Monday, June 7, 2010

Canadian Responsible Investment Conference Preview: Impact Investing: Problem solving while profit seeking

By Alex Kjorven, Development Manager, ACCESS Community Capital Fund

Impact investing represents a category of investment that generates financial returns while aiming to solve social or environmental challenges. It goes beyond socially responsible investment decisions, which focuses primarily on screening companies based on their social or environmental footprints. Impact investing takes this one step further. By funding market-based solutions to social and environmental challenges, impact investors recognize the power of enterprise in bridging the gap between philanthropy and profit maximization.

From a global perspective, the amount of money required to solve the social and environmental problems of today cannot be funded through philanthropy and public resources alone. However, impact investments are positioned to narrow this gap by tapping into the for-profit capital markets by offering an attractive return while funding positive change. It has the potential to re-direct substantial sums of profit-seeking capital in the direction of solving some of today’s most pressing issues ranging from financial services for the poor to education or sustainable agriculture.

Today, we are seeing a rapidly growing trend in new enterprises making their way into mass markets. Social entrepreneurs are successfully building innovative, for-profit business models aimed specifically at solving these issues above. As infrastructure continues to develop around effective identification and evaluation of social impact metrics, impact investments in these types of enterprises may one day move to compete equally against any other market grade investment options currently available.

In the meantime, impact investments exist at various levels and take many forms. It could mean lending to a community microfinance project, or an equity investment in a social enterprise providing employment to at-risk youth. Regardless of the scale of operations or the level of investment required, one thing is for sure; the combination of profit seeking capital with a socially driven business model creates a better way to solve problems.

David Berge, Senior Vice-President, Social Finance, Vancity and Betsy Martin, Senior Advisor, Community Foundations of Canada will join Alex Kjorven at the “Impact Investing: Innovations for Social Finance in Canada” panel discussion on Wednesday, June 16 at the 2010 Canadian Responsible Investment Conference.

This is the second in a series of articles on the 2010 Canadian Responsible Investment Conference. Subscribe to SRI Monitor for more pre-conference articles over the next couple of weeks and full blogging coverage during the three-day conference.

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