp ImpactAssets (Donor Advised Fund) Omidyar Network (and affiliated entities) Leap Frog (PE fund)
- Global Steering Group for Impact Investment, Global Impact Investment Network, SDG Impact at UNDP, Sorenson Impact Center, Case i3 at Duke, Bertha Centre at Cape Town University, Skoll Centre at Oxford, Initiative for Responsible Investment at HKS, Milan Politecnic, ANDE
- There is a difference between Leading and believing the Strategy is right
- US Alliance for Impact Investing GSG GIIN Sorenson Impact Center Impact Alpha
- Sorenson (of course) Rockefeller Sir Ronald Cohen (not an institution but he is moving the needle on the topic) Ballmer Group Outcomes based financing institutions I would like to believe that our new company will be up here at some point: OutcomesX
- GSG; the VP networks; GIIN; IMP, IFVI (formally IWAI), GAIL; Tipping Point
- Gates, Rockefeller, GIIN, GSG, OECD, think tanks (ODI, CGD, McGill ;)), long-standing impact investing managers (RA, Blue Orchard, Bamboo, MCE), domestic development banks, PIDG, Trade and Development Bank, Nordic countries, Sorenson 😉
G7 Impact Task Force Recommendations
In 2021, the Impact Taskforce was formed out of the G7 summit as an initiative to answer the question, “How can we accelerate the volume and effectiveness of private capital seeking to have a positive social and environmental impact?”
In its report, the Impact Taskforce proposed two pathways for accelerating change:
- Transform the quality and transparency of information on the impact of investment decisions; and
- Mobilize more institutional capital for positive impact and a Just Transition.
The first workstream includes the following recommendations:
- Improving required disclosures
- Evolving accounting auditing and assurance practices
- Building secure, interoperable data infrastructure
The second workstream includes the following recommendations:
- Broad recognition of the need for a Just Transition (which includes (1) advancing climate and environmental action, (2) improving socio-economic distribution and equity, and (3) increasing community voice).
- Support for mobilization of capital (enhancing roles of multilateral development banks (MDBs) and National and international development finance institutions (DFIs) and improving regulatory frameworks for sustainable investments).
- Expansion of capabilities and increase in transparency (sharing performance data across MDBs and DFIs, and increasing awareness of possible actions from asset managers).
Global Impact Leaders were asked what they see as the biggest opportunities and challenges for both sets of workstream recommendations.
With regards to the first workstream, opportunities identified by the Global Impact Leaders included cooperation, mobilizing private and institutional capital, agreement on standardization and accounting practices, the emergence and adoption of new technologies, and leadership. Obstacles included the backlash against ESG, the lack of standardization, vested interests and political impediments, the relative newness of the field, and a lack of urgency.
With regard to the second workstream, Global Impact Leaders again identified a number of opportunities, including the further mobilization of and engagement with catalytic capital, bringing BIPOC, women, and other often unrepresented stakeholders to the table, and engaging with and leveraging local capital sources. Challenges include a lack of flexible and patient capital, misalignment of incentives, greenwashing, corruption, the politicization of ESG, and a lack of leadership.
What are the biggest opportunities to implement the first workstream recommendations?
“Implement global and local regulations, open up the GEMs database, MDBs/DFIs to share detailed information, engage credit rating agencies in the space.”
“Collaboration and convergence between the many players working on these important areas.”
- “Investors are demanding better “S” disclosures. This can be achieved through a Taskforce on Inequality-related Financial Disclosures (TIFD)”
- “Better disclosures are needed on investor contribution. This can be achieved through this PDI and Impact Frontiers collaboration https://impactfrontiers.org/work/investor-contribution-2.0”
- “The Capitals Coalition and their network are doing great work on accounting, auditing, and assurance”
- “I don’t think anyone is working on solid interoperable data infra, but that would be a great value add.”
View all responses
- Improved regulatory frameworks.
- At a macro level, we’re standing at an inflection point when it comes to the role of private capital in improving socio-economic realities globally. It is increasingly becoming necessary (and non negotiable) for private companies to generate financial and social returns simultaneously. This will accelerate adoption of policy recommendations. Investors and stakeholders more broadly are increasingly requiring their portfolio companies to disclose their performance along both financial and social/economic/environmental metrics.
- I think George Serafeim’s Impact Weighted Accounts are a thoughtful framework that may form a basis along with the Operating Principles for Impact Management of a grand unified impact framework.
- Building concensus around metrics.
- It can be created from scratch and therefore can be more effective than correcting or adjusting a current process
Proposed SEC disclosure rules (following on Europe, etc.) seems like the biggest opportunity to drive broad change in disclosure.
- I am not sure how traditional accounting standards e.g. Basel etc were adopted but I gather it was both super boring and super important, and then having bodies like the SCC who police when people do not respect it… who is funding / supporting the super boring stuff + then who polices it when it comes to impact?
- Elevating the conversation, getting the business media involved, and creating more of a race-to-the top.
- Mobilizing institutional capital into infrastructure and innovation. An increasing understanding of investors about climate risk.
- Private capital is increasingly demanding these concepts as a condition of investment and the market is responding. 2. Blockchain technology presents interesting opportunities to formalize and standardize empirically-based impact and eliminate double counting and reduce greenwashing.To do a bottoms up approach and talk to major players to understand what information is available and important and what should be the main KPIs or issues.
- Leadership. Someone respected modeling what this looks like and acting ahead of requirements
- 1. Private capital is increasingly demanding these concepts as a condition of investment and the market is responding. 2. Blockchain technology presents interesting opportunities to formalize and standardize empirically-based impact and eliminate double counting and reduce greenwashing.
- 1) Investors are demanding better “S” disclosures. This can be achieved through a Taskforce on Inequality-related Financial Disclosures (TIFD) 2) Better disclosures are needed on investor contribution. This can be achieved through this PDI and Impact Frontiers collaboration https://impactfrontiers.org/work/investor-contribution-2.0 3) The Capitals Coalition and their network are doing great work on accounting, auditing, and assurance 4) I don’t think anyone is working on solid interoperable data infra, but that would be a great value add
- Require non-taxable entities to disclose % of AUM invested in long-term private market solutions.
- To integrate the focus on impact into other existing/evolving disclosure initiatives (eg. ISSB. SASB, GRI, etc.)
- Creation of standard impact metrics amongst leading financial institutions
- Govt. regulation around disclosures — this can be like GAAP 2.0 with good regulation introduced on impact reporting
- ISSB implementation; development of an international framework for ‘Social’ measures to follow from the ISSB starting point; effective regulation
- Apply the same technologies that have revolutionized every other sector of the Economy and Politics to Development
- For (2), a work programme to quantify/assess which investment firms who can allocate as LPs to funds, ACTUALLY do allocate to impact funds. Who is walking their talk? And what sorts of GPs do they allocate to? this study needs to be done internationally and include the investmetn banks
- The proposed SEC regulations should play a big role in this for some investors, if adopted.
- Backing the ISSB; breathing life into double materiality; leading by example with every member of the impact field; cutting through the noise for investors
- Collaboration and convergence between the many players working on these important areas.
- There is lots of existing progress, including formation of the ISSB and recent proposed rules at the SEC. Aligning as much as possible with accounting frameworks and movement towards reporting within, rather than separate from financial reporting would help. Additionally, clearly specifying where risk or opportunity is more forward-looking and thus only material to longer-term projects in e.g. GAAP’s standard management discussion and analysis could help dispel confusion. Greater requisite transparency around political spending would also help here, which I’ll expand on below.
- Emergence of independent consulting/ auditing firms building process and technology to measure and report impact across companies and investment sponsors.
- Regulating for disclosure Promoting adoption of the SDG Impact Standards as best practice Developing governance capability and performance for impact integrity in decision-making Utilising impact weighted accounting in a targeted way to disrupt current conventions Educating and training professionals across the value chain in impact management Working with academic institutions and independent agencies (eg national bureaus of statistics) to develop trusted sources of data Supporting acceleration and adoption of best in breed data infrastructure for impact management leveraging the body of work already done in sustainability accounting and widely adopted disclosure frameworks in particular GRI Reinforce the need for a shift from compliance to leadership and from an add on to how we do things
- New Technologies, New Legal Frameworks, Systems Planning, Systemic Finance tools. Tax the negative externalities, leverage / subsidize the positive externalities and capture the value of sequenced social interventions
- The biggest opportunity is that this is very unknown to both investors and society at large.
- ISSB adoptions and standards SEC adoptions and standards IRIS + Impact Management Group
- To define the “S” in ESG. Right now we look at this as risks posed to a company, but we can turn that around to assess what is “material” for company related to the “S” and what can/should a company do to increase its shareholder and stakeholder value.
