Impact investing has become an important and mainstream strategy for a broad array of institutional investors. As the debate concerning "impact vs. return" evolves, the specialized talent necessary to create and sustain a viable impact investing strategy requires a new generation of leadership. The war for talent in this sector will continue to intensify, as firms continue to compete for the best investment leadership.
With the current value of global impact investments estimated by the Global Impact Investing Network to be more than $500 billion, these massive (and growing) pools of capital need unique and differentiated talent to effectively manage and deploy these funds. Global investors in all asset classes are demanding credible impact investment strategies, and this trend is likely to continue and accelerate.
The term impact investing is as misunderstood as it is omnipresent in both the social impact and investment management worlds. While it can convey radically different meanings to different constituencies, its current and growing prevalence within both philanthropic and for-profit communities is undeniable. Impact investing has clearly moved away from its binary early days when it was considered a fringe or niche area for both asset managers and philanthropies that historically focused either on grant-making or on generating market returns.
Instead, both sides have steadily begun to move toward the middle of the spectrum, recognizing that social impact and financial returns are no longer mutually exclusive. Global investors are demanding strategies and vehicles that generate sustainable social and environmental impact alongside meaningful financial returns. Meanwhile, philanthropic funders recognize that traditional giving and aid-based models need to change as the issues they seek to address persist and evolve. The United Nations, too, is calling for significantly more private-sector involvement in order to reach the sustainable development goals by 2030. The public-private push toward a more defined and measurable approach to impact investing is relentless and will only intensify in the coming years.
Despite the pervasive focus on the growth of impact investments, relatively little data exists on the evolving profiles of the leaders who are driving this sea change in global investment management. To address these human capital requirements, Russell Reynolds Associates conducted a thorough and proprietary analysis of 76 leading global impact investing organizations, to determine where they are looking for and finding their leadership. Our findings revealed the following:
- Impact investors are significantly more gender diverse than the broader asset management industry — almost 40% of senior impact investing decision-makers are female vs. 4% within asset management overall.
- Cross pollination of talent back and forth between impact-first and return-first organizations is limited, but represents a massive opportunity for both sides.
- There is a paucity of senior and experienced leadership with portable track records in this space. The next generation of impact investing leadership is being created right now and in real time.
- North America is a talent base, as 3 out of 4 senior leaders hailed from the continent.
- Advanced education is a staple as only 21% of senior leaders hold just a bachelor's degree.
These findings are based on a review of the profiles and backgrounds of all senior leaders making investment decisions and classified their organizations into three categories: impact-first firms that prioritize impact over investment, return-first firms that prioritize return over impact and those we are terming balanced-approach investors, which sit somewhere in between.