With impact investing on the rise, the Global Impact Investing Network (GIIN) has published a new report highlighting a range of strategies investors can employ to strengthen their ability to exit impact investments in a way that meets liquidity objectives while continuing to promote positive, sustainable outcomes.
According to GIIN’s 2016 Annual Impact Investor Survey, more than 80 percent of impact investors believe that they have a responsibility to try to ensure continuity of impact after exit. GIIN’s latest report, ***Lasting Impact: The Need for Responsible Exits***, provides investors with a roadmap to fulfill that responsibility and ensure long-term impact.
Through over 30 interviews with investors and entrepreneurs, the report highlights the strategies investors employ throughout the life of their investments — pre-investment, at the time of investment, during the investment, and at the time of exit — to ensure the sustainability of the impact they strive to create.
Lasting Impact reveals that prior to investing, impact investors seek to understand whether impact is deeply embedded in company business models or operational practices and the likely growth trajectory of the business that is consistent with maintaining these practices. At the time of investment, investors often seek alignment with co-investors and factor lasting impact into the structure of their deals; aspects such as time horizons and repayment conditions often influence investee strategy and growth expectations in ways that may affect sustainability. During investment, investors work with investee company management to instill policies and practices that ensure positive impact continues over the long-term.
A new approach to business ...
Join us as we dig deeper into the implications of the Business Roundtable's redefinition of the Purpose of a Corporation — and how it could inform the future of capitalism — at New Metrics '19, November 18-20.
At the final stage — the time of exit — investors consider how their departure decisions will affect impact. These decisions can include the timing of exit, whether to retain investee management and finding buyers aligned with the investee’s mission.
The report includes case studies that provide in-depth examples of responsible exits from impact investments. Case studies profile Adobe Capital’s exit from a natural gas conversion company, Lok Capital’s exit from a microfinance institution, Beartooth Capital’s sale of ranchland, and LeapFrog’s exit from an insurance provider.
“Impact investing has huge potential to generate positive long-term outcomes for society and the environment,” said Abhilash Mudaliar, Research Director of GIIN. “But investors need to have the confidence that they will be able to exit responsibly. There are many more exit approaches to meet financial objectives and ensure sustained impact post-exit than investors may be aware of. This report should provide impact investors with proven strategies that they can use to exit their investments in ways that won’t jeopardize the impact they seek to create.”