- for 1) Impact transparency – harmonised standards, regulatory reporting, impact valuation
- Leverage technology. Standarized frameworks for disclosure and assessment Impact weighted accounts (impact calculated quantitatively and included into financial accounting)
- Unfortunately the tragedy of the state of the world both social and environmental will drive change for example poor people will die because of energy costs but politically will drive sustainable energy
- Implement global and local regulations, open up the GEMs database, MDBs/DFIs to share detailed information, engage credit rating agencies in the space.
What are the biggest obstacles you see to addressing these recommendations?
View all responses
- 1) current economic environment is straining management time and resources
2) fears of greenwashing
3) need for financial return > need for positive impact
- Widespread coordinated action.
- The significance of ESG as business risks (and how it impacts portfolio performance) remains a fairly new concept for capital allocators. Despite the tailwind, it is still early and a lack of best practices as well as a lack of broad conviction across stakeholders on the importance of tracking impact data remain key obstacles to addressing these recommendations. The challenge also lies with establishing a global baseline of standards to disclose non-financial information, and the difficulty of specifically and meaningfully measuring performance across SDGs. The limited collection of impact data so far makes it difficult to build a data infrastructure that can be shared and accessed across users.
- Similar to in the sustainability standards space, consolidating frameworks is challenging and can take years to develop consensus Given the pushback to the SEC’s proposed climate disclosure, it’s unlikely any time soon for there to be standardized impact reporting.
- Lack of leadership at the global level.
- Multiple stakeholders and lack of regulation coordination is forcing each stakeholder to come up with their standards, that are also self serving.
- ESG backlash / disinformation + corporate lobbying.
- See above.
- Lax definitions which allow for watered down approaches qualifying as “impact” and reducing trust in the entire sector.
- Current political landscape, rising energy prices, and cost of living. The political map in the U.S. and globally. Need for regulatory reform. Lobbying by the fossil fuel industry. Old Gard investors and ways of doing things.
- Over requirements and implementation that are costly and cumbersome and rather than promoting investments, is becomes a hindrance
- I am worried about the right-wing movement to attack ESG criteria from pension funds and reject impact measurements.
- lack of incentives to do anything but the bare minimum
- In corresponding order to the above: 1) Incumbent powers will want to dominate the process, thereby replicating inequality in the very process of developing the framework; similarly, an effort led by civil society has challenges fundraising because donors often feel more secure funding initiatives that already have power 2) It will be difficult to reach a level of consensus with investors on pay ratios, distribution ratios, appropriate levels of leverage, when efficient tax structuring becomes avoidance, etc 3) It will be difficult to quantify the value of human life and complex natural systems, and doing so can have unintended negative consequences; on the other hand, human and natural capital are already being valued, but insufficiently 4) Most efforts that would be well-funded would be by private capital providers, but in order to avoid monopoly dynamics and ensure a public good, this type of utility should be publicly funded and governed
- Investment teams for pension funds are provided short term incentives at the expense of committing to long term investments.
- Complaints that this is “one more thing” to tick boxes on, rather than a core tool to build long-term value and mitigate risks.
- Government institutions will need to play a huge role; major challenges to democratic institutions, politicalization of impact capital + bureaucracy could present a significant obstacle.
- A sense of urgency needs to be created
- Lobbyists, fractured regulation from different jurisdictions, greenwashing stories
- Ability to develop international consensus beyond high level principles. Distractions among policymakers because of more urgent socio-economic priorities. Not everything can be boiled down to a number, particularly one that is reported on annually. To shoehorn data in order to do so risks the development of boilerplate reporting (particularly if it has to be assured).
- CRITIQUE – THE GSG / G7 IMPACT REPORT 1 -Makes repeated calls for measurement – which of course is required – but like all measurement, the question is what, by whom and for whose benefit, how does it also address clear conflicts of interest and Governance issues some would argue structures in contravention of regulatory best practice in the separation of functions in Finance 2 – The reports propose to apply the metrics methodologies (but does not provide links) to provide measurement which primarily talk about the costs to business – the negative externalities -BUT not the value created by a sequenced collaboration of all societies stakeholders, including Social Entrepreneurs and the Positive externalities – it fudges any reference as to whose benefit the implicit subsidies will go in this process, or the related and the required tax and subsidy allocation issues – and indeed how it is applied – this is a critical debate 3 A process that ignores or even compounds the cost-inefficient siloing 4 – No recognition of a systems approach – though SDGs and Climate are systems issues – and the required technology tools for this to happen do exist in direct contravenention of what the report notes – the implications of Big data (see Documentary Social Dilemma) which have impacted every other aspect of our lives ignored, with a comment that though important you cannot do anything about it currently – simply wrong 5 – Ignores the downstream cash flow value created – future cash flows both negative AND positive – so potentially ignoring the value of social entrepreneurs and their sequenced social interventions -or at least leaves it on the table to be taken by the Financial Intermediary – indeed the report calls for Asett Managers ina self-regulatory framework to be Principals 6 – Ignores the Policy implications and the existing legal and accounting frames (as did the 2014 G8 Report) that already exist to create collaboration and scale in the commercial sector, which can be applied to the social sector even the existing accounting process to measure the value say of Govt subsidy (as you see in the US with the Congressional Budget Office and the Community Reinvestment Act) 7 – As a result completely ignores the opportunity of Systems planning, plug and play, aggregated externalities – ALL cash flows and the incentives to current inefficient structural frame – which is the exact opposite of what the banks did themselves in the 90s and early 2000s ( I know as I built one of the first) 8 – Notes the data and processes is important but then notes availability and cost are not available to do in Development – simply neither is true. This is critical as it ignores the substantive Governance implications for the Multilateral system as to how these are developed 9 – MOST CRITICALLY – Focus on the need for the engagement of capital markets – which one, of course, more than 100% agrees, BUT does not mention the key question of the capital subsidies/capital sources already available that can be levered better or by the regulatory changes you need to leverage the 130 trillion. Quite simply mathematically the current subsidy frame (and if one was cynical perhaps why organisations are downplaying the scale of the problem) cannot work. The Blackrock CEO has simply stated it needs a blended value frame But If the amount of global capital subsidy Foundations and Govts (ex costs and we do nothing else) is 0.5% of global GDP and the problem is 10-14%… and ODI notes you can get 0.7- 1.14 leverage return on a blended value structure – so the proposal of the MDBs and DFIs plugging the subsidy gap is akin to trying to fill a hole in a breaking dam with a plastic spoon If we are not clear as to how this can be done then to quote the former head of the worlds largest Pension fund – this pledge made at COP (a bit like UN PRI) is simply a pledge and as he has noted last week in Oxford will be seen as the ” largest green washing proposal in history” 10 – Refers to community feedback loops but not as Consumers and auditors or even pricing of securities – more just validation 11 – Talks about a baseline – which is a system that of course, the authors of this report are then Foundation – in a financial mechanism where the VCs are judge jury and beneficiary (the subsidy will go to them and the agenda of business) – in Governance structures the one profiled at GSG – from Policy, Legal framing, Manufacture, Subsidy, Risk Allocation, Metric and Monetisation in fund structure – with Financial houses as Principals.
- Lack of specific mandates from wealth managers/private banks to allocate to impact LP/GP structures. Hiding behind allocating to public funds instead of private markets which is where they should be
- It’s essential to understand the differences in what later stage public companies or private equity firms can report on as compared to startups or VCs.
- The noise confronting investors; the growing political tone of discussion in the US (as distinct from Europe); regulatory fragmentation / patchworks
- Funding and timelines
- One of the largest obstacles in the US, which in many ways then represents a global obstacle, is that political spending does not align with corporations’ social and climate claims. Until the private sector aligns that side of its capital to the goals, it will continue to rely on the excuse that there is not sufficient policy/regulation to guide corporate capital allocation towards a just transition.
- Standardization of impact metrics Greenwashing
- The focus is on taxonomies and reporting at the expense of impact management (these are necessary but insufficient) The focus is diverted or limited to enterprise value creation Large entrenched actors lead without sufficient reference or integration of the body of expertise, experience and know how in impact Insufficient expertise and quality education for professionals across the value chain Boards and decision-makers have insufficient expertise and focus Governments are too slow to signal to the markets Technical confusion and quest for precision delays or misdirects accuracy in direction of travel and whether progress is really being made Political headwinds delay progress and propagate misconceptions
- The G7 / GSG report failed to address most of these issues
- These task force recommendations sit in echo chambers and are reserved for “members” and friends of the organizations engaged.
- Politicization of ESG and Impact investing Confusion and misunderstanding of frameworks and standards Impact washing/green washing
- Backlash against ESG and limited appetite for increased regulation related to it.
- On 1) we need more focus on the social aspect of standards
- Collaboration and coordination between public and private sectors, and also agreement/alignment across countries and regions
- Getting through fast enough with a sector not know for its speed of action!
- Reluctant financial/investment sector, own agendas/politics, lack of interest.
What are the biggest opportunities to implement the second workstream recommendations?
