Wednesday, September 30, 2009

Impact Investing Index

(Photo from Flickr, Biking Nikon PDX, Creative Commons License)

I have a basic question.

How big is the current impact investing market?

Somewhere between $4 billion - $2.71 trillion. Well, that narrows it down. Not.

In this recent article in Forbes, Jed Emerson, the father of Blended Value, says:
"Impact investing covers that category of investment, which is viewed as "sustainable," generating financial returns by integrating consideration of social and environmental factors into the investment strategy. The category also includes a growing number of CDs and other fixed-income investment options--except in this case invested funds are used to support small, sustainable business and community development....What was a niche industry has grown significantly in recent years--now totaling over $2.71 trillion in the United States alone."
But that number is misleading - that includes ALL socially responsible investment funds - it comes directly from the Social Investment Forum which notes $2.71 trillion out of $25.1 trillion in U.S. Investment marketplace. SRI includes a number of practices (screening, shareholder advocacy) that don't result in more dollars flowing to mission driven businesses.

In the 2009 report, Impact Investing, The Monitor Institute defines the term Impact Investing as "Actively placing capital in businesses and funds that generate social and/ or environmental good and at least return nominal principal to the investor." That would define impact investing as a subset of SRI - so we know it is smaller than $2.71 Trillion. The report goes on to aspire to a market that is 1% of assets under management in 10 years (emphasis added)- a number it targets as $500 Billion. But the report doesn't give us a 2009 baseline number.

Mission Related Investments (MRI) and Program Related Investments (PRI) are one sub-class of impact investments. So how much do they add up to? On the advice of my colleague and co-author of Equity Advancing Equity, Lisa Richter of GPS Capital Partners, I went back to the Social Investment Forum to get a value for community investing - which includes PRIs and MRIs, as well as community development finance institutions, community development banks, and community venture funds. Their number? Total community investing assets (2007) $25.77 Billion. Subset of that in MRIs and PRIs? Lisa offered an estimate of $4-5 Billion, based on a report that used 2005 data and trends and self-reports in the last four years. But that $4-5 billion is an informed estimate.

How much of that comes from foundations making PRIs or MRIs? I checked public sites from More for Mission and the PRI Makers Network. I couldn't find hard baseline numbers for now (Please send to me if you have them or can find them). More for Mission is a foundation-led campaign to increase mission investing by $10 billion over the next five years - but, again, provides no baseline number.

My quest also took me to the websites of The Calvert Group, Good Capital, the Community Investing Center, Investors Circle, RSF Social Finance, One California Bank, New Resource Bank, the TakeAction Summit, Boston College's Institute for Responsible Investment, and EuroSif. I found all kinds of numbers and impressive rates of growth (SRI assets under management in Europe increased 102% in two years 2005-2007). But no baseline.

Can you help? I need an index and a value for the monograph I'm writing on the future. Those in the space of impact investing and MRIs/PRIs need a baseline to know if they are meeting their growth goals. Standardizing ways to measure the social and environmental returns is critical work, and the impact investing community is working hard on this. Doing so will help with market definition - as those measures can help set "what is impact investing and what isn't."

Is there some industry definition and standard measure of the financial resources in it? If I simply failed in my search and all my email inquiries, please point me in the right direction and forgive my naivete.

If not, well, I'm not the right person to go adding up all the numbers reported on these sites, classifying them, and defining a number - but someone out there is. Please - someone - create the "I-cubed"- Impact Investing Index. Define your terms, analyze current size of the components, and identify our baseline.* Please email me with any data you do have, any benchmarks I can cite with some assurance. Doing so will directly help me - I don't want to publish a report that claims the Impact Investing market is somewhere between $4 billion and $2.71 trillion. Much more important - it will help the market.

*And yes, these kinds of indices are created in precisely this way. The Dow Jones Index, easily the most well-recognized such market measure, was created by a newspaper editor in 1896. By the way, it is now for sale.


Tom Bailey said...

You have an excellent blog. I am just starting mine. Mine is for positive thinking too and my personal philanthropy.

Justin said...

If you gain any insights on this, be sure to let us know.