This post was written by Sonal Shah on behalf of the Case Foundation:

Over the past couple of months, I have had the opportunity to talk to many experts, leading thinkers, and disrupters in impact investing. There is a great collective wisdom about this sector, with good ideas for scale and some good reasons for caution.

One fact is clear. Impact investing has gained momentum during the last two decades, especially in the last few years. Many factors have converged: impact investors who want double and triple bottom line returns; the development of infrastructure with GIIN, GIIRS, B Corps; more incubators and accelerators to seed the pipeline; interest from more established, traditional banks and firms like JP Morgan and Blackrock; more research from universities, consulting firms, and philanthropy such as Monitor, Omidyar, Duke (CASE); and a growing interest from academic institutions offering classes, projects, and business competitions, all in response to student interest.

There is widespread recognition that interest in impact investing is at the cusp of major growth. There are also many people who rightly caution that while impact investing sounds cool, it is not easy. It is still complicated and expensive to structure deals, largely because there is no infrastructure, making scale difficult to reach. Metrics and definitions are not standardized, leading to confusion and difficulty in attracting traditional financing. And, there is not enough deal-ready flow.

While I understand and recognize the caution, I want to be a bit more provocative and say there may not be a better time than now to really turbo-charge impact investing.

We have an economy that needs new ideas and new jobs. There is already momentum in supporting entrepreneurship, with efforts to create and scale startups led by the Startup America Partnership, Startup Weekend, Social Enterprise Alliance; successful entrepreneurs like Steve Case, Pierre Omidyar and John Doerr are celebrating and championing entrepreneurs as job creators. In addition, there are a proliferation of organizations and foundations, including the Kauffman Foundation, the Case Foundation, the Social Enterprise Alliance, Skoll Foundation, Rockefeller Foundation, Omidyar Network, Calvert Foundation, Heron Foundation, and MacArthur Foundation, focused on business models that can address social problems. There are real market opportunities where investors, banks, philanthropy, and policy can have all have an impact.

Will there be challenges? Yes!

But we also have the potential to create jobs, create new businesses, and a new type of economy. And in the process, we will inspire a whole new generation to have an impact.

I am still sorting through details, so I am hoping to use this post to get comments. In the past few weeks, I have come through with a clear sense that there is a real opportunity for scale and that investment in some definitions and the building of the ecosystem will move the field forward exponentially. This includes:

• Definition. There needs to be some clarity for investors and for enterprises/companies regarding the type of investments and businesses that are in the Impact Economy/Investing. Does the impact investing umbrella only cover business models that will have a tremendous impact if they are successful (e.g. educational software that helps kids learn better), or does it also cover nonprofits with a sustainable business model and sustainable funding that return investor dollars with some modest returns like CDFIs or microfinance institutions? What about companies like Patagonia, The Body Shop, Timberland, or TOMS Shoes where how the business is run is the differentiator? Definitions matter, both for the investors and the entrepreneurs. How this gets defined will set the incentives accordingly.
• Sector or Place-based. The Omidyar Network believes that in order to scale impact investing, there should be a shift from a firm-based approach to a sector-based approach in impact investing. I think there might also be an opportunity to think about investing from a place-based perspective like the SBA Impact Fund (which does both). For instance, can we think about community development from a place-based perspective, low-income, rural, revitalizing communities, etc. There are likely investors, entrepreneurs, and businesses interested in building or rebuilding their communities. There is of course overlap in both of these approaches. But if we try to grow the space by going deep on certain sectors, places, or issue areas, will we alienate potential enterprises that don’t fit in, or potential investors that may not be interested in the chosen area of focus?
• Adoption of metrics. The sector needs to get some traction on more widespread adoption of metrics that then become common metrics for all in the sector. Even adopting a base standard of metrics would be a great place to start. Can we make it easy to be an impact business? Another key question is whether intent matters? Also, can we simplify and condense the number and type of metrics we need to track to make it attractive for businesses that might otherwise be deterred?
• More infrastructure. There needs to be investment in building the pipeline and some of the infrastructure. On pipeline, many investors are interested in later stage investments, but many enterprises and companies still need early stage investments. Some companies still need to build out their business models, and others are still building marketplaces and may need greater investment up front (grants, loans and equity). There are also a growing number of incubators that can help build the pipeline. An investment in intermediaries, both for-profit and nonprofit, could help create the pipeline for more impact investments. While I have not seen the data on whether this is really a problem, anecdotal evidence seems to show this might help build a pipeline. Other infrastructure investment could also include standards development like GIIN, Blab, etc as well as market-making entities like Mission Markets and the Social Impact Exchange. The market is still small, but these entities can and should over time become self-sustaining.
• More products. The sector needs more banks, asset managers, and investors to develop products to allow for greater investment in businesses that can generate revenues and impact. Philanthropy and governments might also think about developing some credit enhancements to create incentives for more capital market investments.
• Debate on returns. There needs to be an honest, open debate on the expectations of returns. There are likely some sectors that already have the potential to produce outsized returns (e.g. clean technology, housing), but other sectors need more maturity, and still others may have lower rates of return or likely sustainable returns. It is important for investors to be realistic about expectations of returns. Even more important that investment at least meet expected returns.
• Policy. Policy has a critical role to play in impact investing. How CRA rules get redefined, adoption of B Corp legislation, tax policy changes and ERISA interpretations for pension fund investors — all of these policy ideas can have a tremendous impact on the amount of money available for impact investing. Policy not only needs ideas, but also needs people to engage in policy related discussions that have not been traditionally engaged (social entrepreneurs, social enterprises, investors, etc). It makes a difference.