“The Just Transition Challenge which is well supported and will develop open-sourced criteria for a just transition label to help asset owners and managers ensure impact capital flows as intended. Enhance the mandates of MDBs and DFIs to include more stretching mobilisation objectives. Careful use of conditional finance, first loss and guarantee structures to ensure the true additionality of private investment”
“Opportunities to implement:
Storytelling: leverage increased awareness of issues around climate change and inequality to push for different solutions
– Provide education and support for earlier stage companies to build their capacity for impact measurement
– Increase diversity in decision making roles for impact investment capital (both in first-time fund managers but ultimately we need to see change in decision making roles for much larger vehicles)
– Mobilize capital to locally-led organizations in emerging markets, with an emphasis on supporting entrepreneurs and fund manager with lived experience.”
“Bring in more catalytical capital.”
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- 1) engaging impacted communities in discussions and strategies with pension funds, govt and corp bonds, etc. 2) require “”just transition”” capital set aside for growth incentives, e.g. via the US IRA. 3) clear mapping and guidance on how to add “”just transition”” to standard impact investments (e.g., renewable energy in underserved communities)
- Both the mobilization of capital through innovative finance, and increased transparency through improved data and analysis.
- Engaging those closest to the issues and REALLY giving them power
- Recognizing the need for a just transition creates the opportunity to include those segments of society that are typically underrepresented in climate change discussions. This holistic approach allows for different climate transition strategies targeting those working in sectors and regions that are reliant on emission-intensive economies, and therefore, will be affected by the climate transition the most. Supporting capital mobilization objectives hence provides the opportunity to fund new solutions that are addressing specific these challenges. Thereby, MDBs and DFIs role is to use their status, networks, and expertise to go where the private sector currently cannot, however, could follow if these agencies create investable pipelines and track records. They can further mobilize private capital investments by offering capacity-building support, risk mitigation instruments, performance data and partnerships.
- Impact frameworks and standard setters should come together and establish their own version of ISSB, which would make it more straightforward for regulators. More emphasis should be placed on greening the use of fossil fuels, which would provide the timeline for a just transition.
- Using forums like the COP to come up with clear guidelines.
- Popular mobilization to give the Just Transition a constituency and consensus for collaborative action. Change in the risk profiles/ investment policies of DFIs and MDBs to, for example, enable more catalytic investments (jr. positions) and selection of first-time managers, etc.
- Showing that impact investing can return more on a risk adjusted return basis when climate events are more frequent etc. I.e. Al Gore’s data for his investments were good. More examples of this.
- Radical change inside the MDBs so that they take more risk
- Increasing transparency from investors. The rise of a new generation of investment firms. Pressure from stakeholders. Regulatory reform.
- Bring in more catalytical capital.
- Same as above – someone respected modeling what it looks like
- 1) The anti-ESG backlash is being fueled, in large part, by elite liberal neglect of socioeconomic insecurities that have persisted for decades. While many of the world’s poor have faced existential threats to their survival and ways of living for many years, the liberal elite are perceived as prioritizing climate issues for their own future generations. Addressing the Just Transition and social inequalities that are experienced today can build more popular support for climate solutions and ESG / impact investing. 2) DFIs should be funding more community and worker ownership models to keep more of the profits in recipient countries. 3) More efforts need to be made for two-way learning between communities and financial institutions.
- Need to provide carrots and sticks for non-taxable entities to mobilize more capital.
- Aligning intergovernmental organisations and government policies.
- Opportunities to implement: – Storytelling: leverage increased awareness of issues around climate change and inequality to push for different solutions – Provide education and support for earlier stage companies to build their capacity for impact measurement – Increase diversity in decision making roles for impact investment capital (both in first-time fund managers but ultimately we need to see change in decision making roles for much larger vehicles) – Mobilize capital to locally-led organizations in emerging markets, with an emphasis on supporting entrepreneurs and fund manager with lived experience
- Bringing Bipoc community leaders to the table to help write the framework and strategy for this is groundbreaking
- Alliance of the top 50 asset owners with commitment to measure their impact of investments
- The Just Transition Challenge which is well supported and will develop open-sourced criteria for a just transition label to help asset owners and managers ensure impact capital flows as intended. enhance the mandates of MDBs and DFIs to include more stretching mobilisation objectives. Careful use of conditional finance, first loss and guarantee structures to ensure the true additionality of private investment
- Look to sources of capital – the future cash flows generated by collaborative action, Look to leverage local capital sources, Address structural cost inefficiency
- Connecting asset owners/allocators to funds with impact – and closing the rhetoric gap
- There is more money than ever being dedicated to impact, and even “non-impact” organizations are seeing that impact is just good business sense.
- Developing the JT Financing Challenge criteria (underway through the UK NAB) and application of that criteria to investment vehicles in multiple geographies; continuing to encourage the shareholders of the MDBs / DFIs to shift their mandates to incent mobilization, inviting partnerships between MDB/DFIs and asset managers; proactively engaging with local institutional investors (e.g. sovereign wealth funds in Africa); promoting case studies across asset classes with a particular emphasis on emerging markets (that are under continued constraints for access to capital)
- There are many opportunities – this report broke new ground and provided a helpful framing for investing in a just transition. The work needs to be further shared/promoted and implemented.
- Expanding corporate taxes in developed countries to have a larger pool of capital to draw on for this increased financing would be a start. Similarly, ensuring that governments are equipped to grow their tax bases as economies grow in developing countries would make an enormous difference.
- Adopt SDG Impact or other standards that hardwire in the sustainability context and stakeholder voice Initiate commitments and requirements eg UK Impact Investing Institute Just transition challenge is a good start Collaboration across DFIs and between investment community and relevant experts to accelerate practice
- Systems thinking – hard wiring the social mission at all levels – capture all cash flows created by social interventions – not just siloed interventions in a VC model, Aggregate markets allow a much wider range of financial tools- and drive economies of scale via Cities and their hinterlands where 70% of humanity will be by 2030 and the opportunities of 70% of the earth surface – The Oceans
- Broad recognition is an opportunity, as communications for such recommendations reach the same actors.
- Effective, bipartisan policy Clear, material standards harmonization and adoption
- Standardize outcomes across the entire sector in order to be able to benchmark the quality of delivery organizations and assess pricing.
- for 2) blended finance to break through barriers for emerging economies especially the JET projects to show we can deliver
- Science, technology and data
- Again and unfortunately the tragedy of the state of the world both social and environmental will drive change for example poor people will die because of energy costs but politically this will drive sustainable energy. What a terrible way and price to pay to get to there.
- Open up the GEMs database, largely improve financial knowledge (talent) and practices at DFIs/MDBs (implementing practices in existence for centuries in the mainstream financial sector), MDBs/DFIs to share detailed information.
What are the biggest challenges you see to addressing these recommendations?
View all responses
- 1) lack of understanding/clarity on just transition – what it means, who is impacted, etc.
2) fears of pandering
3) need for economic return; need for positive impact
- First, I assume the recommendations are further elaborated on or defined. If not, that would help. And like above, widespread coordinated action will always be the biggest obstacle.
- Much more activity is needed to achieve the climate and socio-economic objectives that come with the Just Transition at an international level. The private sector needs to follow, and how it invests its resources plays a crucial role on whether it is possible to get on track with the SDGs. Their barriers therefore should be better understood, followed by a tailored approach. They face individual challenges, operate under different frameworks and regulations, and have various levels of enthusiasm for being involved. The challenge for MDBs, DFIs is to collaborate to develop principles for a framework for financing a just climate transition. It is vital that this framework is reliable, with consistent conditions and long-term monitoring. Furthermore, new financial instruments are needed to bring together strategic investments and secure their funding in the long term.
- Lack of energy security and the energy crisis and rising geopolitical risk make a just transition less likely
- Lack of global representation at tables like the COP
- MDBs and DFIs are still too risk averse.
- DFIs behaving too much like commercial investors when they should be first-in, more flexible, more patient, etc. Justice / Just Transition still not central enough in climate/green thinking,
- Retail impact investing is a mess / the wild west. Would love to see players emerge with true retail options…
- Donor governments pursuing a business-as-usual approach with the MDBs
- Greenwashing on the part of institutional asset owners. Reluctance to confront this greenwashing.
- There is and there will be a lot of greenwashing of impact (too broad definition, more driven to raise capital (vs true intentionality)
- Same as above – lack of incentives to do so
- The more that wealth pools to few wealthy individuals globally, the more the world’s future will be influenced by that Global Minority, who are out of touch with the Global Majority.
- There are no incentives for the investment teams to support the opportunities above.
- Budgetary constraints and institutional inertia at MDBs and DFIs.
- One of the biggest obstacles I see right now is the politicalization of impact and ESG – it is highly alarming to see what should be a nonpolitical issue of ensuring that capital is mobilizing towards positive impact (and can do so in a way that is not a threat to financial outcomes). So I think the narrative challenge is a real one that we will need to be prepared for as a sector.
