The Social Impact Investment Taskforce, created by the governments of the G8 in June 2013 to nurture a global market for impact investing, has released eight high-level recommendations devised by government and private sector experts from across the G7, EU and Australia to increase impact investment worldwide.
The report, The Invisible Heart of Markets: How Impact Investing is Harnessing Innovation and Capital for Public Good, represents one of the most comprehensive initiatives to date to define what is needed from all stakeholders in the effort to advance the tremendous potential of impact investment to improve society and the environment.
The eight recommendations include:
- Set measurable impact objectives and track their achievement.
- Investors to consider three dimensions: risk, return and impact.
- Clarify fiduciary responsibilities of trustees: to allow trustees to consider social as well as financial return on their investments.
- Pay-for-success commissioning: governments should consider streamlining pay-for-success arrangements such as social impact bonds and adapting national ecosystems to support impact investment.
- Consider setting up an impact investment wholesaler funded with unclaimed assets to drive development of the impact investment sector.
- Boost social sector organizational capacity: governments and foundations to consider establishing capacity-building grants programs.
- Give Profit-with-Purpose businesses the ability to lock-in mission: governments to provide appropriate legal forms or provisions for entrepreneurs and investors who wish to secure social mission into the future.
- Support impact investment’s role in international development: governments to consider providing their development finance institutions with flexibility to increase impact investment efforts. Explore creation of an Impact Finance Facility to help attract early-stage capital, and a DIB Social Outcomes Fund to pay for successful development impact bonds.
“This is not about increasing or reducing public expenditure, but helping government to benefit from innovation and private sector capital in order to achieve more impact with the money it has, “ said Sir Ronald Cohen, Chairman of the Taskforce. “In driving the achievement of impact, social impact investment harnesses the forces of entrepreneurship and capital and the power of markets to do good. It brings the invisible heart of markets to guide their invisible hand.”
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The US National Advisory Board (NAB) on Impact Investing was initiated at the June 2013 G8 meetings in London to explore how impact investing can accelerate economic growth and solve the world’s most pressing social challenges. At that time, the Social Impact Investment Taskforce was created and charged with recommending policies to accelerate impact investing, establish a common global approach for measuring social outcomes, and encourage greater engagement across foundations, institutions and private investors with input from the G8 countries.
Also in 2013, five major organizations active in the social investment market in the United Kingdom — the Big Lottery Fund, Citi, Big Society Capital, the City of London Corporation and the Cabinet Office — came together to launch the Social Investment Research Council (SIRC), with the aim of generating “powerful and practical insights for the benefit of social sector organizations and investors.” The research body is looking to maximize the benefits for socially motivated investors by enhancing knowledge within the sector.
Another report with global ramifications was released this week by PwC, which warned global economies must cut their energy-related carbon emissions for every dollar of GDP by 6.2 percent — more than five times the rate currently achieved — every year from now to 2100 in order to to limit global warming to 2°C. Scientists agree 2°C of warming is the limit needed to ensure the serious risks of climate change impacts are avoided worldwide.