Impact Investing: An Introduction | Rockefeller Philanthropy Advisors

From the US SIF Foundation’s 2016 Report, assets under management that incorporate ESG considerations totaled $ 8.72 trillion—a 33% increase over 2014. These assets now account for more than one out of every five dollars under professional management in the United States.

Impact investing has caught the attention of institutional investors, driven by client interest. BlackRock, Goldman Sachs, Bain Capital, and TPG are just a few that have taken significant steps to integrate impact investing into their asset management offerings. Moreover, across the financial industry the number of SRI (socially responsible investing) mutual fund and ETF offerings has grown rapidly over the past few years. MSCI and Morningstar—leading providers of independent investment research—have also released ESG indices and ratings to inform investment decisions.

As impact investing gains traction among a wider range of investors, efforts to codify impact measurement have been amplified. A number of relevant frameworks now exist, an example of which is the Impact Reporting and Investment Standards (IRIS) —an early taxonomy providing the foundation for impact measurement. New accounting standards are also in development by the Sustainable Accounting Standards Board (SASB) to track social metrics in public companies.

Mission Related Investments (MRIs): MRIs are risk-adjusted, market-rate investments made as part of a foundation’s endowment and have a positive social impact while contributing to the foundation’s long-term financial stability and growth.

Program Related Investments (PRIs): PRIs are IRS-defined below-market rate investments made by private foundations designed to achieve specific program objectives. As opposed to MRIs, PRIs have a legal definition in the U.S. and count as a qualified distribution towards a foundation’s 5% annual payout requirement. The Bill and Melinda Gates Foundation, for example, uses PRIs to complement its traditional grantmaking and to scale social enterprises that serve the poor.

To keep pace with these blended corporate aims, hybrid corporate forms have developed. For example, since the organization B Lab began its work in 2006, 33 states have enacted legislation for incorporation as a “benefit corporation,” in which a company prioritizes public benefit over financial performance. In addition, over 2,000 organizations in over 50 countries have taken up a non-legal designation of B Corporation that have been vetted to account for the company’s social purpose.

The structure of the transfer of money itself also has a range of possibilities. The investment structure can incorporate cash, private and public debt or equity, real assets, or other innovative instruments—such as pay-for-success contracts. Of these options, the 2017 GIIN Annual Survey shows private debt as the most common investment structure.

Investors Circle, investorscircle.net

An early-stage impact investor network made up of individual angel investors, professional venture capitalists, foundation trustees and officers and family office representatives.

Mission Investors Exchange, missioninvestors.org

Network of foundations and mission investing organizations offering workshops, webinars and a library of reports, guides, case studies and investment policy templates – with the goal of sharing tools, ideas and experiences to improve the field

Toniic, toniic.com

An international impact investor network promoting a sustainable global economy and offering peer-to-peer opportunities to share, learn, co-invest – including a searchable directory of impact investments, an impact portfolio tool, and multi-year studies of impact investing portfolios.

Case Foundation’s Short Guide to Impact Investing