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Impact investing is booming–but not nearly enough to make radical change

The impact investing market has grown to nearly $228 billion.

Impact investing is booming–but not nearly enough to make radical change
[Image: StudioM1/iStock]

Between mid-2017 and mid-2018, the value of the impact investing market roughly doubled to $228 billion in assets under management, according to a survey from the Global Impact Investing Network, a nonprofit that works to increase the scale and effectiveness of financial bets with social and environmental returns. But that’s still a drop in the bucket of what’s needed to make real-world change.

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The United Nations projects it will take $5 trillion to $7 trillion to reach the world’s Sustainable Development Goals, which aim to eliminate many worldwide inequalities by 2030. “If we are going to have the impact that the world needs on issues like inequality and climate change, we also have to think about how we continue to grow this market and accelerate progress,” says Amit Bouri, the CEO and cofounder of GIIN.

To do so, GIIN has released a new report called “Financing the Sustainable Development Goals: Impact Investing In Action.” It serves as an inspirational blueprint, tracing the success of several investment firms that have pioneered new and lucrative ways to make impactful financial bets.

[Image: StudioM1/iStock]
One successful example is Blue like an Orange Sustainable Capital, which has partnered with the Inter-American Development Bank to co-invest in Latin American and Caribbean companies. The bank’s development arm has its own tools for quantifying, tracking, and measuring these impacts, which provides Blue like an Orange a uniform way to analyze its investments. The firm recently invested $30 million over seven years in a coconut water manufacturer in Brazil, which supports the hiring and training of local workers, a local school, and advancement of women in both management and science-related roles.

Another project by Incofin Investment Management provides $4.5 million to support a Colombian coffee cooperative whose process is Rainforest Alliance and Fair Trade certified. That deal requires that women are included at managerial and board levels, and invests in social programs so the collaborative can offer educational opportunities and microcredit for its 3,500 members. There’s also a minimum future price guarantee for bean farmers.

Since starting in 2009, GIIN has grown to include 237 members across 37 countries, including global banks like UBS and Credit Suisse and JP Morgan, and nonprofit funders like the Ford Foundation, Gates Foundation, and the MacArthur Foundation. It also includes a variety of government agencies and boutique investment firms.

The report comes on the heels of another guide, dubbed GIIN’s “road map for the future” that highlights numerous ways for those in the field to continue to formalize, popularize, and build trust in this style of making change.

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“If you zoom out and take a perspective of the world’s needs now, we have to be thinking not just about how we do more deals, but how we influence the broader system,” Bouri says. “It doesn’t mean anything if we have a successful impact investing market in a broader system that’s failed.”

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About the author

Ben Paynter is a senior writer at Fast Company covering social impact, the future of philanthropy, and innovative food companies. His work has appeared in Wired, Bloomberg Businessweek, and the New York Times, among other places.

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