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David Bank

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Rockefeller's High-Impact Investment

Posted: 09/19/2012 3:36 pm

The provenance of the term "impact investing," according to the official founding myth, was a 2007 gathering of leaders on Lake Como, high in the Italian Alps, at Bellagio, the Rockefeller Foundation's spectacular retreat center. The group reconvened the next year, and Rockefeller's board approved a $38 million impact investing initiative.

It was not quite a present-at-the-creation moment, because social investing, social enterprises, social entrepreneurs and a whole world of community development finance had existed for decades. But after grants and investments to 30 core allies, it can be said that the two Bellagio meetings launched much of the network of organizations and activities that now define impact investing.

Rockefeller's impact investing initiative was slated to end about now, but earlier this year the board extended it through 2013. With sunset approaching, the foundation has issued two self-assessments of the initiative's impact, prepared by the consulting firm E.T. Jackson and Associates. "The initiative succeeded in defining the field of impact investing, thus enabling collective action from diverse stakeholders," concludes Unlocking Capital, Activating a Movement, the foundation's internal report.

Indeed, if impact investing grows as rapidly as the projections made by Rockefeller's own grantees, the impact investing initiative may well become a case study in philanthropic leverage. The external report, Accelerating Impact, cites:


  • A 2011 report from J.P. Morgan, based on surveys by the Global Impact Investing Network (GIIN), suggesting that approximately 2,200 impact investments worth $4.4 billion were made in 2011, up from 1,000 deals worth $2.5 billion the year before;

  • A 2008 estimate by the Monitor Institute estimated the industry could grow to $500 billion within five to ten years, representing an estimated 1% of global assets under management;

  • Another J.P. Morgan report in 2010 estimating a profit potential ranging from $183 billion to $667 billion, and invested capital in the range of $400 billion to nearly $1 trillion, in just five key areas.


There are of course significant caveats and footnotes on all of those projections, and all standard disclaimers about forward-looking statements, and more, should apply.

But what may be more noteworthy is that the GIIN, the seminal Monitor Institute report (Investing for Social and Environmental Impact) and even the two J.P. Morgan reports were all financed by Rockefeller. As are the Impact Reporting and Investment Standards (IRIS) and Global Impact Investing Rating System (GIIRS), the two main reporting and data-gathering efforts. Acumen Fund, the pioneering social venture fund that itself was originally spun out of Rockefeller Foundation, was instrumental in IRIS as was B Lab, the nonprofit certification body that annoints "B-Corps." B Lab is also managing GIIRS, and rolling out an analytics platform to rate companies and funds, all backed by Rockefeller. Rockefeller also finances the valuable policy work conducted by Insight at Pacific Community Ventures and the Initiative for Responsible Investment at Harvard University. And dozens of other mutually reinforcing projects and research efforts.

That makes one of the biggest 'if's in the future of impact investing, what happens if -- more like, when -- this whole network loses the cachet, not to mention the funding, conferred by Rockefeller. The most widely read section of Accelerating Impact may be Appendix C, which makes recommendations for the remainder of the funding. The appendix makes clear that the gravy train is over: one recommendation is to help in "smoothly and constructively winding down and handing off" even the most successful projects. The GIIN ("continued active support"), along with IRIS and GIIRS ("active promotion") are called out for some level of ongoing engagement. But the action is already shifting to the targets of Rockefeller's "two-year transitional phase."

Those targets include "platforms and networks" in places like Kenya, India, Hong Kong and Mexico and new investment products and distribution platforms , particularly that can engage "larger investors that have shown an appetite for making impact investments."

Perhaps most significantly, if a bit cryptically, Rockefeller is seeking to "test ways of improving investment readiness on the demand side." That's impact industry-speak for expanding the pipeline of investment-ready ventures with management teams, business plans and the ability to scale up operations. That reflects the new conventional wisdom that the supply of capital may have outstripped demand in the form of attractive deals (see Impact IQ's very first post, "Social Bubble"). Expect a raft of organizations to try to pivot from accelerating investment to accelerating entrepreneurship and operational capacity.

There are worse legacies Rockefeller could leave than "too much money" for social and environmental ventures. But the full assessment of Rockefeller's impact investing initiative will have to await its actual exit, when the new investment marketplace it helped spawn will grow, or not, on its own.

 

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