- There may need to be an incentive to encourage financial institutions to adopt same levels of transparency and reporting
- Lack of standard measurement frameworks, political dynamics in the media (e.g. woke vs others)
- Lack of a global architecture to support the drive for a just transition to net zero. Reliance on pledges (not commitments for delivery). More visibility of projects; work on building capacity in country to enable more stable deliver (reduce execution risks); lack of incentives to reach tough, beyond risk tolerance goals.
- Multiple – See Critique noted above – it makes VCs and Asett managers as Principals – this has little to do with Social Justice
- Lack of genuine interest or commitment from wealth managers to invest in impact funds as LPs; avoidance of private equity/VC altogether
- Much of this requires coordinated and committed policy action and regulatory frameworks, which is never easy.
- – Getting beyond talk to actually mobilizing capital – Measurement and sharing of data
- Corruption is the single largest challenge here, including in the US where corporations and wealthy individuals pay far below their share of taxes thereby disproportionately concentrating wealth.
- lack of understanding of intersectionality – eg focus on climate first in the expectation social goals can be added on or done as a second wave DFIs can be slow to act, subject to changing political winds and overly risk averse Insufficient stakeholder voice to inform the way forward Insufficient focus on adaptation and mitigation until too late eg whole communities become uninhabitable and/or uninsurable
- Change management, Culture and the current intermediary framework focsued on silos
- White/green/blue washing also happen among MDBs and DFIs
- Politicization of ESG, impact Investing
- The notion that because social impact involved human beings, standardization is callous and little support can be generated for it.
- On 2) COP commitments that dont arrive – or are offered on terms that are not functional
- Prioritization and alignment on those priorities Coordination and building patrnerships (there is A LOT to do, we need to prioritize and better coordinate and build partnerships to achieve results)
- Poor financial experience and knowledge overall at MDBs/DFIs, combined with weak corporate governance/oversight. Own agendas/politics.
SDGs and Impact
Global Impact Leaders are divided regarding whether or not the 17 SDGs sufficiently capture the scope of issues that impact investing should tackle. In total, 42.5% of respondents are not sure if the SDGs entirely meet the needs of impact, 25% think that the scope is sufficient, and 32.5% believe that it is not. Some Global Impact Leaders warn that the SDGs were developed primarily for the purpose of public policy and public capital needs and, as a result, should not be the only framework applied to private capital and investment.
Are there any areas that impact investing should be tackling that fall outside of the scope of the SDGs?
If so, what are they? And do these areas receive sufficient capital and focus?
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- More specific focus on transition away from fossil fuels (i.e. ending subsidies) – more clarity around financing mechanisms and sources(public, private, catalytic etc.).
- SDGs barely refer to mental health, and there are other large gaps still e.g. is there anything on racial equity? I do not think we can solely count on SDGs to define the field of impact overall.
- Internet freedom, data privacy, disinformation, and media. Also campaign finance reform.
- Systems development – and NO the system to a large extent is rooted in Hierarchical silos – how technology can and should be applied to development holistically is ignored
- The SDGs do not represent an investment strategy but rather a pathway for achieving economic development. I think we need to be careful in how we use them. We should use them to hold ourselves accountable for whether and how we are making progress but not as an agenda per se for impact investing.
- We need to move beyond the framing of the SDGs to mainstream impact
- The SDGs are fairly expansive, so it is hard to imagine an impact area that isn’t at least implicitly in scope. Having said that, I understand the SDGs to have been designed around public sector policy and capital needs, which often means they are not the best framework for private capital, especially since they are not mutually exclusive and can therefore quickly become confusing to novice or even experienced users.
- Ultimately the SDGs are the most holistic roadmap we have. While not complete coverage they are good enough.
- Climate, Climate, Climate
- More clarity and harmonization. Materiality is key
- Measurement of impact. And it doesn’t receive sufficient capital.
- Quantification of issues, so we can prioritize efforts and actions based on tangible “impact vs effort” assessments
Ascribing Value to Impact
The monetary valuation of impact has been recommended by the Impact Taskforce, and many Global Impact Leaders say they are already using frameworks to assess the monetary value of their impact portfolios. Some, however, warned about the dangers of ascribing financial value to all and every positive or negative externality.
Impact-weighted accounts are currently being developed by Harvard Business School as a mechanism “to create accounting statements that transparently capture external impacts in a way that drives investor and managerial decision making” and are broadly viewed as a positive development by Global Impact Leaders.
In terms of opportunities, survey respondents see Impact-weighted accounts as a way to drive mainstream adoption and further standardization of impact. Obstacles remain around accuracy and adoption, with many Global Impact Leaders calling for regulators to step in, even while recognizing challenges posed by the current anti-ESG political environment.
The Impact Task Force recommended moving toward the monetary valuation of impact. What (if any) methods for monetary valuation of impact do you use or follow the development of?
“Internal evaluation applying existing tools.”
“Blockchain technology linked to impact outcomes that enable the creation of a SDG marketplace.”
“I am in favor of the efforts of George Starofin and others to account for impact (the Impact-Weighted Accounts project.) As well as efforts by The Shareholder Commons to make the case for the broad portfolio impacts of business actions. I think companies and businesses need to better amount for negative, and positive, externalities.”
View all responses
- Environmental and societal impact – translate into the costs of linear or extractive models, costs of degradation to economic systems, financial benefits of materials kept in play (vs. in landfill/nature), financial benefits of job creation, financial impact of healthier societies (esp for preventative care)
- While I am supported of this direction of travel, follow these developments and have interacted with the team at Harvard we need to be very careful not to suggest this approach is ready for prime time until it is. Providing examples of how it can work should, in my view, continue to be encouraged. The only ‘monetization’ method I have used is aligning part of an AM’s carry with its impact imperatives (obviously, a very different (and limited) tool but I feel it is a critical alignment tool).
- We follow SASB and GIIN’s principles and metrics for impact reporting, however do not currently use any methods for the monetary valuation of impact.
- We adjust EBITDA projections based on our performance of key ESG and Impact metrics, benchmarked against peers
- This is much of my work – the value is already calculated by McKinsey Accenture WB etc – it is effectively the aggregated future cash flow of sequenced social interventions – minus the negative externalties – as cash flow it can be traded in a way the higher the impact the higher the return. 2 – Alignment via the Assurance markets of all Local Capital ; There are 6 models in my view can mobilize Billions to Trillions – the current paradigm will not do that
- The work of Impact Frontiers and Impact Weighted Accounts (mentioned below) is some of the best in the field.
- The GSG is supporting the new IFVI (previously IWAI), and collaborating with VBA, Capitals Coalition etc, all to get more and faster progress. GSG is also ensuring that countries outside NA and EUR to have a voice in this work, and to be prepared for it.
- Something similar to the Carbon Coin in the book Ministry of the Future.
- Some areas easier to monetize i.e. DALYs + the future earnings of someone based on 1 extra year of schooling etc etc. Some other areas are much hard to monetize i.e. what is the monetary value of not being raped? Bridgespan in fact did try to quantify that through its IMM metric for TPG Rise and I was somewhat horrified. Also educating someone with a disability in a conflict setting who does not speak English is going to cost a lot more than elsewhere – if you look just at the monetary value, you always leave the most oppressed behind…
- Pricing carbon emissions.
- Our own methodologies linked to IMP
- OECD Impact measurements for DFIs
- Not sure how to respond here- are they looking for an impact IRR? From my perspective impact and retunrs need to go hand in had. Thus, good IRRs in sustainable and impactful business that are able to scale should speak to both.
- My company (Clarity AI) is a SaaS platform to assess impact, so we use various methods depending on the objective and the specific topics
- Internal evaluation applying existing tools
- Impact Institute, the Harvard Impact Weighted Accounts program.
- If you read the full reports behind the three G7/ GSG reports – ie EU and Havard / Oxford Proposals – you will note the primary focus is on Negative externalities (which ensures business will get the valuable subsidy to tackle and we fudge / difuse any debate about taxing negative externalities) – there is little focus on the monetary value of of the Postive externalities – what the social sector produces – and thirdly absoltely nothing about the value of the aggregated systemic collborations – the value of the future cash flows created by this systemic collaboration – these are large and already calculated by McKinsey Accenture World Bank Stop TB etc…mesaured in the hundreds of billions of future cash flow – where one dollar of investment creates six to fifty dollars in return. Shockingly the G7 / GSG report notes the technology to achieve this does not exist – simply wrong
- IWAI, VBA
- IRIS plus
- IMP, Operating Principles of Impact Management
- IMM, although I don’t love the way in which the value of a life in the global south is lower than in the north
- I’m not researching this at present
- I have not seen any that feel totally sound
- I have clients who use monetization and integrate it into our approach. While very useful, it also has significant drawbacks, so I see it as a secondary indicator for certain subjects, but not something that can be applied universally.
- I follow most of them from an ‘information’ perspective.
