Impact Investing Hits the Big Time

One of the silver linings of a deadlocked congress is that President Obama has been forced to come up with creative ways to stay relevant. Among other things, the president has suddenly decided, after years of largely ignoring his White House Office for Social Innovation and Civic Participation, that philanthropy is his new best friend.  

In March, the White House convened a conference of next-generation philanthropists. And this week it swung behind impact investing in a big new way, corralling twenty investors, including the McKnight, Case, Cordes, Ford, Grantham, Nathan Cummings, and MacArthur foundations, to commit a collective $1.5 billion dollars to impact investments. (See the White House background paper on this initiative here.)

The initiative’s goals include delivering “affordable housing and healthcare for low-income communities, carbon footprint reductions for some of the America’s least energy efficient buildings, fresh produce to food deserts, financial services and education to help lift millions out of poverty.”  

Okay, we know: This all didn't come out of the blue because Obama is desperate to keep something going on. In fact, the White House has put together a number of convenings with philanthropists over the years. And impact investing in particular has been gaining traction among western policy elites. The G-8 established a task force in this area last year, and the U.S. formed a National Advisory Board on Impact Investing as part of that G-8 push, funded by many of the same foundations which committed investment funds this week. The board recently published an influential report, Private Capital, Public Good:  How Smart Federal Policy Can Galvanize Impact Investing — and Why It’s Urgent. Other G-8 countries are also moving forward with different initiatives, including the U.K.

Mobilizing private capital to solve large social and economic issues is hot and getting hotter. 

All of which makes us wonder whether we are now at an inflection point in the development of a new kind of philanthropy. Jean Case, the CEO of the Case Foundation, took to the Huffington Post to proclaim exactly that: “A new day has dawned. Impact investing offers a unique opportunity to 'invite business in'—not limiting their role to that of their foundations or social responsibility programs, but rather enabling and encouraging them to use their core areas of expertise, or their established products and services in these efforts." Case gives the example of Warby Parker, “using fashion and consumer demand to bring eyeglasses to the developing world at scale.”  

Case has said this kind of thing before, many times, only now more people are listening. 

Of course, many questions and some controversy surround impact investing. We'll leave those questions to others to sort out, but one thing is crystal clear: Impact investing has hit the big time, and one notable thing about the recent high-level push is the cast of characters involved: Some of the participants, like the Omidyar Network, MacArthur, and the Case Foundation have long been touting the potential of impact investing, but others are still feeling their way here.

Our bet is that things will speed up now, with more and more foundations embracing impact investing. Remember, these institutions like to move in herds, terrified of missing the next big thing.