Overcoming the challenges of impact investing: Insights from leading investors (original) (raw)
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Finance or Philanthropy? Exploring the Motivations and Criteria of Impact Investors
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Inching to Impact: The Demand Side of Social Impact Investing
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Social impact investing (SII) is transforming the availability of private capital for nonprofits and social enterprises, but demand is not yet meeting supply. This paper analyzes the perceived barriers faced by nonprofits in engaging with SII, arguing the need to assess differences using a policy field framework. Four parameters of a subsector are conceptualized as shaping participation in SII: the scale of investment required, embeddedness in place, the need for radical innovation, and the configuration of intermediaries (such as loan funds and market brokers). Based on 25 interviews with leaders of nonprofits and intermediaries in affordable housing and community economic development in Canada, the study finds that significant barriers are a lack of knowledge of the market, inadequate financial literacy, and the challenges of measuring and valuing social impacts. In addition, nonprofits report that, in spite of the inherent importance of social impact in this form of investing, they currently make limited use of evaluation and impact metrics, and perceive that intermediaries and investors, particularly in affordable housing, still put a greater emphasis on financial over social returns.
The Challenges of the Impact Investing: A Systematic Review of Literature and Future Research Agenda
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There have been a lot of discussions about the Impact Investment Industry (III), and despite having multiple unique benefits, it is still not reaching mainstream investing. This industry is facing some unique challenges as it is a bridge between for-profit investing and charity/philanthropy. So, this study discovered the critical challenges faced by the different stakeholders in the impact investing highlighted by the existing literature. The study used Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) guidelines and included 116 documents published between 2009 till 2021. The descriptive, thematic, and content analysis is done to achieve the objective. After reviewing the existing literature, the authors found multiple stakeholders operating in the III, such as impact investors, social entrepreneurs, intermediaries, and regulatory bodies. They are exposed to different challenges which are unique to each stakeholder. The study categorized all the challenges...
WITH HEARTS & MINDS EXPLORING THE IMPACT INVESTING MARKETPLACE AND RELATED STRATEGISING
Aalborg University, 2021
Purpose: This study aims to explore the characteristics behind an emerging impact investing marketplace in Denmark. This will be combined with examining related or- ganisational strategising within an institutional context of Danish development policy and strategy. Motivation(s): As an industrial PhD project, the research builds on a collaboration between four supporting project partners, the World Wildlife Fund Denmark, Dan- ish Red Cross, Access2innovation and Aalborg University, with the aim to shedding light on the opportunities in impact investing, related strategies, and the drivers behind investing for impact. The study has explored and supported project partners' impact investing-related strategising, through the research period from 2018 to 2021. Here project partners motivations guide the research aims to explore the emergence of impact investing in Denmark at an institutional level. This is combined with understanding project partners responses and related strategising, within the context of Danish development at an organisational level. Conceptual framework and research design: Impact investing is often referred to as an investment strategy with the intent to contribute to measurable social and environmental real-world outcomes, alongside a financial return.Overall, interest and activity around impact investing in Denmark have increased significantly in recent years. De- spite the enthusiasm, the emergence and characteristics of the impact investing mar- ketplace, combined with interpretations, motives and adoption of strategies, remain largely unexamined. To explore how impact investing is structured in Den- mark and explore project partners related strategising, this study presents a concep- tual framework combining institutional theory and strategy as practice theory. The framework becomes a lens to explore Danish-based interpretations, motives, and practice of impact investing, which is combined with project partners responses and strategising at an organisational level. Soft system methodology is applied as a research design to operationalise the conceptual framework, and combined with mixed methods to collect and interpret the primary data from 120 semi-structured interviews with Danish-based actors and project partners. Findings: The study provides research on the emerging characteristics of impact in- vesting in Denmark and individual actors related strategising. It examines the ena- bling role of public actors in the institutional context of Danish development. Findings show how public actors can (i) leverage financial investment with blended value, (ii) create incentives to (re)shape arrangements and (iii) promote legitimacy in investing for development. However, public actors could face tensions and trade-offs when promoting blended value that caters to institutional capital needs, while balancing investment