- I follow development of the International Foundation for Valuation of Impact (formerly IWAI) and some of the social value methods eg SROI. These can be useful tools when used the right way (eg to highlight cost of inaction or as one input to relative decisions across an industry) but should not be the only tools. The risk that numbers (again) are seen as substitutes for understanding and as the answer rather than the prompt for more questions (as Michael Lewis points out in various ways) is high.
- I am in favor of the efforts of George Starofin and others to account for impact (the Impact-Weighted Accounts project.) As well as efforts by The Shareholder Commons to make the case for the broad portfolio impacts of business actions. I think companies and businesses need to better amount for negative, and positive, externalities.
- HBS’s Impact-Weighted Accounts Project
- Following the developments of “impact VaR”, and of the International Sustainability Standards Board (ISSB).
- Deeply involved in the Capitals Coalition community and following the SEC’s discussions on valuation of labor. We’ve also convened several roundtables for institutional asset owners and allocators on this topic with the Responsible Asset Allocator Initiative (RAAI) led by Scott Kalb (former CIO of KIC), as well as Paul O’Brien (former Deputy CIO of ADIA and current Trustee of Wyoming’s Retirement System).
- Creation and implementation of system to monitor, measure and evaluate impact in the same way accounting is standardized and reinforced
- Blockchain technology linked to impact outcomes that enable the creation of a SDG marketplace.
- As a VC, we use the financial success of our portfolio companies as a valuation of the impact they are able to create.
Harvard Business School has developed Impact-Weighted Accounts “to create accounting statements that transparently capture external impacts in a way that drives investor and managerial decision making.” What are the biggest opportunities and obstacles you see with regard to making impact-weighted accounting a mandatory and normal practice?
View all responses
Opportunity = non-financial impacts are integrated with financial for decision making (vs. being an afterthought or additional benefit) Challenge = could end-up in a pointless debate on the relative values of impact. who decides how much a life vs. a coral reef vs. air quality in worth?
- There simply isn’t enough reliable data yet to make trusted and reliable IWA projections, and, IWA excludes or is not applicable to many important facets of impact that cannot be quantified through a monetary value.
- Not everything that matters can be measured. How are we taking into account the stories of those who’s story is untold? How are we valuing emotion, intuition and well-being?
- Impact-weighted accounting signifies a crucial next step in investment theory and will establish an effective risk-return-impact optimization tool while identifying a new investment frontier. By making it a mandatory and normal practice, impact becomes more valuable because it increases its relevance, reliability, and comparability of the reported information. The value lies in data being linked to other data. Yet, the hurdle lies in the fact that, as in the case of financial accounting standards which have adapted several revisions over the years, the measuring impact will evolve and improve over time as well. This could be a liability for businesses should impact-weighted accounting be implemented as mandatory and normal practice at this stage.
- I think compliance expense and corporate pushback, but there should be an efficient way to do this.
- Adoption by mainstream investors Problem is that there is no focused leadership to lead to this adoption.
- The way that ‘risk’ came into financial decision-making is a good analogy for impact, so in that sense, impact-weighted accounts are a step in the right direction. Obvious issues of metrics/measurement, real-time reporting (rather than rear-view window), and assignment/tranching of impact across financial instruments and capital channels.
- Capturing the cost of externalities and taxing those could be super interesting esp. when it comes to climate change.
We’ll need major stakeholders in the capital markets to start taking into account these accounting practices
- If it is not adopted by regulators then it will be hard to get investors to take these efforts seriously, and greenwashing will continue to be a problem. We need to move away from pure self reporting to other data sets.
- Diversity and nuances of business models; good data/info; ability to consolidate; cost of implementing
- determining standards and funding enforcement
- We should send you takeaways from our roundtables on this, where Rob Zochowski presented to asset owners and allocators.
- Politically conservative asset managers and executives of large corporations.
- Financial institutions have overwhelmingly favoured voluntary moves over mandatory demands (see the response to the SEC”s climate disclosure proposals). They will need to be persuaded that their stakeholders overwhelmingly want them to adopt impact-weighted accounting, and that it will offer benefits such as standardisation and a level playing field.
- From my point of view in supporting very early stage companies, these organizations will need education and support in understanding how to build their capacity to institute this type of accounting as they grow. I’m a big believer in incorporating impact from the earliest days of the company, but it is important to acknowledge that there might be headwinds from other (non-impact oriented) investors, and other capacity factors that will make this challenging to factor in from the earliest days of a company’s growth and development.
- Mass adoption by institutions may take a public campaign or UHNW clients joining forces to request this
- Reliable and consistent data; differing philosophies on reporting (eg EU Sustainable Finance approach which is heavily prescriptive and has a challenging taxonomy, even for carbon. Lack of consensus on which factors really matter (are the driving factors) – too broad a canvas of options. Lack of definitional consistency beyond TCFD.
- As per my comment above the report (on my last reading) focused primarily on pricing negative externalities at a silo level – and not the value of Positive externalities and completely ignores the value of future cash flows created by systemic collaboration across the whole social value chain which can now be identified, granularly identified at both a silo and more critically at a systems impact – tracked audited and paid facilitated by technology
- how do you weight it? Who are the beneficiaries you prioritise? Very difficult
- Many of these systems are too burdensome and inapplicable to early stage investments when companies have few metrics to go off of.
- See above. It should not be make mandatory until we are confident that it works to reflect total value across the board – geographies, sectors, etc.
- The work today is very impressive but there are alot of assumptions in the caculations and the danger is that the results might not accurate indicate true impact – or only on a narrow dimension.
- The anti-ESG / anti-woke political movement in the US right now is concerning, and I believe that impact and ESG will continue to be politicized at least in this market. If investors and corporates cannot even accept limited naming restrictions (proposed ESG funds naming rule at SEC) and basic climate disclosure (also SEC), they are far less likely to accept a much more stringent disclosure expectation associated with impact.
- The IWAI picks a helpful fight in the right areas around the way we have accounted for things and the way forward. this is useful additional information and relevant for making some decisions. This is a useful addition but not sufficient on its own. However, it is not the full story. Not all impacts can be quantified in this way. Availability of consistent data is an issue. These numbers do not bring forward stakeholder voice or sustainability context. It also has the limitationf outlined earlier re reporting vs management for impact.
- Most of them focus on Negative externalities – ergo the interest of Business and somewhat derail any conversation about taxing the generators of negative externalities. ‘ What is ignored is oft the value of the Positive externalities created by primarily though not exclusively the Social sector – and CRITICALLY the value of sequencing social interventions by all societes stakeholders
- I am not familiar with the concept
- Politicization of ESG and Impact Investing
- Opportunities exist to better define what would be considered “material” or relevant in the social space. There are tremendous opportunities to appeal to investor and consumer interest. The biggest obstacle will be political opposition.
- time and money – this is still very small scale work 2. governments engaging in this work 3. investors and corporates engaging with pilot work – though this is underway
- I strongly believe in the Impact Weighted Accounting We need better disclosure and scalable tools to make it a reality Regulations supporting it would also highly accelerate the efforts
- Great opportunity, but requires a regulatory environment
The Carbon Economy: To divest or engage?
A growing debate among ESG and impact investors has been whether to engage with the legacy carbon economy — accelerating its transformation by working with key insiders to make positive changes to its operations and transitions — or instead divest entirely from carbon and invest in clean fuels and technologies. There is no consensus on this issue among the Global Impact Leaders, only 18% favor full divestment as the best way to get the world to net zero emissions. Other responses range from partial divestment (32%) or some engagement (32%), with 18% describing their position as “Neutral.”
What do you believe is the best approach to allocating capital to fossil fuel or other environmentally harmful industries in order to reach net zero emissions globally?
The Greatest Good
When asked where the field of impact investing could be the most beneficial, Global Impact Leaders almost universally agreed on climate change as the number one priority. Of the top five actions that were ranked number one with regards to where impact can be the most helpful, four were directly related to climate, with 40% of Leaders choosing “Limit global average temperature increases to 1.5 degrees Celsius” as the most helpful thing impact can do.
The only activity not directly related to climate in the top five responses was the allocation of $100 billion a year to developing countries from developed countries, with 13 % of respondents ranking this as the most useful area for impact. Much of that $100 billion may ultimately be directed toward climate-related issues, as the Global South represents much of the investable opportunity to tackle climate change and also takes on the majority of economic, social, and environmental burdens relating to the climate crisis.
Where can the field of impact help the most? Actions are ranked by percentage of first-place votes:
- Limit global average temperature to 1.5C (40%)
- Doubling of finance to support developing countries in climate change adaptation and resilience (28%)
- National action plan to reach net zero from each country (15%)
- US$100 billion/year delivered to developing countries from developed countries (13%)
- Phase-down of coal power (5%)
ESG and Impact
The Global Impact Leaders see the recent surge of ESG investing as overwhelmingly positive for the impact space and achievement of the SDGs. 36% say this trend is “Very helpful,” 49% say “Helpful,” while only 13% of those surveyed are “Neutral,” and 2% think it is “Harmful.” That said, the detailed comments accompanying these responses paint a more mixed picture, with concerns that current requirements for ESG classification are not sufficiently rigorous or stretching. In particular, respondents mention that the “S” measurement for social requires a lot of work, which may represent an opportunity for impact leaders, with their long-standing experience in delivering social impact, to lead the broader investment community.
