By Tom Holland, Founder and CEO of Maximpact
The impact investing sector is reaching a critical moment in its evolution.
It’s expanded hugely in the 18 months since Maximpact came on the scene, attracting attention from world leaders, governments and mainstream investors.
New funds are launching almost daily while more mature funds are developing sophisticated investment philosophies, models and methodologies.
All this is healthy—it’s what we’re all working for. But to continue this healthy growth, impact now needs several key things:
Despite the growth in the sector, many parts of it are still working in separate silos. Activity is up, more capital is invested, but the sector is still very fragmented. Many impact organizations don’t connect with the wider impact community or take advantage of the many possibilities it offers. There’s nothing wrong with specializing in your area, but impact investors need to adopt a big umbrella approach and do more to collaborate across organizations, regions, sectors and disciplines.
There are lots of different impact investing models out there now. Instead of spending our time debating definitions, we need to embrace this diversity and use it to our advantage. Quality is important but we shouldn’t assume rigid standardization is the only way to achieve it. A wide range of approaches gives investors options and offers multiple ways to tackle problems using impact capital.
For impact fund managers, sourcing impact deals is still a very time-consuming process. A fund manager may have to review 100 deals to find 2-3 that are right for him—that’s highly inefficient. At the same time, an impact entrepreneur may have to take her pitch to many, many funds before she finds finance. This is a huge amount of time and energy that could be used building the business and doing good for the planet. The sector needs to find ways to make this matching process more efficient so that more deals can be done.
The final thing the sector needs is, of course, more money. We’d all like to see increased amounts of capital invested in the right places—and by the “right places” I mean in businesses that produce results for a triple bottom line. It isn’t just large cash infusions that are needed, but a whole range of different levels and types of investment by individuals as well as institutions. Crowdfunding will play a role, making it possible to deploy very small amounts of capital for good, so will large-scale investing by governments and major financial institutions.
The points on this wish-list are interdependent. Only by making deal flow more efficient—and ensuring diversity as well as quality across the impact sector—will we be able to attract the volume and variety of capital that will really make a difference. Collaboration, the first item on my list, holds the key to resolving the issues around the others: efficiency, diversity and capitalization.
At Maximpact we try to practice what we preach when it comes to developing sector capacity and this starts with a commitment to collaboration. Our platform is designed to encourage collaboration among users and we welcome opportunities to work with other parts of the sector ourselves—in fact, we will be announcing some exciting new collaborative and innovative partnerships and alliances in the near future.
There’s still much more to do, but we are looking forward to seeing how the developing sector meets its new challenges—and to playing an active role in finding the solutions we’re all looking for.
On February 25, 2014
in Impact investing, Interview, Opinion.