What’s Preventing Impact Investing From Moving To The Next Level?

The strategy of investing for both financial and social returns is getting more popular, but even experts have trouble agreeing on a definition. One thing is clear: Investors need to be comfortable with risk.

What’s Preventing Impact Investing From Moving To The Next Level?
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Impact investing–investing for both financial returns and social impact–is a popular topic these days; in one recent survey, impact investing was found to be more popular than traditional “socially responsible” investing among high net worth investors.


But there’s little data on returns from this investing strategy, and the space is still so young, even the definition of the phrase isn’t always clear.

Sonal Shah, a senior fellow at the Case Foundation, stands out as someone who could help carve a path for the impact investing space as it continues to grow. Before joining the Case Foundation to work on increasing the number of impact investors and investments, Shah put in time as the first director of the White House Office of Social Innovation and Civic Participation. She has also led global development at

I caught up with Shah at the Aspen Institute’s Aspen Leaders Action Forum, a gathering of fellows from the The Aspen Global Leadership Network–a worldwide network of entrepreneurial leaders committed to taking on society’s challenges. Below are excerpts from our chat.

How Do You Define Impact Investing?

According to Shah, it’s a spectrum. She usually first wants to determine the investor’s goals: are they in it to build the ecosystem, to get a return of capital, or for profit? “I personally think that, from an investor perspective, it’s at minimum return of capital but really looking for how do we actually create a system that allows for money to be made in this space,” she says. “Measuring for impact, but also measuring for profit. Right now, we measure for profit but we’re not making the trade-off between profit and impact and saying, ‘What’s the right amount of profit for the impact?’ Intent matters a lot when defining impact investing, she says: “It can’t just be any business. It’s got to be the ones with intent.”

On Moving From The White House To The Case Foundation

At the White House, Shah was more focused on social innovation policy–things like examining the government’s role in impact investing and identifying the policy barriers to its growth. These days, Shah is examining many of these same general issues, but from a different perspective (i.e. why impact investors themselves aren’t putting more money into businesses that do social good and make money, and what’s stopping the sector from growing).

Creating A Market For Impact Investing

“It’s happening. There are lots of people doing it, lots of people experimenting in it,” says Shah. “There’s Method, there’s Revolution Food, you can name a few of them. There are investors doing it at small scale, but the question is…how come we’re not getting to the next level of players? What is that’s keeping people from taking the risk to create a new market?”


So what’s preventing the market from scaling up? Shah believes there are three main factors.

First, she says, “It’s the taxonomy. Depending on who you talk to, sometimes you’re talking for-profit, and sometimes you’re talking nonprofit. I think investors don’t know yet how to divide up where are you in the spectrum and where do you want to be and then where’s the opportunity. I think the industry needs to figure out the taxonomy, so when a person comes to see it for the first time, they know which category they fit into.”

The second issue: The need to understand what the returns on investment have actually been. “We have a lot of stories, but we don’t actually know the data. You might get 50% of your capital back, you might get 75%, we just don’t know those answers yet, ” she says. The Case Foundation and others are working on ways to collect that data, but it will take some time.

The final hurdle: “I think people just aren’t willing to take risk. Everybody is looking for calculated risks, and this is just risk. You’ve got to be willing to create the market that doesn’t yet exist, and that’s going to be somewhat challenging,” she says.

About the author

Ariel Schwartz is a Senior Editor at Co.Exist. She has contributed to SF Weekly, Popular Science, Inhabitat, Greenbiz, NBC Bay Area, GOOD Magazine and more.