Several respondents said it remains important to view ESG as a key part of the needed transformation in investing, particularly because it helps to highlight significant business risks, but it in no way reduces the need for an ever clearer focus on delivering and measuring impact. Global Impact Leaders mostly view the current backlash against ESG and so-called “woke capital” as less of a threat than as an opportunity to drive better, deeper ESG with a greater emphasis on investors and businesses achieving a more significant positive impact.
To what extent do you believe the widespread adoption of ESG is helpful or harmful to the impact space and achievement of SDGs by 2030?
How important a role do you believe ESG will have in advancing the impact space and achieving the SDGs?
ESG Investing has been the subject of increasing mainstream media interest. How, if at all, do you believe the impact field should respond?
“More clearly explaining the differences between ESG (framework to include sustainability metrics into financial analysis) and Impact
Moving financial industry towards Impact and not just what ESG is today.”
“The impact field should remain steadfast in keeping the compass set to due north. There is a lot of expectation for ESG it was never designed to deliver and the risks in the current context abound and the area is very contested. Impact can be the clarity for where we need to head toward and how. Views outlined in this podcast“
“By being clear on what impact is, raising awareness substantially, engaging to increase acceptance of its role, not demonising ‘good’ ESG but being prepared to call out when it is merely marketing.
This will boil down to working to consistent standards within a common philosophy framework and the buildling (and sustaining) of coalitions for change.”
View all responses
- ESG investing is part of impact investing. the broader impact field should collaborate to ensure that ESG isn’t used as a tool for greenwashing typical operations. This is where transparency and accountability in impact is critical
- By taking a balanced, middle of the road perspective. ESG won’t fix everything, but it also isn’t all green-washing. And when used to drive improved management decisions for long-term value creation or capture, it has considerably utility, regardless of your political views.
- There is far too much white-washing in the space. I would like the impact field to take a strong stance on how we must re-imagine capitalism to much more inclusive.
- As both ESG and impact sit beneath the sustainable investing umbrella, ESG becoming more mature is a positive development for the ecosystem. There is a fundamental difference, however, which many conflate, and the impact field could highlight in response: while impact is about the type of investments a manager is targeting, ESG investing is an approach to identify non-financial risks as part of an investment process.
- The impact investing field should double down on standardizing metrics and frameworks and hold itself to a rigorous standard (get its own house in order) and be broadly supportive of ESG.
- Bring in the S of ESG clearly into impact metrics -so far this has been the most neglected.
- As adjectives to the noun.
- ESG is relatively straightforward inclusion of material risks. Reporting and operationalization of ESG lays a foundation for proactive impact. Demonstrated positive impact (and investment performance) will advance the ball more than abstract arguments about processes and checklists. i.e. “Impact” is a better place to hang our hat than “ESG.”
- ESG is still the wild west unfortunately and it’s yet the only real option available in the retail market. We need to reinforce what ESG means so that it’s not in fact meaningless + ideally give much strong impact investing options to retail investors.
- The impact field should support ESG but also be clear that the bar must be raised on what is considered ESG.
- I have mixed views on this. I think there is an urgent need for business and other voices to push back on the anti ESG efforts, particularly voices of support of ESG from the right . On the other hand fiduciaries do not like to be told what to do by anyone, either on the left of right. The impact investment industry can play a role by emphasizing that this is just common sense investment, and not political.
- Defining what ESG does, and means; and defining Impact. These are 2 different strategies that intersect in some ways but not all.
- I think they are right to be skeptical; the players in the impact field need to be serious and consistent (it needs to result in a change of behavior). They should look at the real players in the impact investing space and not concentrate only large financial groups. Their criticism impacts all the players- they are throwing the baby out with the bathwater
- Should be supportive and hold up examples of success. Can also facilitate convenings to support it as a field and practice
- ESG as historically practiced, with a focus on enterprise value, is ineffective. However, an increasing focus by ESG investors on system-level risk and return (accounting for externalities) is promising and aligns well with impact investing. I would like to see ESG and impact investing, as they have been historically practiced, converge and evolve into system-level investing and systemic stewardship.
- We need to establish a standard ESG report framework for PE and VC firms.
- Differentiate with fervor around impacts solutions based value proposition
- ESG is clearly at an inflection point, particularly in the US, where it is attacked from those on left who smell greenwashing by overmighty corporations and from those on the right who say that “woke” capitalists are standing in the way of energy security. Given long-held concerns about the need to ground ESG rhetoric in substance, this presents the impact field with an opportunity to persuade well-intentioned holders of capital that their intentions may be better met through an impact approach.
- Continue to demonstrate the business case.
- Turn the wave of media into a tidal wave so every person opening a bank account will know to ask about ESG
- Full-throated support for more common definitions of ESG metrics and data collection of metrics by investors
- By being clear on what impact is, raising awareness substantially, engaging to increase acceptance of its role, not demonising ‘good’ ESG but being prepared to call out when it is merely marketing. This will boil down to working to consistent standards within a common philosophy framework and the buildling (and sustaining) of coalitions for change.
- In the last few years – We claim to have aligned up to 40 trillion in ESG – if it has been so successful why are all the key benchmarks of Climate SDGs and inequality all deteriorating? We need to be honest as configured it is not achieving the scale of systems change we need it to
- We need to differentiate between a risk management system that includes social and environmental factors (ESG) as opposed to an investment strategy, with purpose, that aims to deliver social and enviromental outcomes (impact investing)
- It would be helpful to differentiate between what ESG investing is – sensible risk mitigation – from impact investing – which is outcome and additionality focused.
- With clear delineation and helpful explanation!
- There has been a huge backlash against ESG which is dangerouse for the impact field. Transparency, measurement and standards are key. The impact field needs to help with that…
- As mentioned in previous comments, I believe impact investors should collaborate with those building better ESG practices. They can also support proposed policies and regulations to increase transparency and clarify definitions – not just with their own capital and programmatic initiatives, but also by socializing this work among their broader networks.
- Objectively vs. Defensively. Ie ESG is an important research-based tool for risk-mitigation, not a “woke” political strategy.
- The impact field should remain steadfast in keeping the compass set to due north. There is a lot of expectation for ESG it was never designed to deliver and the risks in the current context abound and the area is very contested. Impact can be the clarity for where we need to head toward and how. Views outlined in this podcast https://podcasts.apple.com/au/podcast/rosemary-addis-a-new-government-a-new-business/id1440119945?i=1000576313911
- Conceptualizing what is impact
- Robust responses to disinformation about ESG and Impact Investing is essential
- While there is a lot of opposition to ESG investing, particularly amongst conservatives in the US, consumers and investors have already jumped on the bandwagon and care about these issues. The mainstream media seems more interested in the controversy than the benefits and they should present both sides of the story.
- Clarity – ESG is sometimes risk reduction, sometimes intentional benefit to communities. The latter can connect with impact, particularly as harmonised standards allow impact positives and negatives through use of publicly listed information
- More clearly explaining the differences between ESG (framework to include sustainability metrics into financial analysis) and Impact Moving financial industry towards Impact and not just what ESG is today
- Build on ESG into ESG Impact
- Be more active in the media, increasing promotion and addressing incorrect information/publicity
- I look forward to a day when proactive ESG principles (not just the Hippocratic oath to do no harm) becomes integrated into mainstream business. We should respond to the criticism by highlighting how sound ESG practices correlate to positive business outcomes — with specific examples.
Impact Investing During Recession
In general, Global Impact Leaders who identify as investors do not anticipate that the coming recession will alter their investment activities very much, if at all. No survey respondents in this group felt that a recession would cause them to pause their dealmaking activities. In fact, over a quarter (29%) said they would increase their dealmaking during a recession. In total, 36% said they would continue investing at the same rate as before, 21% anticipated cutting back by less than 25%, and only 14% of respondents anticipated cutting back by 50% or more.
The majority of these Global Impact Leaders (65%) do not expect that a recession will have any impact on return expectations for their impact investments. While 15% of respondents believe that their portfolios would outperform expectations in a recession, 15% said their portfolios would underperform, and a further 5% anticipated their portfolios would perform well below expectations. Most of these investors (58%) did not expect that a recession would change the internal rate of revenue (IRR) of their impact investments relative to non-impact related investments.
If you are an impact investor, which best describes the effect of a looming recession on your investment strategy for the near future?
How else is your organization preparing for such an economic downturn? Are you adjusting or altering your impact goals? How do you expect the recession to impact your organization financially? Please enter N/A if not applicable.
