While international and domestic problems bombard us daily, strong signals indicate that a new kind of revolution is afoot that has the potential to open doors to people who have been left out of jobs, and the mainstream economy. There are signals of possibility, of hope -- even of a revolution that could come from how we make investment decisions and measure the impact.
The G7 Social Impact Investment Task Force, which I participated in as a U.S. representative to the measurement working group, just released a seminal policy paper likely to accelerate growth of the field, making the case that 'social impact investing' is a force capable of solving some of our toughest problems and is growing fast. This new form of investing -- really in its infancy -- has already been mobilized to broaden economic opportunities, reduce recidivism to prison and jail, and create affordable and supportive housing.
The task force defines impact investing as "those that intentionally target specific social objectives along with a financial return and measure the achievement of both." Their framework is broad, including investors from the private market, philanthropy, and government. Additionally, they offer tools that include guidance on lending and equity, pay for performance models, social impact bonds, and grant making.
A companion piece by the US National Advisory Board on Impact Investing makes a forceful case for the urgency and opportunity to do much more domestically.
What are the top five reasons that our country should make social impact investing a priority?
#1 More capital. First, it offers the possibility that a vital, new framework could channel vastly more capital toward solving thorny social problems at scale in the US and around the world.
#2 Business methods to achieve social objectives. The new approach blends capital market and business efficiencies with social sector prowess in understanding and meeting human needs.
#3 Social objectives embedded in business. It pushes investors and the business community to consider social objectives - full inclusion in the economy, a clean environment - as fully embedded into their core objectives and responsibilities, and a calculated element of their return on investment. This sets us on a path toward the full integration of social impact into the core of how business is done in the US.
#4 Results. It presses philanthropy, government and the social sector to make efficient, effective solutions that deliver results at scale, an essential way to express humanitarian values.
#5 Leverage. It suggests a powerful new way that philanthropists and foundations can deploy scarce grant capital in the context of preset agreements with government that lead to better public sector decision-making about where to deploy much larger tranches of funding over time.
This potentially explosive combination of social and business interests on the horizon is increasingly driven by a growing wave of young people in the U.S. and elsewhere that view this integration of practices and values as essential. It offers a way out of the paralyzing political divides that are holding us back, and could enable us to harness the indomitable American spirit to not only talk about but create and sustain hope, and a dream that encompasses all of us, and not just some of us.