In many ways, the ambitions and anxieties driving their conversations embodied a world that I have spent time in and work with—a collection of unique practices, people, outlooks, events, and organizations I think of as “Foundationland.” In this realm, philanthropic practitioners and those they fund gather at convenings like Rockefeller’s to debate and refine theories of change, all in the hope of making a better world. They build new mechanisms to measure and manage social impact. They identify levers essential to achieving their goals and use grants to help pull them. But those who live in Foundationland know that they do this at a remove from the world. In their conceptualization of impact investing, they view finance as a potent force in a real economy that is separate from philanthropy, a force that can be influenced toward better social outcomes. Impact investing also reflects the idea that foundations see themselves as less powerful than finance—it is a strategy that hopes to persuade institutional investors and wealthy families to do better for the world with their vast financial resources.

In 2009, the term “impact investing” made its public debut in Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry, a report from the Monitor Institute that was funded by the Rockefeller, Annie E. Casey, W.K. Kellogg, and JPMorgan Chase Foundations. The document laid out a plan for growing the field to both promote impact investing and change how conventional investment engaged with social issues. By promoting impact investing as an industry, organized philanthropy could do what it had helped do for microfinance—grow the field into a mature, commercially viable financial practice and make it, for a time, “the best brand in development,” as Antony Bugg-Levine and Jed Emerson wrote in their 2011 book Impact Investing: Transforming the Way We Make Money while Making a Difference.

Read the rest of David Wood’s article here at Stanford Social Innovation Review

Nobody could reasonably expect business alone to fix the pandemic. Nonetheless, some investors under the banner of “impact investing” argue that business alone will be able to fix the other big problems ailing the global economy, such as climate change or global female literacy, without sacrificing commercial returns. This view has garnered interest from major banks, consultancies, business lobby groups, and even former prime ministers. One of impact investing’s leading champions, Sir Ronald Cohen, believes that it could be the “revolution” that will save capitalism and solve many of the world’s greatest problems.

It is an enticing vision of an enlightened post-pandemic economy, and, as an impact investor and economist, we support its ambitions. However, if we really want to reform capitalism, then impact investing as it is traditionally conceived will not be enough. The pandemic is not a mere anomaly; there are profound limits to what business can do profitably in normal times too. We need to reform the rules that govern how our economy works — and impact investors have a critical role to play.

There are certainly examples where impact investment has been successful at generating both a commercial return and a positive impact. But there are also those who argue there is a trade-off between profitability and impact. Who is right?

The answer is “both.” An easy way to clarify the issue is by looking at a typical “carbon cost curve”, which shows the financial costs of investments that would reduce carbon emissions.

Read the rest of the article at Harvard Business Review