View all responses
- No change
- We expect flat budget (vs continuing on our path of growth)
- At this point, we are not adjusting or altering our impact goals. At the same time, as portfolio values fall, we have less capacity for private investing
- The manufactured recession seems designed to curb worker power and wage hikes, so it will clearly set back impact in that regard. Cutbacks and negative sentiments could affect our subscription business, but downturns and economic crises can also open the way for needed reforms and systematic change.
- Wait and see – we fundraise from foundations, corporations, individuals. Their budget cuts do not always follow the economy but they might this time.
- Working with portfolio companies to ensure they are well capitalized and calibrating their growth.
- Preparing our companies for a difficult fund raising environment. We are not adjust our impact goals. We believe we will lose more companies that can not raise follow-on capital
- We are revisiting our staffing model to ensure we are better prepared to grow or shrink based on trends. We saw growth during the pandemic, given increasing awareness of the importance of the need to build innovative solutions to our big challenges, and while we don’t necessarily know whether the same will be true in an upcoming potential recession, we want to be prepared for either scenario.
- We are focused on building our business and managing our resources as well as possible. No adjustments are being made for potential changes in the near-mid term economic outlook
- Crisis = Opportunity. There will be a need for clearer solutions and opportunities – the danger will be the Ostrich effect and a move away from the Innovaion we need
- Our Foundation actively engages with other UHNW asset owners to encourage deployment of more capital to impact. These asset owners are highly insulated from any direct economic impact of a recession – and many decided for example in the early days of COVID to increase their investing in response to the challenges.
- The investment organisation I’m most closely involved with is focused on SE Asia markets and anticipates that growth opportunities connected with impact will remain a focus in current conditions.
- Working on real resilience studies on impact of food systems, energy prices and world trade on fragile states
- Play a bigger role in providing catalytic capital.
- We believe it will be more challenging to raise funds in the next 2-3 years. Thus, we are seeking grant capital for our start up.
- Examining which impact tools will be most useful in the gathering storm of food, fuel, fertiliser and refugees
- As recession bites we are needed more.
- No impact
In an economic downturn, how do you anticipate your impact investment portfolio will perform from a financial perspective?
In an economic downturn, how do you expect the IRR from your impact investment portfolio will perform relative to non-impact investments?
Global Impact Leaders are relatively split on whether impact investments are higher or lower risk than non-impact; the majority believe impact investments are lower risk, and 45% believe they are higher risk.
Comments and feedback from the Global Impact Leaders show risk to be a function of markets and investment type, with emerging market and early-stage investments tending to carry more risk. Economic tailwinds around climate change, a focus on community needs, and other factors can act as risk mitigants, however.
None of our respondents definitively believe that returns must be sacrificed for impact. However, some recognized the importance of taking concessionary returns in order to galvanize certain activities or outcomes.
Do you perceive your impact investments to have a higher or lower risk than non-impact investments?
Please answer ‘Why?’ in response to your previous answer.
View all responses
- Our investments view impact as risk mitigation and opportunities for growth and disruption
- Because we have a strong view on equity – and places where markets are typically broken and there is less buying power.
- As a traditional VC, we do not keep an eye on measurable impact when making investment decisions. We do, however, consider venture investing as inherently impactful in the MENA region, and measure the lives impacted using various metrics based on five SDGs.
- In some cases the risk is higher because our impact investing strategy focuses on underserved communities and we are explicitly willing to take more risk or accept lower return in that part of the portfolio In other cases, impact investing reduces risk by avoiding systemic risks
- I believe investment in impact areas will actually outperform as there is huge demand
- I operate in LDCs, SIDS and other frontier markets
- More holistic understanding of long-term drivers and opportunities.
- Higher short term, lower risk long term.
- Weak definitions around what “impact” means
- Depends on the crisis. With pure financial crisis, we see less correlation with low-income customers- they are more resilient and unaffected (vs. formal economy). However, inflation is a real concern. Also, while appetite for P/E or VC in emerging markets will be reduced in a crisis (generally), there will still be appetite for impact as a differentiator.
- I believe the tail-winds for clean energy technologies will be helped during the recession.
- New business models and need for high growth combined scarcity of aligned capital
- Impact investments are aligned with growth sectors of the economy, and most inherently incorporate a long-term view.
- We are operating at the very early stage – on balance, I believe our investments are just as risky as non-impact investments at our stage
- My impact investments are seed/early stage and so they are higher in risk
- The opportunities of systems fiancing is huge – the inefficiency so great
- Impact investments have double value add in terms of returns, while non-impact investments only have one.
- Not currently formally impact investing, but I hold all of my personal investments to the same standards, including both ESG and impact standards
- Higher only to the extent that we allocate a portion of our portfolio to “catalytic” investments where we recognize a higher risk exists. With respect to our core portfolio we view the risk as similar to a traditional non-impact portfolio.
- The risk is aligned with the asset class and market context rather than the impact element. If anything, the impact lens gives greater clarity of performance dimensions and risk
- lack of guarantees
- Earlier stage fund managers and investments
- These investments take climate and social risks into consideration. These risks will be exacerbated in an economic downturn.
- Varies over time and events.
Do you believe investors must sacrifice returns when investing in impact?
Please answer ‘Why?’ in response to your previous answer.
“Impact investing can support mitigating risk, diversifying exposure and higher yields.”
“I don’t believe it is necessary to sacrifice returns for impact – Ie one can construct an impact-focused portfolio with market-rate returns BUT many investors (us included) allocate a portion of their capital in a catalytic manner where they/we are willing to accept a reduced return for greater potential impact. This is an individual asset owner decision that is entirely appropriate – no less so than allocating a portion of assets to traditional philanthropy with zero financial return.”
“I think there are cases when investors should be willing to prioritize impact over returns; but I don’t think they must (all a matter of sector, stage, etc).”
View all responses
- Our entire firm is based on the notion that higher returns are possible through smart investment in impact-driven companies
- Pending the space / sector, if you want to reach those underserved with less income and significantly more systemic barriers, you should not expect to see the same return
- Impact investments are made with the dual goals of achieving financial returns and positive social or environmental results. A well-considered and targeted investment decision should be mutually enforcing, rather than sacrificing returns.
- It depends on the context and type of investment. Underserved communities can be less correlated with the broader market.
- These investments need to be seen from a long term perspective.
- Different impact investments will be at different points on the spectrum from catalytic/concessionary to full commercial.
- I think we should see capital as a continuum and there are reasons to make impact investments that would not achieve comparable return benchmarks. But we also have to acceptable that benchmarks can be highly biased + problematic i.e. venture returns are extractive by and large and extremely uncertain, so the benchmark should change regardless.
- Short-term returns, yes. In the long-run, impact investments may outperform. It’s all about time-horizon.
- It really depends on the investment. In some sectors you could expect a better risk adjusted return than non impact investing, but in some other sectors returns will be lower.
- Some investments do, others do not. Depends on the objective of the deal. And some investments are focused on developing new pathways.
- Elevar does not sacrifice returns, but it will depend on the impact investor and their thesis. However, I do believe thaat impact investors should deliver returns to attract more capital.
- Turning down high financial return opportunities is sometimes the cost of impact. And, market rate returns can generally be achieved through impact investing
- Some investments might produce strong returns, while others won’t. It depends on the strategy.
- For sectors like energy, food and water – impact returns and financial returns can be directly coupled.
- Most of the research I have seen suggests that impact investing requires little or no sacrifice of long-term returns.
- I think there are cases when investors *should* be willing to prioritize impact over returns; but I don’t think they *must* (all a matter of sector, stage, etc)
- It is very idiosyncratic
- It is not essential to sacrifice returns (or take increase risk) but some investors may choose to do so.
- The wrong question to ask – as in normal capital markets different sources of capital require different returns
- Its how the rewards of success are shared between stakeholders. An equitable share means greater rewards for employees, communities and likely less for owners of capital. But we need to see if all can succeed together whilst generating market returns
- Our model has proven that concessions are not required, and in fact, impact investments outperform and redefine traditional markets.
- Some impact investing gets its additionality from the fact that the opportunity is concessionary and would not otherwise be able to get funded. Philanthropic and catalytic impact capital are crucial. On the other hand, some impact investing returns far above market, intentionally or unintentionally. There is a broad spectrum for good reason.
- I don’t believe it is necessary to sacrifice returns for impact – Ie one can construct an impact-focused portfolio with market-rate returns BUT many investors (us included) allocate a portion of their capital in a catalytic manner where they/we are willing to accept a reduced return for greater potential impact. This is an individual asset owner decision that is entirely appropriate – no less so than allocating a portion of assets to traditional philanthropy with zero financial return.
- It is not a necessary trade off however can be by choice to catalyse and enable
- Impact investing can support mitigating risk, diversifying exposure and higher yields.
- Personal experience
- Because it depends on the impact we are talking about. If we are simply seeking job creation, then there is no sacrifice, but if we want to reach the most economically disadvantaged populations, then returns would likely be lower.
