*This post was originally published on http://www.socialfinance.ca on Aug 26, 2011
I had the privilege to speak with Antony Bugg-Levine, Managing Director of the Rockefeller Foundation, Board member of the Global Impact Investing Network and one of the thought leaders and influencers in impact investing. He leads the Foundation’s impact investing team that works to harness the capital and expertise of investors making “impact investments” that generate a social and financial return. This in an insider interview to his book, Impact Investing: Transforming How We Make Money While Making a Difference. This book was co-authored with Jed Emerson, an executive atImpactAssets, Senior Advisor with the Sterling Group (Hong Kong) and a senior fellow with the Center for Social Investing at Heidelberg University. In our conversation, he shared key highlights in the book as well as his hopes for the book. Note: This interview is being posted in three parts; stay tuned for Part II and Part III over the next few days.
1) The premise of the book is on impact investing. How do you intend for people to read this book? What mindset should people be in?
Firstly, this book is not a ‘How-to’ guide for practitioners or investors who are looking for simple guidelines on how to construct an impact investing portfolio. There are other guidelines or resources that are available for that. We step back from the day-to-day work of constructing a portfolio of impact investments, but instead ask the more fundamental questions about how impact investing, as a new approach to addressing social problems and deploying capital, is disrupting our existing systems. The book is constructed in two parts.
Part 1, The Terrain of impact investing, takes a quick overview of impact investing’s historic and current role in the following sectors
- Accelerating the growth of microfinance
- Supporting the international development agenda
- Helping to build the social enterprise sector
In each of these cases, we examine how impact investing is generating opportunities as well as a set of challenges and questions.
In Part 2: The Implications of impact investing, we examine the fundamental systems around which our society is organized and how, one after another, they are going to need to change to accommodate the aspirations of impact investing and to take advantage of the potential that this field offers.
This is really the core of the book: In our society, especially in the West in the past 50 years, we have organized our society around two fundamental pillars that support our current systems:
- The only way to solve a social problem is through philanthropy and the government
- The only purpose of investing is to make money
If you accept these two fundamental pillars, then the system we currently have makes sense, and will support your activity. However, if you believe in the fundamental premise of impact investing, that we can integrate our investment and our social purpose, then these systems do not work. So in the book we highlight how impact investing is challenging various systems to change: the legal system, the philanthropic system, the system by which we develop leaders, our capital markets and our systems for measuring value.
We provide a framework for thinking about the new systems we will need to build. We think what is really exciting about impact investors is the opportunity to build a new set of systems to realize the great potential of impact investing.
However, we are not overly prescriptive partly because we don’t claim to have all the answers. We do not know, between Jed and myself, exactly what these systems need to be, but there are clear guidelines on how as a community, we have to engage on this.
2) What do you hope this book would inspire people to do? What is the next step? Spread the word? Become actionable? Start building systems?
Everyone has a different role to play. Every human system in which we live is the result of both intentional decisions we make and unintentional actions we take. We believe that anyone reading the book has the ability to participate.
If you are a student, you could challenge institutions in which you are learning to not fall back on easy stereotypes, but rather recognize the great potential in combining social impact and investing.
If you are fortunate to be a holder of wealth, you could read the book and challenge your wealth advisor to not give an easy answer that rejects how you can put your investments to work towards a social purpose.
If you work in the financial services sector, we hope you consider putting your skills to work to build a more efficient social capital market.
At the same time, we are not so naïve as to think that reading this book would inspire many people to change their current life path — and we don’t think you need to. In the book, we profile some inspiring heroes who have stepped out of mainstream work to pioneer new institutions and approaches, including Canadian based Sarona Asset Management and Social Capital Partners. However, we don’t believe that impact investing is a domain only for radicals.
We recognize that in order to be truly powerful, impact investing needs to be accessible to regular people as well. We emphasize in the book that we don’t want to perpetuate the idea that only the most revolutionary or entrepreneurial people have a right to be part of impact investing. Leadership is going to come in many forms, and not only from the charismatic individuals who start new enterprises or quit their jobs. Instead, we anticipate it will come from the many more thousands of people who can embrace impact investing at whatever scale they are able to.
3) What do you think this field is picking up momentum only now, given that it has been around for years? Why do you think people are realizing the importance of this space so late?
Impact investing has been going on for decades — but the coining of the phrase “impact investing” around four years ago has allowed different communities to share their aspirations under a common language and to come together more visibly.
In the book, we talk about this phenomenon. Many people are increasingly frustrated with business-as-usual approaches. There is a growing number who do not think that the model of philanthropy their parents adopted is enough. At the same time, we talk about a new generation of people who have been raised within the social enterprise movement and seek to integrate business and social purpose throughout their career, not in sequence.
In addition, the recent financial crisis has shaken people’s confidence in old approaches. Governments, also, are increasingly intent on figuring out how to do more with less, and are mobilizing impact investing capital to complement government spending.
4) If you had one message for this community, what would it be?
Let us all go from rhetoric to action. We need to see real deals proliferate that generate social impact and financial return. We also need to recognize that we are part of a longer-term movement to change the fundamental systems and mindsets that currently limit us.
5) What was your favorite aspect in working on this book?
It has been a great honor and intellectual privilege to work with my co-author, Jed. He’s a real visionary. By its nature, impact investing will be best when it brings together people from different perspectives, even if that is not always the easiest and most comfortable way to work. For me, working with Jed was a real-world manifestation of this idea—we brought different perspectives and experiences to the process and challenged each other to both broaden and sharpen our ideas. I hope the result is more interesting and insightful for our readers.
Antony Bugg-Levine is the co-author, with Jed Emerson, ofImpact Investing: Transforming How We Make Money While Making a Difference (Wiley, 2011) which will be released in early September and is available now for download as an e-book. The opinions expressed in this article do not represent the official views of any institution with which he is affiliated.
Photo credit: Jai Catalano