Below are 19 trends in the impact investing world that are most likely unknown to you, because they are developing in pockets and corners of the arena where most people don’t have visibility. One or two of these may be familiar to readers who work in the space.
One thing is generally recognized. Impact investing is growing. Quickly.
The Global Impact Investing Network recently estimated that there are $228 billion invested in impact, double the prior year estimate.
The trends observed below hint at opportunities for both impact investors and social entrepreneurs. They also suggest hope for the future.
“Zebras fix what unicorns break,” says Stephanie Gripne, founder and CEO of the Impact Finance Center, suggesting a shift to investing in real solutions rather than fictitious ones. “A new stable of investments: if angels invest in unicorns (10x), and heroes invest in racehorses (10%), what about the catalysts (0%) and champions (-65%)?” She is seeing roles for investors across a spectrum of returns—including negative financial returns for the most philanthropically minded investors.
Dave Richards, managing partner at Capria, has placed investments around the developing world. He observes, “International ‘airplane investing’ is being replaced with investing via smart, professional, on-the-ground investment teams.”
International impact investor Cecile Blilious, founder and managing partner at Impact First Investments, observed two parallel trends—one of which she doesn’t like. “Startups adopting business models serving society without saying the word ‘impact.’ Unwanted trend: funds misusing the word ‘impact’ as a marketing tool.”
“People are becoming more conscious consumers of impact investing,” says Morgan Simon, the founding partner of Candide Group. They are now asking, “Is the impact truly transformative, or just making poverty a little more bearable?”
Thane Kreiner, Ph.D., executive director of the Miller Center for Social Entrepreneurship, sees “the mobilization of capital to address refugees, migrants, and human trafficking survivors.”
“Digital finance is making it cheaper and quicker to access financial services; key impact investors are ensuring that a deeply ethical approach will be part of any new delivery mechanism,” says Candace Smith, managing director of risk at MicroVest Capital Management.
“Impact investing is cutting into philanthropic dollars earmarked for Africa,” notes Matthew Davis, CEO of Renew LLC. He says this is “appropriate for the African economic story that is unfolding.” Finally, he adds, “DAFs [donor advised funds] are becoming an enabling tool for impact investing.”
In the context of “more capital flows into the impact space,” Daryl J. Carter, CEO of Avanath Capital Management, sees three trends. First, increasing capital from “offshore investors,” second, “more focus on housing affordability,” and third, “increased emphasis on impact measurement.”
Ross Baird, president of Village Capital, notes that “81% of entrepreneurs raise neither venture capital nor get a bank loan.” He adds, “I’m excited to see investors innovating on alternative financing mechanisms for the vast majority of new businesses.”
“Principles to separate impact investing from conventional forms of finance are coming,” says Mara Bolis, a senior advisor at Oxfam America. “They are critical for establishing impact integrity, for building community and reforming how finance behaves.”
“Water and sanitation is gaining momentum among impact investors,” says Alix Lebec, executive vice president of investor relations at WaterEquity, which is affiliated with Water.org, famously supported by Matt Damon. “According to the Global Impact Investing Network, 42% of investors plan to increase their investments toward this global challenge.”
“The previous sense that investors were OK sacrificing some return to invest in compliant channels has shifted to the expectation that SRI is expected to keep up with or outperform the broader market,” according to Samim Abedi, global head of portfolios at Wahed Invest, a halal investing platform.
“Aligning impact investing to the UN Sustainable Development Goals is going to increase in the years ahead,” says Dave Fanger, CEO of Swell Investing. “The goals ensure investors’ dollars work towards solving the world’s greatest challenges.”
“Impact investing: do well by doing good while also protecting nature,” says Nancy Pfund, founder and managing partner of DBL Partners, an early investor in Tesla. “The Muse survey finds workers value access to healthy outdoors.” DBL acted on this trend by investing in “America’s first memorial conservation forest.”
“As the world’s attention has focused on plastic pollution and health of the ocean, I see huge impact investing opportunity in the solutions to the root causes,” says Robert Kaplan, CEO of Circulate Capital, which was recently formed to take advantage of this opportunity.
Robert Rubinstein, founder and chairman of TBLI Group BV, says, “Public transport infrastructure, community banks, small-scale agriculture and hospitality are major trends.”
Joel Solomon, co-founding partner at Renewal Funds, sees a trend in “the rising push for funding focused specifically on underserved communities of color and women-led companies.”
“The creative economy–food, fashion, media, entertainment—is what’s next,” according to Laura Callanan, founding partner of Upstart Co-Lab, which “identified 100 impact funds active in the creative economy.” She says, “We need a Creativity Lens to see what’s there.”
Andrea Armeni, executive director of Transform Finance, sees “a shift in focus from the what–the product or service itself–to the how: how you create impact via an investment’s structure, its effect on all stakeholders, and for whom wealth is created.”
Each of these trends suggests a profitable lesson for impact investors or social entrepreneurs along with guidance for solving the world’s biggest problems.