logic and development objectives. The findings also provide empirical evidence on Danish financial interpreta- tions, motives, and practice with impact investing. The study derived the segmenta- tion of financial actors by categorising them according to their interpretations of impact investing and understandings of investing with impact. The segmentation shows how financial actors interpret and adopt different strategies depending on their organisational characteristics and institutional ends-means. On the one hand, one segment of actors (referred to as Type A actors, primarily con- sisting of asset owners and few managers) emphasises value-alignment (i.e., views im- pact investing as an extension of values) and/or impact-generating (i.e., aiming to generate or accelerate new projects or impacts) to bring about value-creation. The low prevalence of investment logic makes some actors open to new investment management practices, where institutional ends (values, motives, goals) govern their means (resources, practices, and investments) when adopting impact investing. On the other hand, a larger segment of financial actors (referred to as Type B and C actors, primarily consisting of asset managers and few owners) upholds moderate or high prevalence of investment logic. These actors adapt impact-aligned strategies by ensuring investments address broad social or environmental areas, where impact is complimentary to risk-return considerations. Similarly, actors have motives towards investing with impact, yet interpretation or adoption builds on experience from sustainable investing strategies or traditional investment practice. Furthermore, more complex institutional patterns are identified than currently rec- ognised by impact investing literature. Here, marketplace segmentation is discussed to better understand actors approaches to investing with impact through their ends-means, motives, and practices. This is combined with discussing a reconceptualisation of impact investing, from having one uniform definition to instead building a typology for how actors can invest with impact and address real-world issues. The study shares insight into project partners' motives, responses, and interactions shaping strategy-making at an organisational level. The study follows the World Wild-life Fund Denmark strategy-making on bankable nature-based solutions, Danish Red Cross commitment to innovative finance, and Access2innovation initiatives on impact financing. Findings are based on project partners strategy-making within im- pact investing related areas and underpin the emerging challenges when project part- ners seek to strategise or adopt a new practice outside core institutional means. This can, in some cases, lead to tensions between embedded practice and other strategic intentions. The findings from three different project partners describe the dynamic and continuous strategising as organisations seek to navigate an emerging field and engage in a new practice outside their traditional operations. The study showcases how actors can craft strategies and pathways to engage in related areas to impact investing through practice-driven learning to overcome organisational tensions or adopt a new practice. Contributions: In summary, the research provides empirical evidence on the emer- gence and development of impact investing in Denmark. By doing so, this study provides a segmentation of the marketplace to convene actors around shared motives to invest with impact and share insights into diverse pathways to engage in new practices.
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Impact investments are emerging as a new asset class of social finance, sometimes driven by multinational enterprises as part of their strategic corporate social responsibility strategy. These investments intend to create positive societal impact beyond a financial return through the development of social enterprises. Scholars have highlighted the conflicting institutional logics that these later hybrid organizations must face when combining social welfare and profitability. Yet we lack in-depth insight into how impact investing funds are building their own accountability and legitimacy, and more specifically how they are responding to their investor's pressure to manage societal impact. This paper builds on a three year actionresearch program conducted with Schneider Electric, a multinational enterprise specialized in energy management. The company initiated and sponsored an impact investing fund targeting energy access ventures in Sub-Saharan Africa, alongside four Development...
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Practitioners and academics have been using different terms to describe investments in the sustainability context. The latest inflationary term is impact investments—investments that focus on real-world changes in terms of solving social challenges and/or mitigating ecological degradation. At the core of this definition is an emphasis on transformational changes. However, the term impact investment is often used interchangeably for any investment that incorporates environmental, social, and governance (ESG) aspects. In the latter instance, achieving transformational change is not the main purpose of such investments, which therefore carries the risk of impact washing (akin to “green washing”). To offer (re-)orientation from an academic perspective, we derive a new typology of sustainable investments. This typology delivers a precise definition of what impact investments are and what they should cover. As one central contribution, we propose distinguishing between impact-aligned inve...
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