Growth Industry Watch:
Impact Investing Takes Off.

Marketing and communications will be crucial in next phase of growth.

Since 2007, Impact Investing has increasingly occupied the space between philanthropy and socially responsible investing (SRI), with a decidedly activist bent.

The goal: to make positive social impacts and ultimately create specific outcomes such as a cleaner environment, sustainable energy, better jobs, affordable housing, and more. According to the Global Impact Investing Network investors plan to commit $25.9 billion in assets to impact investment deals this year, a 17% increase from last year.

Demonstrating that impact investing is leading the financial zeitgeist of the moment, look no further than the last few days. On Oct 3rd, Morgan Simon, a veteran of social and impact investing, published: Real Impact: The New Economics of Social Change.

On the same day, Fast Company reported that Cloud-based CRM giant Salesforce has “launched a $50 million impact investment fund to invest in social enterprises that are using its cloud-based customer relationship management platform in new ways to change the world.”

Not content to simply avoid social harm, impact investing is geared towards generating a positive social impact along with financial return. So for example while SRI might seek to screen companies involved in gambling, an impact investor might be focused on how their investment creates jobs or affordable housing.

Impact investments can be found in all sectors and geographies and can take the form of equity, debt, cash deposits or hybrids. The structure of financial returns can range widely, and include interest on loans, shares of revenue, and participation in growth.

From a marketing standpoint, investors are very interested to know how these impacts measure up, and financial firms are working to clearly communicate results. According to a McKinsey study - the top concern among investors is the difficulty of comparing impact-investment firms and their products. Impact investors, asset managers, governments, and entrepreneurs need transparent communications, particularly when it comes to how those products balance non-financial impact with financial returns.

In a great example, Salesforce, already known for its commitment to philanthropy, has clearly articulated its approach right out of the gate. The company is investing in change-dedicated organizations that are using the Salesforce platform, enabling participation in their partner’s good works, and in any upside growth. One area of interest to Salesforce is employment and jobs, and the company is investing in companies that are “developing tools to promote equal opportunity and economic empowerment across the company and really around the world.”  It is reported that the group has already committed to at least four companies, each representing an area where they plan to be active: workplace development, equality, sustainability, and the social sector.

In an interview with journalist Leonard Lopate, Simon (above) notes that one of her goals in writing Real Impact was to correct mistakes and unintended consequences made by some well-meaning projects. For instance, wind farms have notoriously created land grabs such as land-grabs and micro-lending, while effective has been beset by a host of problems. The goal, according to Simon, is understanding the full impact of any strategy and incorporate social justice principals under the banner: “nothing about us without us.” One lesson for marketers: audiences may be dubious given past mistakes in this area, so be sure and clarify how your offering differs.

At every level, impact investing is an area demanding great marketing and communications. Financial companies need to clearly articulate “impact alpha,” and other participants will need to begin defining and differentiating their roles as the industry grows.

Currently one out of every five dollars is under some sort of screen, but impact investing’s growth potential is tremendous, and is expected to account for funds 10 times the amount of charitable giving in the next decade. More than four hundred foundations are involved in the impact investing sector. One way to look at the potential, the Rockefeller Foundation stated that this idea could “one day represent 1 percent of professionally managed global assets, channeling up to hundreds of billions of dollars towards solutions that can address some of our biggest problems…”

As impact investing brings together social, financial and corporate sectors, marketers have an opportunity to creatively convey some of these compelling ideas with great strategic marketing.