Imagine a future with an abundance of quality jobs, affordable homes in environmentally sustainable and thriving neighborhoods and continuous innovation in the delivery of basic services that saves taxpayers billions of dollars, all supporting Benjamin Franklin's maxim that "an ounce of prevention is worth a pound of cure."
This is the country that people envision when they think of the American Dream -- and the same, shared vision that led President Obama to call the issues of growing inequality and economic immobility "the defining challenge of our time," arguing that government should -- as it has in the past -- play a supportive role in alleviating the nation's social crises.
But in a time of reduced public resources, how will we get there?
Through smart public-private partnerships that leverage impact investing, the practice of investing for intentional, measurable positive social and environmental outcomes in addition to financial returns.
The good news is that impact investing is quickly gathering steam. For example, while just six percent of U.S. pension funds report that they have made an impact investment, fully 64 percent expect to in the future, according to a recent World Economic Forum survey.
To be sure, growth in impact investing presents an historic opportunity for public leadership. Government plays a critical role in driving investors to opportunities with social and environmental impact, and both public and private actors working to address today's myriad challenges are realizing the importance of combining forces.
Several powerful policy levers supporting impact investing in the U.S. already exist, directing private capital to communities and causes that stand to benefit from additional investment. Consider, for example, the Community Reinvestment Act, which requires depository banks to make loans and investments in underserved places where they have branches; the Sustainable Communities Initiative, which is encouraging cross-sector collaboration and co-investment in U.S. metropolitan regions; and Program Related Investment tax law, which provides an incentive to foundations for making some investments in support of their charitable purpose, in place of grants.
While these policies have quietly benefited millions of people, government can do more to facilitate the growth of impact investing, leveraging private dollars into needy communities across the country. In order to enable public officials to capitalize on the full potential of impact investing, Pacific Community Ventures (PCV), the Initiative for Responsible Investment (IRI) at the Hauser Institute for Civil Society at Harvard University and Enterprise Community Partners, have created the Accelerating Impact Investing Initiative (AI3), with initial support from the Ford Foundation and Surdna Foundation.
The AI3 will be looking at opportunities to refresh and support key impact investing policies, including those named above and the many others that influence the ability and willingness of investors to put capital to work in sectors ranging from affordable housing and community economic development, to health, education, infrastructure and sustainable agriculture.
With the goal of developing a credible national policy platform for impact investing, the AI3 will:
- Engage -- collaborating with organizations that have already made significant progress building communities of practice;
- Examine -- providing the first, comprehensive mapping of existing policies and new ideas and
- Educate -- creating a learning agenda to educate key stakeholder groups on scaling impact investing as a public good.
Our goal is not to reinvent the wheel, but to build on the work of leading practitioners in the U.S., particularly in responsible and community investment. The U.S. is fortunate to have a strong existing policy infrastructure on which to draw, and a deep bench of large, high-quality impact investing intermediaries.
There are complementary efforts underway, not least those that emerged from the G8 Social Impact Investment Forum in London last June, hosted by Prime Minister David Cameron. This included an international task force, national advisory boards in a number of countries, including the U.S., and most recently the Global Learning Exchange, created by the World Economic Forum together with the Impact Investing Policy Collaborative, a global network of researchers and policymakers co-convened by PCV and the IRI.
Impact investing is attracting the attention of government and business leaders globally. We must ensure that, here at home, the urgency of the moment bolsters a unified vision and continuous legacy of policy innovation, creating pathways of opportunity for low-income people and places and making the American dream an achievable reality.
Ben Thornley is a director at Pacific Community Ventures
Abby Jo Sigal is senior vice president of innovation for Enterprise Community Partners.
David Wood is an adjunct lecturer in Public Policy and the Director of the Initiative for Responsible Investment (IRI) at the Hauser Institute for Civil Society at Harvard University.