13. Impact Investing Dr. Falko Paetzold
Managing Director, Center for Sustainable Finance and Private Wealth, University of Zurich
History and Definition The concept of impact investing developed out of “blended value” in the 90s in the US, wherein thought leaders together with different organisations sought options to merge financial returns and philanthropic efforts. The term “impact investing” was coined during such a conversation convened by the Rockefeller Foundation in 2007. The Rockefeller Foundation then initiated the Global Impact Investing Network (GIIN) in 2009, an association that by 2017 had established itself as a global network of over 200 organisations active in impact investing, including asset owners, asset managers, and service providers. One of its key outputs is an annual survey to collect information on volumes and trends within the impact investing space. As of 2017, the 208 respondents to the annual GIIN survey managed USD114 billion in impact investment assets.1 GIIN defines impact investing as investments made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return. Depending on investors’ strategic goals, impact investments can be made in both industrialised and developing markets and deliver a range of financial returns, from market-rate to belowmarket rate (see Figure 14). Further, a set of core characteristics helps to distinguish impact investments from other types of sustainable investing: Intentionality refers to investees that, through the core activities of their business, specifically intend to achieve a positive social or environmental impact. Examples include health care services for underserved populations, education technologies, or social housing. Measurability refers to the commitment and ability to measure and report the social and environmental outcomes of investees’ business activities. This is done through systematic setting of social and environmental goals as well as performance metrics, monitoring, and reporting processes. The GIIN provides a standardised set of impact performance metrics through the IRIS2 metrics catalogue. IRIS metrics, as well as other impact measuring frameworks, are widely applied by impact investors and funds globally. Building
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