Impact Investing: Harnessing Capital Markets to Solve Problems at Scale

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There is not enough charitable and government capital to meet the social and environmental challenges we face. Where, then, will we find the money to complement charity and government to bring solutions to scale?

The Rockefeller Foundation launched its Harnessing the Power of Impact Investing initiative in November 2008 because it believes that impact investing can be part of the answer. Imprint Capital was similarly founded in 2007 to help the growing ranks of institutions and high-net-worth individuals create and execute strategies to drive impact with their investments.

However, as the report Investing for Social and Environmental Impact by the Monitor Institute highlights, the ability of this new industry to deliver on its potential is not inevitable. Industry leaders must work together to measure and articulate the industry’s successes, build infrastructure to increase its efficiency, and create products that respond to investors’ demand for transparency and liquidity.

Impact investing helps solve social or environmental problems while generating financial returns. The pioneering investors are diverse, with a variety of motivations. Despite the current market turmoil, by recognizing they are part of a broader industry, participants can learn from recent innovation and work strategically to improve the efficiency and broaden the capacity of impact investing. These developments present new opportunities for banks in new investments, co-investors, and collaborators. Consider the following examples:

A family in New Jersey is moving into a newly renovated, previously foreclosed home. The home is affordable because the nonprofit organization Housing and Neighborhood Development Services Inc., received timely access to a low-cost loan. That loan enabled it to buy 47 distressed mortgages from JP Morgan Chase from the Washington Mutual portfolio, renovate and sell them for a profit. The capital for the purchase of the loans came from Prudential’s Social Investment Fund.