Impact Investing: $1.5 Billion in Commitments and a New Resource for Policymakers

It's a great week for impact investing. At the White House roundtable on impact investing today, corporations, banks, foundations, and individuals including Prudential, Capricorn Investment Group and the Omidiyar Network committed to invest more than $1.5 billion in new capital into companies and funds that strive to generate positive financial and social returns. US government agencies, including the Small Business Administration, USAID and Treasury, also announced programs to support impact investments and social enterprises.

These commitments were complemented by the release of a new report from the U.S. National Advisory Board to the Social Impact Investment Task Force--Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing--and Why It's Urgent. The report provides a framework for how federal policies can support impact investing. The presence of both investors and policymakers committing to support businesses that are using market forces to create social change is a great signal for the space.

The Private Sector Steps Up

As we look at a world with urgent needs, many realize that there is an incredible opportunity to more effectively bring companies and entrepreneurs into the business of solving social problems by both tapping the entrepreneurial spirit, and by leveraging the power of the private sector. Government, philanthropy, and nonprofits cannot solve many of our world's greatest challenges alone. Indeed, many of these challenges--in education, healthcare, and access to opportunity, for example--have become chronic and in real need of new, more scalable solutions.

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.

We are seeing an increasing number of companies, large and small, that have developed models that enable them to sell products and services that contribute to addressing some of our greatest needs, while making a profit. We have seen this in GE's Head Health Challenge, which supports the development of technologies that address traumatic brain injury. We've seen it in companies like Warby Parker, using fashion and consumer demand to bring eyeglasses to the developing world at scale. And we have seen it from startups like Sanergy, which is using market-based solutions to solve the global sanitation crisis.

We are also seeing a growing number of investors who want their investment dollars to better represent their values. They are interested in exploring ways that they can do good not only through philanthropy, but also by mobilizing their investment capital. These investors include individuals who are asking their financial advisors to help identify businesses that provide a social benefit across asset classes, foundations that are reallocating money within their endowments to community banks that support underserved populations, hedge funds that are raising money to invest in renewable energy, and corporations investing in innovation that benefits customers at the base of the pyramid, among many others.

A New Framework for Policy

As the industry matures and more investors enter the market, policies that remove barriers to growth and provide incentives for more impact investments will grow in importance. As a response to this need, an international Task Force was launched by UK Prime Minister David Cameron at the June 2013 G8 Social Impact Investment Forum in London to establish a framework to accelerate impact investing and the policies that support it.

The U.S. National Advisory Board to the Social Impact Investment Task Force was created to address policies in the United States, and it has engaged with hundreds of stakeholders in the impact investing field over six months--from policymakers to foundation leaders to institutional investors and many others--to surface the most compelling recommendations for policies that would support the increase of the amount of private capital that is committed to social change.

The report lays out several recommendations for executive and legislative action, which are grouped under three umbrella policy strategies and two supporting policy areas:

• Strategy 1: Remove regulatory barriers to unlock additional private impact investment
• Strategy 2: Increase the effectiveness of government programs
• Strategy 3: Provide incentives for new private impact investment
• Supporting Policy Area 1: Provide support for innovative impact enterprises
• Supporting Policy Area 2: Standardize metrics and improve access to data

Moving Forward

It's relatively early days in the sector, but I am encouraged by the growth and enthusiasm that I've seen over the last few years. And, like in many new endeavors, I think that the best way to move forward is to commit to learn by doing. At the Case Foundation, we'll make investments and grants to support impact businesses that are using market-based solutions to solve some of our greatest social challenges. We will also support the growth of the ecosystem and infrastructure that will be necessary to support those businesses and investors as the market expands.

We commit to share best practices and to learn from others along the way, and we hope that you will join us in this exciting time as we mobilize the power of the market for good.