What is Social Impact Investing?

How can we maximize our ROI by investing in social projects?

Dave Bradley
Investment Manager (Financial Advisor) in North Charleston, SC

What is Social Impact Investing?
May 29, 2016

Recently, one of my esteemed colleagues from Boconni University suggested that we become involved with Social Impact Investing which requires all stakeholders (everything including the investment managers and the investments themselves) to be held accountable for the beneficial changes (and avoiding failures) that their passions seek to accomplish. This particular group is engaged with Private Equity & venture Capital (PE&VC). This is a very exciting field to be involved with. So, I am sharing some of the concepts with you while expressing them within a more user friendly dialogue.

Keep in mind that these five concepts (see diagram above) are very broad strokes.Many firms (funds) are specialized in just one of these or perhaps even a sub-set of one. The choices are defined by several factors including stakeholder processes (knowledge, experience, relationships), financial returns ($$ profits, increase in value of the project), social impact (from the environmental level to society as a whole), and how they identify with it -through reciprocity, reputation, and/or the satisfaction they receive.

I.What will you invest?

Decide what kind of ROI you seek (process, financial, identify, social). If you are seeking a financial investment, will you accept lower than market returns by putting social impact first? Take an inventory of your available resources that will maximize the beneficial impact of your stakeholders time, reputation, and assets (cash & non-cash assets).

II.What problems will you address?

Evaluate the investment opportunity. Clarify the methods such as; new product development, addressing a social problem, networking, technical support, promote greater understanding, legislative changes, etc. Identify your target market such as; the geographic location, people or groups, and stage of the problem. Look at the breadth of your investments such as; the range of related or unrelated causes, using multidisciplinary approaches to address the same problem, and focus your approach to the problem itself. Always ask if this is a good fit within both accountability and financial responsibilities of the stakeholders. Also, Decide the structure (grants, loans, philanthropic, social bonds, angel/VC investing, etc.), organization (non-profit, foundations, social enterprise, corporate social responsibility, investment funds, etc.), and the role of investors (contributors, contractors, advisors, collaborators, etc.) for the most beneficial impact.

III.What steps will you take?

Clarify your mission (purpose) and goals to align within your efforts. Create your theory of change explaining how your actions will lead to outputs (deliverables). How will these outputs lead to outcomes (immediate effects that are needed to achieve your goals)? Validate these by engaging with stakeholders-especially beneficiaries and their staff or organizations that are closest to them.

IV.How will you measure success?

Identify and implement practical solutions for all the barriers. Decide constructs to measure. Why are you measuring? Choose appropriate measures. Evaluate & monitor these using meaningful, representative & valid statistics which you can visualize. What data should you use? What about controls? Review approaches & their classification to suit your needs. Decide which impacts are most important and what specific information is needed to manage these. How do you plan to use this information & their drivers? Which represent the most significant? Develop & deploy your system for efficiency.

V.How can you increase impact?

Decide when you’re ready to amplify (expand) and choose your best strategy using innovation, scaling, and/or leveraging your resources. Regularly scan your external & internal environments for opportunities.Identify assets you can use for impacts.Determine which can be leveraged through other organizations.

Conclusions

You’ve already chosen to devote your time, money, and other precious resources to help others by promoting positive social & environmental changes. Now you’re making the decision to manage your investments in new ways to create the maximum possible benefits.Virtually all those stakeholders involved with social impact want to ensure that their investments make a difference.This does put pressure on investors to deliver. It also puts more attention toward providing support & resources that can help deliver impact.

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