Giving Compass' Take:

• Impact investing sounds great, but not everyone is doing it well. Self-serving investors may be doing more harm than good.

• Can the impact investing community rally around some core values to prevent the perversion of the practice? What is a reasonable balance of impact returns for the community and financial returns for investors? 

• Learn the basics of impact investing. 

The concept of impact investment that has the explicit purpose of supporting economic and community development is receiving a growing amount of attention from an increasingly diverse set of financial players. This emerging trend is one of the most exciting, and potentially problematic, trends I’ve seen over the last decade.

I am concerned that in a drive for global scale in impact investment, we will lose the voices that should matter the most—the billions of people who will be affected by social enterprises funded by our investments. I am advocating for the establishment of effective mechanisms to empower “beneficiaries” to be actively involved in the planning, execution, governance, and ownership of enterprises, and in the flows of capital connected with them.

Current Problematic Trends in Impact Investment

  1. Investors and entrepreneurs may profit at the expense of communities.
  2. Impact gets defined by investors and entrepreneurs instead of beneficiaries.
  3. There is a major “capital gap” for community-run projects.
  4. Capacity building is lacking.

Read the full article about impact investing trends by Morgan Simon at Transform Finance.