“We thought that the only way to achieve large-scale impact was to build large commercial enterprises that could generate enough cash to support both organizational growth and market-level impact. But as we began investing more heavily and more directly in early-stage companies that targeted less advantaged populations in emerging markets, we began to notice the complexity of these market segments. Again and again, we saw phenomenal entrepreneurs who were developing innovations with transformative potential – but many of them needed more patience and more upfront capital than a commercial investor would typically provide.”
From “Across the Returns Continuum,” SSIR, by Matt Bannick, Paula Goldman, Michael Kubzansky & Yasemin Saltuk, Omidyar Network
Amidst a steady stream of hyperbolic, content-free puff pieces all heralding that the impact investment industry has gone “mainstream,” Omidyar Network’s recent article (excerpted above) in the Stanford Social Innovation Review, “Across the Returns Continuum,” is an honest and nuanced treatise outlining their strategic framework. It is a must-read for any investor or philanthropic funder that seeks to develop a serious strategy around investing for impact.
Those of us actively allocating capital to fragile enterprises in developing markets recognize that those people who promise comfortable market-rate returns while solving global poverty are the equivalent of diet gurus promising that one can lose weight while eating limitless amounts of chocolate cake. As former Omidyar Network India Managing Director Jayant Sinha (now Indian minister of civil aviation) said on stage at the recent India Impact Investing Conclave, “Do not kid yourself that this is commercial investing, you are here to deliver impact.”
Yes, we certainly acknowledge that there are numerous ESG-oriented public equity and bond funds, as well as U.S. and European focused private equity and credit portfolios geared toward generally responsible and beneficial companies that are delivering perfectly solid returns. We get it. We are investors in many of them. If that is the entirety of your intended scope of impact, then mission accomplished.
However, for those with the flexibility and fiduciary responsibility to pursue direct impact in truly marginalized and underserved regions and communities, it’s necessary to grapple with the reality that these contexts often require concessionary rates of return, an appetite for a range of risks (geopolitical, currency, security, etc.), as well as a need for creative structures and patient timelines. We find it unhelpful when advisors, fund managers and even asset owners declare that you can have it all, when the reality is that it depends on what “it” is.
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