"Impact Investing” is generating an enormous amount of buzz these days – even if it is talked about much more than it is practiced. It has become particularly popular among foundations, endowments, and high net worth individual investors.
While the precise meaning of the term is still being defined and debated, in essence, impact investing is a style which explicitly pursues social and environmental objectives as well as purely financial ones.
In many cases, investors are willing to sacrifice some of the latter to achieve the former.
Typically, impact investing occurs in the emerging markets, in private transactions, and at a small scale – to date the average investment has been in the $1 million range. Typical projects might include the purchase and distribution of clean burning cooking stoves or solar-powered lamps to rural villages in Africa, Asia, or Latin America. All very good stuff, but…
I recently attended a session on impact investing at a Clinton Global Initiative meeting in New York City. The two most common laments from impact investing devotees were the enormous difficulty of generating positive impact at the necessary scale, and the related fear that there simply weren’t enough investable projects to absorb the level of capital potentially interested in investing in them.
We at Inflection Point Capital Management would like to respectfully propose a complementary (not replacement) strategy which could resolve both of these serious problems. We call it “Impact Investing 2.0,” and we have been practicing it in one way or another for well over a decade.
Image of a hammer that hits pink piggy by 3DStock via Shutterstock.
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