Can the private sector benefit from 'impact investing'?

Impact investing has come a long way since John Elkington coined the phrase “Triple Bottom Line” in his 1997 book Cannibals with Forks: the Triple Bottom Line of 21st Century Business. In a relatively short amount of time, this term has captured the ethos of this emerging asset class. According to an often cited 2010 JP Morgan report, this segment of the market offers the potential over the next 10 years for invested capital of $400 billion-$1 trillion, and profit of $183 billion-$667 billion.

For the uninitiated, impact investing refers to investments made based on criteria that go beyond just financial return and attempt to create benefits for both society and the environment. Also known by some as “socially responsible investing,” “corporate social responsibility” or “environment, social and corporate governance,” impact investing looks more specifically at how investments can promote positive impacts and less at the minimization of negative impacts.

San Francisco recently played host to the annual flagship impact investing event, SOCAP12. Conference organizers report that attendance has tripled since the first conference was held back in back in 2008. This growing interest in SOCAP may be a reflection of a maturing market and signal of the potential for growth in this largely untapped sector.

The growth in the interest in impact investing market may also be due to the meltdown of traditional capital markets over the past five years, as it can be a safer long-term place for investors to put their money, as well as their hopes for the future. According to a recent study by Oekom Research, its portfolio of 300 major companies that had satisfied its industry-specific sustainability requirements outperformed the MSCI World Total Return Index by 15 percent from 2005-2011.

Conservation International (CI) — along with our partners, including the French Development Agency, Starbucks Coffee and the International Finance Corporation — have been involved in impact investing since 1998 through the Verde Ventures Fund. While it may come as a surprise to the traditional financial community that a conservation organization has a long history of involvement in impact investing, for CI it was a logical step in searching for innovative ways to provide conservation finance at scale.

The Verde Ventures business philosophy is based on our steadfast belief that economic opportunity and responsible stewardship of the Earth are at the core of successful conservation efforts benefiting both people and nature. It also recognizes that by leveraging investments through debt finance and capacity building of “disruptive innovators” -- businesses that unexpectedly improve products or services with implications on scaling and rapid growth. This strategy paves the way for a greater impact compared to just grants alone.

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