For Profit and Global Good, Impact Investors Have the Power

220px-Judith_Rodin_2011Impact investing is no longer only for high-wealth investors. That’s the message behind a new book published by Wharton Digital Press.

In The Power of Impact Investing: Putting Markets to Work for Profit and Global Good, co-authors Judith Rodin and Margot Brandenburg offer guidance on how any investor can get started with their first impact investment.

In an interview for Knowledge@Wharton, Wharton Social Impact Initiative senior director Jacob Gray speaks with Rodin, president of the Rockefeller Foundation and past president of the University of Pennsylvania, about the origins of impact investing, how it compares to traditional investing and philanthropy, and what’s next for the field.

An excerpt of the interview is posted below:

the power of impact investing

Jacob Gray: A lot of people have heard the term “impact investing,” but not everyone knows what it means. Can you sketch out what impact investing is?

Judith Rodin: It’s the intention to produce both a social or environmental and a financial return. It is a conscious investment that looks for a double bottom line.

Gray: In The Power of Impact Investing, you talk about impact investing as existing on a continuum, with traditional grantmaking over here and traditional financial investing over here. Are impact investors people who are coming at this from more of the grantmaking perspective, trying to find new ways to do good? Or are they coming from the traditional finance perspective, trying to make their capital work harder?

Rodin: As the field started to develop, it was people who were investing philanthropically through grants, through family foundations or other kinds of grantmaking and who were looking for ways to develop further flows of capital, where they could use their grantmaking to help bring in another kind of investor, sometimes by de-risking the investment or being that first tier of concessionary financing, and then allowing another investor to come in. They found that that helped to build the field and build that capacity. In fact, the term “impact investing” was developed at the Rockefeller Bellagio Conference Center in 2007, when we convened a group of investors to talk about what they had learned working in the space.

Interestingly, we have been working more recently around the world, rather than just in Europe and North America, and what we are finding is the gateway in Asia, in Latin America and in Africa is from the financial investor who is becoming more socially responsible in his or her own country, who is starting to think, ” I know how to do financial [investments] and maybe I can put that money to work for social purpose.”

Gray: Among Wharton students, we see that impact investing has gone from an oddity to a really highly respected side pursuit, and now to what people see as really a nascent or maybe proto-nascent industry. The students are actually paying attention, like they could actually get a job in this field.

Rodin: Absolutely. We see survey after survey [that reflects that.]… J.P. Morgan and the Global Impact Investors Network (GIIN), which we helped to start, [surveyed] a group of impact investors.

Between 2013 and 2014, the amount that was being invested by this group went up 19%, from about $10.6 billion to $12.7 billion or something in that range. Ninety-one percent of them said that they had met their financial objectives and 99% said that their investment had met their social objectives.

The development of networks, the development of metrics and sharing data, and more performance data now coming out from older funds, such as those that you worked on and others early in the game, are really bringing more people into the field. Young people are so excited about this. They see the world in need of change, and they want to touch and feel it, and if they can use capital to make that happen in a really constructive way, it’s really attractive.

For a full video and transcript of Jacob Gray’s interview with Judith Rodin, visit Knowledge@Wharton.