Susanna Rust asks Amit Bouri, CEO of the Global Impact Investing Network, about the opportunities and risks that come with impact investing’s growing popularity
At a glance
• Bouri co-founded the GIIN in 2009.
• Previously he was a consultant with the Monitor Institute, which produced a 2009 report ‘Investing for Social & Environmental Impact’. It had been commissioned by the Rockefeller Foundation after a 2007 meeting at which the term ‘impact investing’ was coined.
• The GIIN is a non-profit organisation dedicated to increasing the scale and effectiveness of impact investing. It provides thought leadership, tools and training.
IPE: Impact investing is getting a lot of attention at the moment. What have the market’s evolution and the growth in interest meant for your organisation?
Amit Bouri: When we were founded in 2009 it was about the potential of channelling vast sums of investment capital to address the world’s social and environmental problems. At the time we had just over 20 members. It was a small group of pioneering investors who were focused on impact investing. That included insurance companies, pension funds, philanthropic foundations, global banks, and development finance institutions. What’s happened since we were first launched is that the market has absolutely exploded, in terms of interest as well as in terms of capital being deployed. In those early days we were out bringing together a small community of pioneering investors. Now we’re playing a role in reaching out to a much broader set of investors, whether they’re large institutions or high net worth individuals, who are interested in putting their money to work to address social and environmental problems, maybe in their own communities, or in the world at large.
IPE: Why is impact investing becoming more popular among institutional investors? How significant are the UN Sustainable Development Goals (SDGs)?
AB: I think there is a kind of booming interest among institutional investors when it comes to impact investing. Just to give you a sample of the conversations I’ve been having in my travels: in the fourth quarter of last year, I went to Australia to speak with superannuation funds that were interested in moving more capital to impact investments and I was in Europe earlier this year, speaking with a number of insurance companies who are thinking about how to increase their commitments to impact investments. And we continue to get interest from a variety of pension funds, insurance companies, and endowments that are seeking to make allocations to impact investments. In terms of what’s driving that, the SDGs, particularly outside of the United States, have been quite significant in increasing awareness of the role of the private sector in sustainable development. What we’ve been working on at the GIIN is to make sure that that broader interest translates into the deployment of investor capital and the development of investment strategy. We’ve published a short briefing on the opportunity for investors to use impact investment as a means of making progress towards the SDGs. The interest in that exceeded our expectations for the work. I also think the Paris climate accord has really elevated this issue of the need for the private sector to play a role in climate change. And we’re certainly seeing a number of investors starting to think about how they can put their assets to work to support those goals.
IPE: To what extent do you think the low-yield environment and the associated search for yield and move into alternatives like private equity is driving some of the increased interest in impact investing?
AB: I think the low yield environment has contributed to institutional investor interest in impact investing. I think the search for yield and returns has certainly driven more investors to look for impact investments or new opportunities. But I think there is also a bigger contextual factor there, which is that whenever you see performance start to dip it creates an openness to revisit assumptions about the investment strategies that people have been implementing for some time.
IPE: What are some of the challenges facing impact investment as it becomes more popular? Is there a danger of re-labelling or it becoming a catch-all for quite a lot of different strategies?
AB: I think one of the things that’s so exciting about impact investing is that it does cover a diverse set of investment opportunities and that investors can find impact investment opportunities to fit into many different elements of their asset allocation strategy. Most investors are typically introduced to impact investing through a single strategy. As they start to diversify and broaden their aperture for what they can do from an impact investing standpoint across their portfolio it can be overwhelming, and it certainly can raise questions about where the boundary sits. I think what’s really important for us in this moment is that there are people who may have been making impact investments, but just aren’t familiar with that term. So there’s this opportunity to coalesce a community that’s been identifying around impact investing, which will deepen the expertise, strengthen the ability for co-investment and learnings, and ultimately scale this market. That is a very powerful, positive development. But as you point out there’s also this risk that as impact investing becomes an increasingly attractive brand, it may attract people who want to claim the mantle of that brand, and get whatever positive points, in terms of public relations, that may come with it. But they may not actually be making much of a difference with their investments. I think that is a risk for the market and it’s important to manage. We have to be thinking big. It won’t be successful with just a niche market. But it has to be a market at scale that has great integrity, and ultimately, that has great impact. And I think the GIIN’s role as it evolves with all this increased enthusiasm is to support and channel the growth of the impact investing market.
IPE: Do you think impact investing is possible in the context of public markets? Is that an important question?
AB: I do think it’s an important question. I think investors are trying to figure out how impact investing applies to a number of strategies that they’re pursuing. I think this is an incredibly exciting time in the public markets as far as people are thinking about different ways in which their holdings can represent their values, and their social and environmental objectives. I also think it’s a confusing time because there’s such a spectrum of approaches. There’s a lot of exciting activity in what’s broadly termed the ESG space, where one big motivation is how you mitigate risk through consideration of these factors. But where I think impact investing comes in is that it is not just about avoiding harm and it’s not just about managing risk. It’s about proactively directing capital to solutions to social and environmental problems. It’s complementary to these other strategies, but it’s also incredibly exciting to so many investors given the global uncertainty we’re facing in terms of climate change and inequality. Many investors are starting to explore how we can make a difference with our capital and our portfolios. I see this as a really exciting time across the spectrum of investment opportunities.
Special Report: Investing for Impact
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Interview: Amit Bouri - GIIN