Open the Spigot: The Way We Think About Impact Investing is Too Narrow

4 February, 2019

Original Source: NextBillion 

A resounding cry heard across many impact investing reports, articles and blogs is that one of the biggest challenges facing the impact investing community is deal flow. The Global Impact Investing Network’s (GIIN) annual report for 2018 noted a key barrier facing the impact investing community is the “limited number of investment ready businesses.” A recent article in Entrepreneur magazine noted “since impact investing, as an industry, is relatively ‘new’, the supply of investment opportunities offering impact, scale, and financial return often falls short of demand.” And the list goes on.

While now a commonly accepted diagnosis, this perceived lack of deal flow is actually the result of a very narrow definition of impact. The issue is not that there is a lack of investible companies, but rather the industry’s detrimentally narrow definition blinds investors to companies that are creating impact in other industries and geographies. We need to broaden this definition by closely analyzing the effects that companies’ products and services have in relation to the eradication of a given social/environmental problem.

Though faulty, this perception is a natural byproduct of the history and rise of impact investment.

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