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Moving Impact Investing to the Mainstream

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Hats off to the World Economic Forum. Their recent report From the Margins to the Mainstream -- Assessment of the Impact Investment Sector and Opportunities to Engage Mainstream Investors is hot off the digital press, and, I think, makes a significant contribution to the global effort to promote impact investing.

First and foremost, it's a positive development that the WEF decided to play in this space. One of the more startling figures offered in the report was a stat from a recent survey by the CFA Association that discovered that 66 percent of financial advisers were unaware of impact investing. Two-thirds of the investment professionals hadn't even heard of it? C'mon. Granted that impact investing is a nascent field, but I'm still surprised these professional advisers could be so uninformed. I hope that the WEF decision to commission and disseminate this report will send a message to the very mainstream investors -- and their advisers -- that we'd like to join the movement. If they are talking about it in Davos, perhaps there will be more open ears on Wall Street, and ultimately, Main Street.

Even for those that have heard of impact investing, there is still a lot of confusion about exactly what the term means. In response to this lack of clarity, the report offers and explains a concise definition: "Impact Investing is an investment approach that intentionally seeks to create both financial return and positive social or environmental impact that is actively measured."

Impact investing is not an asset class. It is an approach that spans asset classes. Nor is every investment that incidentally creates jobs an impact investment. Intention and measurement do matter. And on the other end, it is possible to make an impact investment in more advanced markets or in sectors that already have some commercial capital engaged. As the report argues, there are ways for investments to intentionally create social value, regardless of the stage of maturity of the enterprise.

The WEF definition is neither too broad nor too narrow. I think they get it just right -- and hope that it may end the discussion about how to define impact investing so we can move on to DOING more of it, and measuring it effectively.

Happily, the WEF is not content just to define and describe, although their map of the impact investment ecosystem of actors is quite useful. They have also developed cogent recommendations specifically targeted at a series of actors, including impact investment funds, impact enterprises, philanthropists and foundations, governments, and intermediaries.

I was particularly glad to see the inclusion of the last type of actor, as the value of network and capacity development organizations in building new fields is often underestimated. It also hit home because I direct an intermediary, the Aspen Network of Development Entrepreneurs (ANDE), which focuses on supporting small and growing businesses (SGBs) in emerging markets as a means to fight poverty. A large number of our 183 members are particularly focused on supporting impact enterprises or social businesses in developing countries -- and thus represent one segment of impact investing.

At ANDE, we are already working on a number of their recommendations for intermediaries -- including "aggregating data on impact investment deals" (our annual impact report does this) and "advocating for a baseline set of principles to define the practice of measurement " (our work in promoting the IRIS data standards for the sector and establishing a set of core metrics for our members is aimed at providing such a baseline). We also have commissioned research into the best ways of incubating and accelerating social businesses and run a number of training programs to support practitioners. Finally, we are helping impact investors collaborate with academic institutions, to implement more rigorous evaluations of their investees.

We're currently gearing up for our annual conference in Glen Cove where our members will gather to discuss best practices in building vibrant entrepreneurial ecosystems in emerging markets. In addition to dialogues on structuring impact investing funds, legal tools for intermediaries, and sourcing and training managers for social business, we will continue the conversation with the WEF in a session on aggregating capital and scaling impact investing.

So, we, along with many other organizations are dedicated to building the infrastructure that will support a strong impact investing industry. There is still much work to do, and I'm optimistic the WEF report will galvanize even more support for the sector. If some significant portion of the 66 percent of uninformed mainstream investment professionals just read the report, it would be a great start.