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A casual reader of international news might assume that New York's big event two weeks ago was US President Barack Obama's maiden speech to the UN. Rather, it was the formal launch of the Global Impact Investing Network (GIIN), a platform important enough to bring together Bill Clinton, JPMorgan, the Rockefeller Foundation, Al Gore, Bill Gates and a small group of other institutions.
So what is GIIN? And what is "impact investing"?
The second question first. Impact investing is the term given to a new class of investing that generates a financial return alongside a social or environmental benefit. The GIIN website describes it as driven by "the shared conviction that creative investments can play a crucial part in addressing social and environmental challenges. This investment interest is sparking the emergence of a new industry that operates in the largely uncharted area between philanthropy and a singular focus on profit-maximization (emphasis mine)".
How big can impact investing get? A report by the Monitor Institute, the research arm of Monitor, a consulting firm, suggests that impact investing could grow to $500 billion within a decade.
For some, impact investing is just the latest jargon in the social change arena. Various terms have been coined to capture the complex range of actors and motivations in this space - social entrepreneurs, corporate social responsibility, triple bottom line, social markets and so on. But while each of these has merit, what was missing was a coalescing force that could pull these energies into a "sector".
Much like the origin of planets, the hybrid social change space has witnessed a whole lot of gas and dust, looking to cool and coalesce around a core idea that can then exert an increasing gravitational force to attract more gas and dust. The key condensation criterion is the ability to create a common grammar for diverse players to come together and have conversations. Measured on this scale, "impact investing" seems a likely winner.
To the first question, then. GIIN has been launched by a small handful of institutions with the intention of creating coherence in this space. Among the key activities that GIIN will take up is the creation of a scoring system called IRIS - Impact Reporting and Investment Standards. When completed, IRIS will provide a common framework for measuring social and environmental impact of investments, thereby allowing the various stakeholders to come together. In other words, the grammar.
There are other contenders, however. Two weeks ago, San Francisco saw the second annual conference on "Social Capital Markets", with 1,000 delegates from at least 30 countries. And in a few months, Cornell University will host a "Net Impact" conference, which will, in its words, "bring together the players behind the sustainable global enterprise movement, including sustainability and corporate responsibility practitioners, social entrepreneurs, and non-profit leaders". Sounds like a lot of competing forums for condensation work.
The big players, however, are beginning to cast their lot. Jamie Dimon of JPMorgan Chase (the only banking chief to emerge from the financial crisis with a larger halo) said: "We're very excited by the momentum behind the GIIN -(it) can provide the framework and catalyst to help evolve from a primarily fragmented industry to a mature market."
Irrespective of which of these networks succeeds, the essential thread holding these players together is what is really exciting: the quest for a new way of thinking about markets and their intersection with social issues, the acknowledgement that the world we live in has too many challenges to be ignored, the possibility of giving meaning to one's work while pushing the boundaries of innovation and networks of knowledge.
And, in all this excitement, what of India? One of GIIN's directors is Pawan Mehra of Intellecap, a firm focused on social enterprises. His presence is symbolic of India being one of the hotbeds of action for the impact investing space. Our importance stems from a number of factors: We face enormous social challenges, many of which would be very well served by the principles of impact investing; we have a large and growing pool of entrepreneurs; and, we have already seen proven examples of scaled-up ideas that have worked in the hybrid social/markets space.
The potential of impact investing doesn't mean that there are no concerns-indeed, this emerging field is throwing up many new questions even as old ones get answered-about the limits of greed and ambition as motivators of social change; about the relevance of ethics and values; about the thin-but important-line between profit and profiteering.
These questions will need to be answered as the field evolves. And here, networks such as GIIN can help by not just getting the grammar right, but also the spelling.