Thursday, December 09, 2010

Impact Investing: Challenges and Opportunities

This story originally appeared in Beyond Profit on December 3, 2010. Click here to subscribe.

Earlier this week, a report by J.P. Morgan and the Rockefeller Foundation declared impact investment a new asset class—a remarkable development in the lifecycle of this industry. What does it mean for social enterprise?

On November 29, J.P. Morgan and the Rockefeller Foundation released a report that will likely serve as a turning point in the development of impact investing. The report, which assesses expected and realized returns of more than 1,000 impact investments, estimates that the industry presents an investment opportunity between US$400bn and US$1 trillion with profit potential between US$183bn and US$667bn. Importantly, the report declares impact investment an asset class which provides a strong indicator to investors who may have shied away from social investing in the past to reconsider this emerging investment category.

The declaration of impact investment as an asset class functions as an on-ramp for investors eager to find the “next microfinance.” A recent article in Forbes estimates that microfinance comprises 50% of the total impact investing market. Within the social enterprise sector, microfinance (not withstanding the current crisis in India) has demonstrated to many investors the role capital can play in a for-profit investment and what that investment can achieve in financial and social returns.

Read more here.

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