Weekly Review August 29 – September 2

How do you facilitate high net-worth individuals who are seeking to leverage their capital to create real impact, rather than just investing “socially responsibly”? Pierre Omidyar, eBay founder behind Omidyar Network, chronicled his journey of becoming an impact investor in an article in the Harvard Business Review. After eBay went public, Omidyar found himself immersed in unexpected wealth. After a couple years of donating here and there as a nonprofit family foundation, Omidyar needed to professionalize and structure the foundation with a defined strategy. He knew the amount of social impact that a business can have, demonstrated by eBay itself and its creation of new markets, livelihoods, and careers for people around the world. Omidyar sought “to harness the incredible power of business in order to make the world better” with his newfound wealth. Working with advisers, he overcame legal and structural hurdles to develop a limited liability corporation that employs staff members who conduct due diligence on investments in both nonprofit and for-profit companies. Thus, Omidyar Network broke ground on what we know as the impact investing circuit and blend the values of mission-driven non-profit managers and for-profit venture capitalists. Invested Development operates in a similar fashion, with a focus on for-profit social enterprise.

In June, Fast Company ran an article titled, “Why Social Investing is a Crock.” The basis for the argument is the lack of randomized control studies which would measure the creation of impact by comparison. Such studies would gauge if there really is a difference made thanks to impact investing in a social enterprise or microfinancing. Sasha Dichter, the Director of Business Development at the Acumen Fund, wrote a rebuttal arguing that resources within a social enterprise aren’t typically going to be allocated to conducting an impact study. The example Sasha uses is cell phone adoption among the BoP, which have had undeniable economic and social impact, yet nobody has done a randomized control test to see if the impact really exists. Ultimately, an impact investor is seeking to “identify products and services that make a material positive impact on the lives of poor people” and “create business models that make the cost of providing each incremental product go down to zero…and beyond (meaning, you make a profit).” We wholeheartedly agree with Sasha on those two points, which is why we seek to invest in for-profit start ups that work and innovative in the mobile technology and clean energy fields.

Fast Company later went on to interview Sasha to promote the conversation within the space on why social impact investing is not a crock. In his blog post, he defended the existence of impact by way of social investing without randomized control tests. In this interview, Dichter explains the functions of impact investing so readers can better understand the functions of impact investing. Dichter highlights that impact investing is a “profit seeking, not necessarily profit maximizing, endeavor” but admittedly has his challenges.  Funding, for example, is not necessarily the challenge, but rather organizations must find the talent that can deploy the capital in innovative ways. The model needs to work in order to allow funding to flow to those who need it.

Newly named CEO of Nonprofit Finance Fund, Antony Bugg-Levine shares his thoughts on impact investing with Jocelyn Ling of Social Finance in a three part series. Bugg-Levine is also the Managing Director of the Rockefeller Foundation and GIIN board member. His new book, co-authored with Jed Emerson, is “Impact Investing: Transforming How We Make Money While Making a Difference” that offers an overview of the evolution and implications of impact investing. In Part I of the interview, Bugg-Levine outlines the content of the book and the purpose it aims to serve. Part II reiterates the book’s call to action, and invites those from all sectors and industries to embrace impact investing, whether actively or passively, in any way they can. In Part III, Bugg-Levine points out that the impact investing community needs to action, not rhetoric, as goes the classic phrase, actions speak louder than words. The activity in the space over the years has produced excellent momentum, which will continue to gain. 


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