Asset management is in a state of flux. Trillions of dollars are expected to change hands over the next number of years as baby boomers begin to transfer their wealth to the next generation – a generation that has grown up in a culture that calls on business to play a more active role in building a better society. In this context, the field of “impact investing” has taken center stage as a means to enable and empower for-profit business models to address society’s toughest challenges.
But what exactly is impact investing, and isn’t all investing intended to create impact? First coined by the Monitor Group in 2009, impact investing is an emerging industry that places capital in businesses (or entrepreneurs) that intentionally seek to create social or environmental value. This could be an investment in a dairy products producer in Nairobi that works to increase the efficiency and production levels of small-scale farmers in rural Kenya. Or, it could be an investment in an innovative program that seeks to reduce youth recidivism (repeat criminal offense) in New York City. The common thread among impact investments is the notion of intent – when the investor intentionally seeks to create social or environmental value, the investment is an impact investment.