Creating a Common Language for Social and Environmental Impact
In the last few years, a proliferation of investment dollars has been allocated to funds and enterprises seeking to generate social and/or environmental impact as well as a financial return. The sector has grown to over $50B in total assets and the pace of new investment grew by an average of over 35% over the past 5 years until the middle of 2008i. In addition, close to 150 organizations are providing approximately $4B in capital and services to small and growing businesses in developing countriesii. And areas like Clean Tech and Socially Responsible Investing have seen double-digit growth year-over year, despite challenging economic conditions. Within the next 10 years, Impact Investing has the potential to grow to about 1% of total managed assetsiii, which would result in about $500B of capital channeled toward social and environmental impact.
Taken together, these statistics suggest that there will be continued growth in this relatively new capital market. The progress of this growth may be limited, however, by a lack of transparency and credibility in how funds define, track, and report on the social and environmental performance of their capital. Transparency, credibility and enabling infrastructure are required for participants to more fully capture the value of the marketplace.