Words Matter: How Should We Talk About Impact Investing?

For a number of years, the Case Foundation has been an active champion of the Impact Investing movement. In this work, which encourages institutions and individuals to align their capital more closely with their values, we have hosted more than 300 dialogues to better understand interests and concerns of audience segments as we seek to accelerate the movement. Yesterday, I had the privilege of joining more than 600 people on a webinar to discuss important new findings.

Thanks to a group of partners that included the Omidyar Network, Ford Foundation and MacArthur Foundation, together with the Global Impact Investing Network and the Global Social Impact Investing Steering Group, we unveiled important new research that tracked and analyzed coverage of the topic of impact investing in traditional and social media over a 12-month period. This report provides a clear picture of common messaging either being received or shared through the coverage that appeared in these months. This data, taken together, provides a unique roadmap to guide those of us championing the movement to key audiences and working hard to build out the impact investing ecosystem. As with any movement, words matter and can play a powerful role in informing, educating and activating those on the sidelines.

The good news is that impact investing has enjoyed mostly positive coverage and engagement in both traditional and social media. But equally good news is that it has been balanced by some skepticism or negative coverage that helps identify for us the work we have to do in the days ahead. An important insight provided by the research is that we must be careful to adapt our language and emphasis depending on who we are trying to reach. For instance, there was a clear difference in how impact investing is talked about in the U.K. as a “powerful government tool” versus in the U.S., where coverage and sharing is dominated by such phrases as “taking off,” “reaping returns” and “Millennials demand it.”

Another clear takeaway from the research is that we have work to do in the realm of measuring impact —reported to be the most common negatively associated narrative; on this point, I think there is broad agreement in the field. We must continue to commit ourselves to measuring the “impact” in impact investing. While this may take some time, there have been exciting developments to help close the gap in this area. For instance, the Case Foundation has partnered with B Lab to bring new tools to companies everywhere who want to measure their social impacts—”Measure What Matters” impact assessment tool has engaged more than 40,000 companies to date—an important step forward.

The research also shines a light on how different audiences, investors, policymakers, entrepreneurs, philanthropists and high net worth individuals are engaging with each narrative, as it relates to a particular issue area. For example, two important audience segments— philanthropists and entrepreneurs—are more closely associated with the more negative “not a silver bullet” references. Indeed, within the field we recognize that it is decidedly unhelpful to paint impact investing as a silver bullet, but rather it becomes a new arrow in our quiver as we seek to champion all means in our efforts toward social impact. For those of us that speak about the movement routinely, we can use this research to remind us of the importance of making this point.

With all movements there are stages. While I believe that the impact investing movement is experiencing great traction and momentum, we are still in early days. This important research confirms we’re making strides in communicating effectively to broaden the tent and invite more participants from the private, public and nonprofit sectors to catalyze transformative social change. At the same time, it helps to guide us in our words and actions to fill gaps and address concerns.

If you didn’t have the chance to join us, the full webinar can be accessed, here. I’d like to extend my gratitude to the partners who invested in this important work and invite you to share your thoughts and insights on Twitter using hashtag #impinv.

New Research Shows Impact Investments are Living up to Great Expectations

This post was contributed by Steven Rodriguez, intern at the Case Foundation.

The Wharton Social Impact Initiative (WSII) at the Wharton School of the University of Pennsylvania recently released a study called Great Expectations: Mission Preservation and Financial Performance in Impact Investments. It included 53 impact investing private equity funds and revealed exciting data for those who are eager to know how these investments can and do perform compared to market benchmarks. According to this research, there is evidence that market rate returns for mission-aligned investments are, in fact, possible*. While the impact investing market remains relatively small, there are active investors who do not think doing good should mean sacrificing returns. For these market-rate-seeking impact investors, the new Wharton report should come as very good news!

As Kate Ahern from the Case Foundation explained during a recent webinar, Everything you Need to Know About Impact Investing (In 1 Hour!), investors can approach the sector with a range of financial and social impact return expectations—from a sector first focus, to blended returns, market rate or even impact alpha. While the WSII research focused on investments seeking market rate returns, something worth noting in the findings is evidence that mission-aligned exits led to even greater performance than non-mission aligned exits. Additionally, Wharton found that “concessionary financial returns were not required to preserve the social or environmental effect of impact investments.”

This report provides evidence that investment managers can align impact goals with financial expectations without sacrificing performance. According to an article in The Chronicle of Philanthropy, Wharton Finance professor, Chris Geczy, who supervised the research, said, “It represents an exciting initial advancement in our ongoing social impact research agenda.”

While the data demonstrates favorable outcomes for impact investing and for fund managers seeking market rate returns, it is important to keep complexities associated with various return expectations in mind. As Professor Geczy explained, “The industry includes distinct market segments with very different social and financial value propositions. One must be very careful not to generalize the performance of the market rate-seeking segment of funds that we studied to the entire, multidimensional industry.” It is important to remember the spectrum of opportunities available for the diverse impact investing community, from foundations making below-market Program Related Investments (PRIs) to early stage venture firms making direct investments in companies, like Happy Family, that generated huge returns from a successful exit.

The Wharton report is one of a growing number of similar research projects focused on the financial viability, competitive performance, risk and expectations of impact investments, particularly fund investments. One additional example that appeared earlier this year is a report from the GIIN and Cambridge Associates, Introducing the Impact Investing Benchmark, a study of 50 impact funds launched after 1998. The study found that these funds delivered returns comparable to other, non-impact seeking funds.

We at the Case Foundation are excited to see the knowledge base continue to grow in this sector. We hope these reports will serve as support for more and better informed investment decision making that includes impact investments from the full range of asset classes, returns and risk profiles.

To learn more about getting started in impact investing you can also check out our updated Short Guide to Impact Investing!

*The financial performance of the funds studied were benchmarked against the Russell 2000, an index that measures the performance of small capitalization companies (between $300 million and $2 billion), along with other indexes and found comparable results.