The global side of impact investing

I’m hitting the conference season this autumn. Thankfully, not the party conferences but the social investment ones. First, I attended the recent Global Impact Investors Network (GIIN) meeting in Amsterdam this October. I had not been to one of these for a while. GIIN was set up in 2009 around the new wave of finance that started to look at impact. A new group of mainstream financial institutions and large foundations ran with the hypothesis that it was possible to invest and achieve positive social and environmental impacts with market rate financial returns. Their principles were that you had to invest intentionally, you had to use evidence and impact data in investment design, manage impact performance and work together with others to contribute to growth of the sector.

What they aimed to do was attract money at scale to tackle the social problems that the likes of us had been working away at. To do that, they consciously chose a look, feel and message that was different. It was market focused, investor directed and scale orientated.

I was lucky enough in a former role to be able to attend meetings of the early GIIN Investor Council, back in the days when perhaps 70 or so people would gather up in Long Island, New York. While the focus was not on us, I did attend what I rate as one of the best conference sessions I have ever attended, a meticulous, heartfelt debrief on the failure of a leading US community finance institution after the financial crisis. This honesty and integrity in understanding a really difficult experience still leaves me moved.

GIIN today is another kettle of fish. There were 1,200 impact investors in the room on the 2nd and 3rd of October, at the Beurs van Berlage a former commodities exchange in the heart of Amsterdam. The GIIN today estimates a global impact investing market size of $502 billion. The impact range is a wide one. It ranges from the likes of us at Big Issue Invest through development finance, emerging market finance and latterly, publicly listed impact funds on the stock exchange, a step in from ESG/Responsible Investment funds.

NOW: The GIIN is thrilled to announce a new report, which marks a key first step in advancing investors’ ability to compare #impact performance rigorously w/in a sector. Learn more about this approach to evaluating #impinv performance here: https://t.co/BYZwHtlZCk

— GIIN (@theGIIN) October 2, 2019

There were some great technical sessions, some hyperbolic claims, some practical detail and networking, networking, networking. I enjoyed most of it. I particularly liked the session I attended on whether impact was being overclaimed. “How many of you have ever put an investee into default for not meeting their impact targets,” asked one speaker of the audience, “If you haven’t, you are not serious!” Wild.

So what do I conclude from these two days? First, intentional investing in international development is doing some good stuff, from what I can see. Bringing rural solar power to Africa and Asia is creating billion-dollar businesses and transforming rural livelihoods for the better. Rolling out affordable housing, reforestation, a new wave of sustainable agricultural technology businesses; I can see the need and benefit to it all. I like it. Second, there is still a disconnect to the mainstream capital markets. The large, daily traded, listed impact investment funds are exciting and a step further along the way from the ESG funds. They are investing in businesses that are positively focused on better outcomes. This is progress, but it does not touch our world of investing in charities and social enterprises at the sharp end of social issues. Third, I still find integrity out there. I like what the GIIN is doing. Yes, it is a cheerleader for the sector, but not an uncritical one. It is standard setting. It is trying to understand and hold true to what real impact is. I came away with some new contacts, old ones refreshed.

The caveat to this picture would come from my previous conference. JP Morgan ran a sustainability summit. One of the panel speakers was from Schroders, a reputable finance house. On their website, they have a climate dashboard. Schroders look at the policy commitments, industry commitments and a wide range of sector actions, and figure out what this converts to as a rise in global temperatures. Right now, Schroders think we are heading for a 3.8 degree centigrade hotter world. Not 1.5c, not 2c, but 3.8c. This isn’t Greenpeace or Friends of the Earth, or WWF. This is what mainstream investing is saying. We have a journey to go on, if we want to move the super-tanker of the global economy, to a better direction. GIIN is a start and I’m delighted we have half a trillion dollars invested in impact and many more trillions invested sustainably. We have a long way to go, though, if we are to get back within planetary boundaries.

A final thought – the sustainable world is a better future. I went to Amsterdam as I often do, by train. Previously, you’d take seven or more hours zipping to Brussels and then crawling along a rather old, three and three quarter hours stopping train from Brussels to Amsterdam that was a scenic route version of an inter-city express. Nowadays, you can go direct from London non-stop in about four hours. Pretty amazing. Now a fast train does not solve the problems of the world, nor is free of environmental damage, but it is an example today of how a sustainable world can be a better one.