There is much excitement about the possibilities of this new form of investment to ignite investment in communities and in enterprises that have potential to disrupt current systems and tackle social challenges in new ways. Yet, the number of questions and potential barriers are equal to the excitement, and if we’re going to accelerate the expansion of this approach, we have to honestly and rigorously address all of them with expediency and urgency.

I along with my colleagues at the Case Foundation and our many partners and peers look forward to your thoughtful and candid responses!

I am excited to join the Case Foundation as a Senior Fellow and to be able to focus on impact investing. Jean and Steve Case have been at the forefront of investing and promoting new models for creating impact, whether through their foundation or through their varied investments like Zipcar and HelloWallet. That is why it is so interesting, and logical, to join them and the Case Foundation team to help expand the potential for impact investing.

Impact Investing in many ways is an already robust area with many people and organizations that have done a tremendous job in both building and promoting the field. Thanks to the work of many foundations, entrepreneurs, investors, and thought leaders, the interest in impact investing is growing domestically and internationally. From my time in government I have seen that there is a real alignment across sectors (government, nonprofit, business) and active interest in growing an impact economy, including looking at how business can affect social change.

It is important to recognize that the White House Office of Social Innovation under Jonathan Greenblatt is doing tremendous work in building the case for and momentum towards creating an impact economy, which includes innovation funds to scale nonprofits, impact bonds to enable capital markets to invest in social outcomes, impact investing, and human capital to invest in building leadership.

At the Case Foundation, we will focus on one important part of this economy — impact investing. Although the definitions vary, impact investing is generally seen as a new form of capital where investors seek to recoup their investment at, or below, markets rates — seeking both social and financial returns. Recent studies show that the potential global capital market could be $300 billion.

Much work has been done in the past two decades to build the current market – investors have taken risks on mission-driven businesses (domestically and internationally) with some great lessons learned. Foundations have also invested in funds and businesses and have taken steps to build the infrastructure that has created an ecosystem around impact investing (e.g. ratings). Social entrepreneurs have created new structures (e.g. L3Cs, Benefit Corporations, etc.) and still others are re-writing corporate rules allowing for managing two different bottom lines.

The market is maturing. In fact, the Omidyar Network has started a series of blog posts in the Stanford Social Innovation Review providing recommendations based on their experience over the past eight years or so.

We believe that there is a real potential opportunity to further catalyze the market for impact investing, including attracting more mainstream investors, looking at new investment vehicles, creating better support mechanisms and building a stronger investment pipeline. We will also be looking at policy recommendations based on our conversations. But, we are just beginning to ask the questions about what is needed.

Over the next few months, we will be having conversations with many players in the field — foundations, investors, entrepreneurs, ratings agencies, thought leaders, philanthropists, banks, and many more to ask some key questions:

• What is the definition of impact investing?
• What are the constraints to investment?
• What are the best ways to incubate entrepreneurs and create a more robust pipeline?
• What types of finance structures are effective?
• How do we get foundation and university endowments interested?
• What are the policies needed (or not) to further spur impact investing?

My colleagues from the Case Foundation and I will be at SOCAP next week in San Francisco, and we look forward to meeting many of you and hearing your thoughts and ideas. We have many more questions than answers. We hope you will be candid, honest, open, and provide us insight. We believe that through these conversations, and through your ideas and input, we will develop a much clearer understanding of the opportunities to help investors (new and old) engage in impact investing, ideas to further develop the ecosystem, and potential policy recommendations based on our findings. That is our hope. This will definitely be a team effort.

I will continue to regularly blog to offer insights on what we have learned and also to ask questions if we need more information, clarification, people to contact, etc. I look forward to the upcoming conversations, and I am even more excited to be a part of the momentum for impact investing.