Unlocking investment for social impact
A guide to impact investing
Thursday, February 20, 2020
Impact investments are investments made into companies, organisations (including INGOs), and funds which generate social and environmental impact, alongside a financial return for the investor. The impact must be intentional and measured by the investor.
INGOs can benefit from impact investment as a tool to help them achieve their goals. They are uniquely placed to understand the local contexts and the operating realities in the global south, a perspective which is often missing when investment decisions are made by other parties.
We have published an introductory guide for INGOs to embrace this innovative form of finance. We outline three main ways for INGOs to get involved:
- As investors: INGOs provide non-grant funding either directly or indirectly to projects or enterprises delivering the work on the ground. More and more organisations are taking on this role. Habitat for Humanity, for example, has followed this approach by using its own grant funds to provide micro loans to small scale entrepreneurs. Consequently, they created the first housing-specific social investment vehicle.
- As recipients of investment: INGOs can receive repayable capital, receiving debt or equity investments themselves. For example, Alive and Kicking received a loan so that they could invest in their social enterprise businesses.
- As convenors to support others’ impact investments: INGOs provide support to the development of the impact investment market. Given their focus on impact, their proximity to the challenges they seek to address and their extensive networks, INGOs can effectively serve as the bridge between investors and those seeking investment by playing two key role: providers of technical assistance or as market facilitators and convenors.
Our guide includes several case studies, incuding the Red Cross and the Access to Capital for Rural Enterprises (ACRE) consortium.
Despite the multitude of options for INGOs to benefit from the growing field of impact investment, what remains clear is that it is not suitable for everyone. Although there are increasing ways for innovative INGOs to participate, the field is still new and there are a number of pre-conditions, which we would recommend for any interested INGOs to comb through thoroughly.
You can also join the Bond Impact Investing Group to learn more about how INGOs are using this new form of funding.