Written by Jed Hamilton
Impact investing, the practice of investing capital to generate a positive social or environmental benefit alongside a financial return, is a popular topic of discussion today.
In addition to the tireless work of groups like the Global Impact Investing Network (GIIN), Big Path Capital, ImpactUs, Toniic, Social Finance, and others, impact investing has benefitted from being at a nexus of global financial trends and informed by a consistent campaign of communications that is working to change the way people view investment capital.
On the trend side, impact investing is being fueled by the largest generational transfer of wealth ever seen. College graduates entering the workforce today expect their capital to be invested with a sense of social responsibility and therefore are demanding their portfolios contain an impact investing allocation. As this group controls a larger and larger share of the world’s investment capital, more funds will be directed to do good in the world.
At the same time, these younger workers are part of a larger global movement that seeks to align investing capital with personal values. As a result, the larger and more traditional institutional investors are working to establish or grow their impact investing practices.
This is all great news, but it’s not enough. The mission of impact investing is too important to rest on the laurels of general demographic trends. While it’s comforting that younger workers are more likely to be driven toward impact, there’s no reason older generations shouldn’t be involved as well. One of the compelling arguments for impact investing is that the causes and issues and array of financial products are so diverse that it holds appeal to people of all regions, generations, and political persuasions.
To truly grow interest in impact to this larger, more diverse set of investors and mainstream the practice of impact investing, thoughtful and smart communications will need to play a key role. Working with an array of clients from our impact investing practice through the years, we have learned how to execute impactful communications campaigns that resonate in the sector.
Show the impact through personal narratives
While the numbers surrounding impact investing continue to be impressive, with upwards of 90% of impact investors satisfied with both financial and impact returns, what is going to help fill the narrative around impact investing are the stories on the ground. The dairy farmer in Kenya who has new financial independence thanks to a solar-powered refrigerator. The family back on its feet after securing much-needed financing for affordable housing. The increased test scores of disadvantaged children enrolled in an impact investing-supported program. These are the kinds of stories that truly resonate and show what impact investing is all about, more so than any spreadsheet can ever do by itself.
Get past the alphabet soup
The alignment of values with investment can take many forms, and it has produced a litany of practices such as ESG, SRI, CDFI, and more. While it’s important to understand and be able to draw distinction between all of these important practices and concepts, impact investing is different in that it goes beyond just the desire to avoid doing harm and focuses on creating a measurable, positive impact. All impact investments are responsible investments, but not all responsible investments are impact investments. The vision of impact investing is to look at investment capital itself differently. While all of these efforts to invest responsibly are important and admirable, don’t let the alphabet soup distract from the powerful narrative that is impact investing.
Be an alliance and networking ninja
Because the impact investing universe is so vast and diverse and involves a nexus of all manner of businesses and philanthropic organizations, communicating impact is going to mean working with a multitude of constituencies. Nonprofit organizations, for-profit companies, investment firms, and government agencies all have their own needs and ways of communicating. To be effective at spreading the word on impact investing is going to mean collaborating with all these different players. Take the time to understand the needs of all the groups you are working with on a given campaign and see how you can help them drive the narrative that suits their needs.
Embrace and invite the skeptics
While impact investing has been proven with research, earned high rates of satisfaction among its most rigorous practitioners, and grown in demand exponentially, there are still many skeptics. Some of them are skeptical about the power of capital to change things. Some want to call out the potential for abuse, acutely sensitive to programs that might be used to exploit the poor or be used as greenwashing. Always remember that these critics share the commitment of impact investors to make positive social and/or environmental change. Resist the urge to paint these critics as sour naysayers. Every good argument needs its devil’s advocates. Impact investing, like any other form of investing, needs a critical eye. Learn to engage with and embrace the critics. Impact investing can withstand the utmost scrutiny. Invite the critics to look closer, and be there to answer their questions.
One of the key benefits of the impact investing space is that it is still in its early stages. There is room for experimentation, there is room for restructuring and revision when a certain project does not go as planned. As with any investing strategy, impact investing is going to have a lot of philosophies and approaches that may take different angles. With greater institutional involvement, things are going to change but the commitment will stay the same, and the need for clear communications will become even more acute.
This is an ideal time to be involved in communicating impact investing. The industry is at a critical inflection point and scaling to drive enormous amounts of capital to help address some of the world’s most pressing problems. Such growth comes with new challenges, and these challenges ahead can be met head-on through clear and compelling communications principles.