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Impact Investing Gets Real at the Skoll World Forum

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Oxford, UK

The Skoll World Forum should be commended this year for showcasing impact investing in a refreshingly vulnerable light, making an important contribution to the difficult task of matching barriers with solutions.

Impact investing is a broad field of practice. Deploying capital for measurable social impact encompasses everything from large institutional investments in underserved areas of developed markets, with the goal of creating quality jobs, to seed funding for the inspiring entrepreneurs delivering health and education services in the world's least developed countries - those for whom the Skoll World Forum is frequently and affectionately described as a "tribe".

The developed market end of the continuum has its own issues. For example, at a convening co-hosted this week with Cathy Clark, from Duke University, we heard how the $30 billion US community finance sector is about as dependent on subsidy as ever. Relegated to places where market failure is deeply and increasingly entrenched, there is simply no commercial proposition to attract mainstream investors, despite the handful of exceptional intermediaries creatively using tax credits to build some scale.

However the challenges are more pronounced at the Skoll end of the continuum. The problem is not just that markets fail. It's that there are no markets to begin with. In other words, investors should bank on low or no financial returns (grants would actually be preferable), very little certainty, and years of scrambling to build business capacity, supply chains, and a viable base of customers, as Monitor Group's recent and essential research reveals.

In a fantastic session led by Robert Annibale, Citi's Global Director of Community Development and Microfinance, Shell Foundation Director Chris West recounted his mistake in thinking the foundation could make large and early grants and investments in social enterprises, with the expectation others would carry the ball forward. It turns out the cavalry never arrived.

The panel paid tribute to the front-line "enablers", focused day-in and day-out on addressing the lack of management expertise at enterprises, and the absence of patient, risk-tolerant capital, and suggested that "influencers" had been disproportionately lionized.

But in the words of West: "We're at a point where I'm not ready to celebrate anything."

It's not rocket science, West further explained. Beyond capital, enterprises need to build capacity in the areas of business planning, financial management, and marketing.

But who will pay? Building these skills is neither easy nor cheap. And investors are certainly not lining up to lose money (despite the tremendous social impacts on offer), let alone to "get real", in West's words, and take significant risks with large sums rather than drip-feeding capital through smaller, short-term investments, and at a distance.

Still, this is what progress looks like in my book. Impact investing is coming to life. The way forward is grounded in a transparent, honest appraisal of current and prior practice - which is precisely the objective of the Impact Investor project on which PCV InSight and CASE at Duke are collaborating, together with ImpactAssets. Keep an eye out in coming months for a treasure trove of real data and insights.