Once upon a time, I used to think that “convergence” for impact investment meant applying good practice from the world of venture capital (VC) to the world of microfinance (MF). Oh, how naïve, I was!
When it comes to convergence, there are multiple sectors within mainstream finance that are increasingly relevant for impact investment, and an even larger number of social, environmental and philanthropic fields of practice that also come into play. I keep hoping that I’ll gain a clear enough vision of these different groups to fuel a pithy and provocative blog post. What I find happening is that each piece of research and discovery leads me to another and my sense of clarity remains shaky.
The vocabulary challenge affects both context and growth potential. Do we need more “convergence” or should we be focused on purpose-driven innovation? Does it make sense to borrow tools and techniques from, for example, the US venture capital industry? Can we overcome the tech/internet bias of VC if we try to do this? Or should we focus on innovation first – what tools and techniques will ensure that the interests of all key stakeholders are aligned – and then figure out what fits best within a mainstream finance context? Given that each practice area has a slightly different objective and set of values, how do we build communities across these practice areas so that both convergence and innovation can move forward in a collaborative way? These aren’t rhetorical questions, so if you have opinions, please share them!
In the absence of a definitive answer to the questions above (so far), I thought it would be helpful (hopefully for all of us) to start by just listing the different terms and fields that are, or could be, relevant for impact investment, and then ask all of you for feedback. Where impact investment is defined as “the pursuit of multiple bottom lines including financial, social and/or environmental”, are there are other sectors/fields of practice that are relevant to impact investment?
- Development Finance
- Social Finance
- Social Capital
- Social Enterprise Development
- Social Ventures
- Venture Philanthropy
- Community Development
- Cleantech Finance
- Green Investing
- Corporate Social Responsibility
- Small Business and SME Development & Finance
- Inclusive Business Finance
- Double bottom-line Investing
- Triple bottom-line Investing
- Sustainability Investing
- Ethical Investing (negative screens)
- Socially Responsible Investing or SRI (positive screens)
- Responsible Investing
- ESG (screening around environmental, social and governance factors; exchange-traded instruments)
- Seed and Early-Stage Investing
- Venture Capital
- Private Equity
- Alternative Assets
- Hedge Funds
Lauren Burnhill, @LaurenOPV