- Both are possible. Catalytic and sacrificial finance is rare and hugely valuable to allow other actors
- There are investment that can have both better impact and better returns
- Depends on who you’re working with and the source of capital
- This depends on the sector and market. If you’re investing in fintech in Kenya (for instance), investors can more likely balance returns and impact. If you’re investing in “zebras” as opposed to unicorns, returns may be lower and take longer to materialize. If you’re investing where there’s currently a gap — in the impact valley of death — some level of subsidy or blended finance is likely necessary.
Global Impact Leaders believe current global events influence their communities and objectives. More than half of respondents (55%) are “Very concerned” about the effect that threats to democracy will have on the ability of impact investments to move the needle on the SDGs, with a further 26% reporting themselves to be “Concerned” about such threats and their effect.
Overall, 89% of respondents are either “Very concerned” or “Concerned” about the impact inflation will have on meaningful action on the SDGs, with TK believing the same of inflation. Only 3% of respondents were not concerned about the effect the war in Ukraine will have on impact investments.
How concerned are you about the following world events and their impact on moving the needle on sustainable development goals?
Rapidly increasing costs of living across the globe have impacted everyone, but disproportionately so for people who are experiencing poverty or are part of already underserved populations.
How can/should the field of impact galvanize to help address rising inflation?
View all responses
- Taxes for the uber wealthy.
- The rising cost of living is shifting the way customers and companies view sustainability from ‘cleaning up’ to ‘saving’. The field of impact can provide support in the rethinking of green business models and improve their practices. With the rising commodity prices for example, companies that can recycle, process waste, and optimize production to reduce costs could also result in a considerable impact.
- I’m not sure what the impact investing field can do other than focusing on food and energy security, which should reduce inflation over time
- Look at more investments in businesses that are aimed at this group
- By championing a robust “supply side” approach to the low-carbon/post-covid rebuild — i.e. more solar power, more affordable housing, etc. Higher supply will lower prices more effectively than interest rate hikes.
- I leave this to the economists and governments as it’s a complex question we still do not fully understand as far as I can tell.
- This is mostly a question of reducing food and fuel costs. More focus on regenerative agriculture and off-grid solar.
- Invest in changing the food and agriculture system.
- Support business models that are reducing the costs of food and food deliverey. Low income people spend ~50% in food 9when you include transportation costs). Need innovation in quality food delivery and improving supply chain in agri and production as well
- Address economic inequality as stated in this link.
- I don’t have any good ideas.
- Focus on affordability of products and quality jobs and fair wages
- Those working in the impact field can help elevate the debate about what is a sustainable corporate profit margin/what are sustainable investment returns at a time when many people have been plunged into crisis by rising prices.
- Organize heads of state to create action plans with fail-safes to protect the middle class
- Inflation is a tricky public agenda item in that central banks need their independence in balancing raising rates to cool inflation and going slow enough not to destroy the markets and feed back into the real economy. In this light, I don’t believe the impact field has a real role to play in lobbying central banks.
- I’m not sure that is the role of impact.
- Empower communities as empowered consumers of auditors and auditors
- rising inflation is linked to rising energy costs, which in turn inflates the food sector then all other sectors dependent on energy. But renewables as they get cheaper and cheaper are inherently deflationary. therefore impact investors need to scale up funding of renewable energy infrastructure but also technologies
- Invest in real economy businesses and be sure capital flows to low-income and low-wealth communities
- In the short term, provide more direct community-level support to those most acutely affected, including by eg banking with CDFIs and giving unrestricted funds to on-the-ground charities. In the long term, 1) support policies that foster economic resilience (e.g. reducing supply chain risk), and 2) don’t participate in behaviors that substantially drive up cost of living, e.g. owning vacation rentals or vacant vacation homes, especially in markets that have long-standing housing crises.
- Keeping the focus on integrating impact and directing capital in ways that address the underlying issues
- The field of impact should not try to influence monetary of fiscal policy
- Support anti-inflation monetary policy
- The need for philanthropy is greater than ever. The fact that people can get a tax deduction to keep money sitting in DAFs and not going to work for those who need it most, is irresponsible. We need to move money out of these entities and into the hands of those who need it most.
- To use the tools we have – impact finance, impact bonds, outcome contracts, wholesale impact funds, etc – and to turn other tools into impact, to take one example, agritech for emerging economics,
- Providing solutions to mitigate the biggest problems that inflation might create. We need to be more proactive and anticipate to the problems, no actings reactively
Moving forward, how can the Global Impact Leaders best contribute to our field? What are your expectations or desires for this group?
“Just do it!”
“Entering into public dialogue by having a voice in the media, in the business and investment community.”
“Bring together private and policy players together to inform each sides work.”
View all responses
- Create a network to share best practices, offer opportunities to gather like-minded (and maybe contrary) leaders
- Given we are a group who believe in the power of capitalism and perhaps even some are on the right side of the political spectrum (vs typical social change being so leftist), it would be GREAT if we could come together with a shared statement on (1) the need to fix capitalism, (2) a view on systemic inequities, (3) re-imagining the values and mindsets of the US (collective, etc.) and (4) the need to invest in the next generation of collective leadership
- For the single parents among us who cannot travel, a virtual even or a short breakfast or lunch in NYC around an event would be extraordinarily helpful
- Need to have a better understanding as to what is expected from the global impact leaders as a group this is a huge opportunity for us to have a point of view and should not be wasted
- A less egocentric group with willingness to contribute
- Could be an effective forum for collective self-accountability to shared impact goals or vision, i.e. by surfacing emerging issues or contradictions.
- Meet in person first then some zoom meetings then another in person meeting to have a sense of community / exchange / peer support.
- We need more advocacy for this space as well as clearer and tougher definitions for impact
- Drive action at scale into impact investing. Bring different and diverse voices into the discussion. Identify solutions, and invest. Focus on tech and innovation. Keep investors accountable.
- Setting the tone and agenda for the high level impact conversation; developing a close knit community of leaders in the space.
- Stronger voices; more case studies and examples
- Hard to say as we haven’t convened as a group or had a chance to get to know one another. It would be nice to convene as a starting point to see how we can collaborate.
- Bring together private and policy players together to inform each sides work.
- Leaders to show integrity and importance and value proposition of impact
- I hope that this group continues to bring a spirit of ambition and rigour to the impact field, with a focus on solutions and best practice.
- This is an incredible group with a very diverse set of skills, experiences and perspectives – personally, I’m very much looking forward to learning more from each person (including others’ perspectives on this survey). I would love to have the chance to gather with this group in person and/or in a series of panels, webinars, etc to understand more about what’s on the top of their minds and priority lists, what challenges they’re facing. If there are ways to incentivize collaboration between leaders within the group who are working in similar spaces, that would be icing on the cake!
- I’m excited to meet, collaborate and get to know cross-sector partners working in impact from philanthropy, investments, private and public sector and to find synergies and ways to accelerate the success of one another’s work
- We should publish a range of op-eds from all participants as signers on key topics
- Too early for me to say
- To create the systems change we need to see – move beyond the current impact paradigm
- Entering into public dialogue by having a voice in the media, in the business and investment community
- We’re excited to learn from other Global Impact Leaders.
- Providing clear and credible voice, committing to bold initiatives, sharing confidence inducing examples Playing the role of proactive allies
- Connections and discussions between the leaders about the future of the field and committing to a roadmap to get there jointly.
- At the risk of mentioning it too many times, I think the greatest opportunity for impact lies in bridging the impact-ESG divide. I would love to see Sorenson nudge leaders in this direction.
- Act as examples for others in their communities Share personal experiences and learnings Participate in multi-sector collaborations
- This group is a valuable addition to the landscape. To really leverage the benefit it would be terrific to have opportunities to come together periodically around developments and collective problem solving. For those of us further away from the US, some opportunities to join virtually or to have virtual meetings would be helpful. My hope is that we can contribute to curating resources and amplifying key messages and priorities.
- Influencing celebrity executives
- Research, publications, field building
- I hope we can convene as a group, and engage in a mutually beneficial relationship.
- The survey data from this will be useful and hopefully influential. I would like to see more global balance of leaders.
- I think we shouldn´t be overly ambitious. We should focus on 2-3 main issues (max) and highly coordinate to work on those
- Just do it!
- Arrive to common views and policy recommendations that we voice loudly/advocate, in open and closed influential meetings and events, op-ed’s, papers, policy briefs.
- We need to work more seamlessly together to ensure a more seamless continuum of support for impact enterprises. Currently, each of us has our own strategy, theory of change, investment thesis, geographic focus, sector focus, instrument set, etc. Taken individually this makes a lot of sense. Collectively it’s a mess, frankly, and very difficult to navigate for those we want to support. Only by working together and forging more intentional partnerships can we hope to achieve our collective objectives around the SDGs.
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Tell us what you think of the 2022 Global Impact Leader survey report.