Is Impact Investing Winning the Battle but Losing the War? - Aner Ben Ami

"Impact Investing inches from niche to mainstream”, reads the title of an upbeat Economist article to mark the start of 2017. The Economist joins a long list of publications and institutions announcing that impact investing has arrived. And, of course, if impact investing is going mainstream it’s because there are more and more proof points showing that you can ‘do well by doing good'. The water’s fine and anyone can join in without fear of giving up financial returns.

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Impact Investing in Haiti

Haiti has been battered by too many natural and human-made disasters, many of which have provoked a strong international response of support. However, most of these interventions, whether by philanthropy or foreign aid, have not achieved meaningful results.  

It was with all this in mind that we welcomed an invitation by a group of Haitian activists and entrepreneurs to bring the work of Transform Finance to them. We overcame our general reluctance to engage in contexts that we don’t know well based on the strong support and tireless preparatory work of our Haitian collaborators, Isabelle Clérié, who ran a social business incubator in the country, and Patrick Dessources, who for years has led Root Capital’s efforts in the country.

Click here to read and download the full report.

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Tying Fund Manager Compensation to Impact

In a typical private equity fund, a general partner’s (GP) financial compensation is linked to the fund’s financial performance in the form of a carried interest – a percentage of the earnings of the fund. In the context of impact investing, a fund manager promises both financial and social returns, yet compensation is still traditionally tied only to financial performance. This traditional compensation structure leaves out financial incentives for the GP to meet the fund’s stated social impact objectives. 

In this issue brief, we explore the reasons for tying compensation to impact and showcase how a few pioneering funds have done it. 

Click here to read and download the full brief.

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Measuring the Quality, not Quantity, of Job Creation

In this article from the winter issue of Cascade, Noelle S. Baldini of the Federal Reserve Bank of Philadelphia analyzes quality job creation, covering in some depth the Job Quality Standards project led by Transform Finance, and featuring project participants HCAP Partners and the Surdna Foundation. 

https://philadelphiafed.org/community-development/publications/cascade/90/04_measuring-the-quality

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Square peg, Round Hole: Innovating Finance For Social Enterprises

The social enterprise community is held up as an innovative ecosystem of investors and entrepreneurs, designing businesses models as diverse as the challenges they address—from poverty in the global south, to recidivism and urban farming in the US.  

How are these businesses being funded? Oddly enough, the vast majority are raising capital using the standard equity (or convertible note) term sheets that are designed to support fast-growing tech start-ups.

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Exploring the How and Why of Participatory Grantmaking and Impact Investing - Nadia Van Der Linde

The very first session of the funders’ Working Group on ParticipatoryGrantmaking was organised at the International Human Rights Funders Group (IHRFG) meeting in San Francisco on 28 January 2015. While we had prepared to welcome just a handful of interested colleagues from peer foundations, we were instead welcomed by a room filled with around forty grantmakers and philanthropic advisers. Participatory grantmaking seems to be hot and happening on the West Coast of the USA.

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Managing vs. Measuring Impact Investment - Morgan Simon

How a shift in mindset from impact measurement to impact management can lead to stronger social outcomes: a case study of Huntington Capital Fund III.

Five years ago, when initiatives like IRIS and B Corp where just taking off, “impact measurement” was the buzzword. Investors were asking: How do we make sure to track the impact of our investments? How can we both quantify and validate our impact? 

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Redefining Community Impact - Andrea Armeni

Impact investment is often seen as a panacea to the challenges of aid and philanthropy, driving capital to socially positive projects that would otherwise not be financed. As the field matures, however, practitioners are starting to recognize some of its challenges.

The enthusiasm around impact investing means that we have often overlooked where its promise has gone unrealized. Given the tremendous potential of the field, we need to get it right – both to seize a unique and timely opportunity, and to avoid some of the pitfalls that have mired its predecessors, aid and philanthropy.

It is time for a course-correction.

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Where’s the Community Accountability in Impact Investing? - Morgan Simon

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. As with any new field, impact investing raises consequential questions and issues with the answers and intended results remaining up for grabs.

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