Giving Compass' Take:

• Next Billion describes the field of impact investing for those still unsure about whether they want to explore it and runs through some helpful exercises.

• These are all great questions to ask, but perhaps the biggest takeaway is that a general philanthropic assessment on your goals and missions will go a long way to making any major decision with confidence.

• For more resources on impact investment and how it works, check out this collection of articles.


If you were to picture a social enterprise and then a Silicon Valley tech firm, what images would come to mind? Many would imagine a small-scale social business working in cramped offices in an emerging market on the one hand and a lush, sprawling IT campus on the other. And in some cases, those stereotypes would be true.

However, it may surprise you to learn that, in the aggregate, social enterprises now account for 3 to 5 percent of the U.S. GDP — twice as much as Silicon Valley. Ninety-one percent of millennials would rather buy from companies associated with a social cause. Investing in impact-driven businesses isn’t an act of charity — it’s a smart financial strategy that can help de-risk a portfolio and also lead to significant returns. And the rapidly growing market for impact-driven business represents a significant opportunity for forward-thinking investors.

Entering the impact investing space requires investors to navigate a complex web of unfamiliar metrics, regulations and strategies. In the process of working with some of the leading investors within the impact investing space, I’ve had an opportunity to observe and identify some key themes and questions that I recommend any new or aspiring impact investor consider before sealing the deal on an investment opportunity.

No. 1: What am I trying to accomplish? It seems like a silly question for a serious investor to be asking, but impact investments are by their nature complex undertakings. You are looking to simultaneously turn a profit (which is hard enough) and further a mission-related objective (e.g. help address climate change, work toward alleviating poverty, etc.) — ideally in a way where the mission drives financial returns and vice-versa. Without having a clearly defined set of objectives, it will be nearly impossible to craft an effective strategy for harmonizing, aligning and driving both profit and purpose.

No. 2: Where do I find myself on the spectrum of multiple bottom line investing? Impact investing has become an umbrella term that encompasses a wide variety of investment strategies across a range of asset classes, seeking to drive results that range from concessionary to above-market returns. Once you have identified your “why,” it’s helpful to start thinking about how priorities rank for you.

No. 3 Do all stakeholders share a common vision? Entrepreneurs should set clear expectations for investors regarding the nature of their social impact goals, and investors should clearly communicate the social returns that they expect their investments to generate.

Read the full article about whether impact investing is right for you by Chintan Panchal at NextBillion.