Impact investments offer a range of returns, from risk-adjusted, market-rate returns to concessionary returns. Not all investors aim for their impact investments to achieve top or market-rate returns. Similarly, market-rate solutions are not feasible across all impact investment opportunities. Below-market-rate impact investments will be out of contention for some LPs, and suitable for others. Even the best ideas have some percentage of unattractive results across the spectrum of probable outcomes. Further, even the best investors or investment ideas are subject to market vagaries, which can be unforgiving and unpredictable.
Impact investing has been referred to as a houseboat, neither a good house nor a good boat. The retort has been that impact investing is like brunch, better than either breakfast or lunch. Impact investing has moved beyond the fragmented condition in which it formally emerged in 2008 when asset owners struggled to find asset managers and vice versa. Moreover, the ecosystem in which asset owners and asset managers can convene, such as the Five Funds Forum held by Big Path Capital, has widened. However, instead of viewing the amount of capital directed toward impact investments as the proxy for success, the practice of impact investing has a brighter future when social and environmental success is as coveted as strong financial returns.
Andrew Siwo is an investment director at Colonial Consulting, a New York-based investment consultancy to endowments and foundations. This content represents the views of the author. It was submitted and edited under Pensions & Investments guidelines, but is not a product of P&I's editorial team.