Business & Philanthropic Leaders Pledge $1.5 Billion in Impact Investments

In the US, 20 private-sector investors have committed more than $1.5 billion in new impact investments, on the heels of a new report on how the government can partner with investors to unleash new capital and use private money for public good.

A roundtable on impact investing held at the White House saw senior Administration officials meet with more than 20 private sector investors answering President Obama’s call to action on the issue.

A White House statement says the investors committed to make more than $1.5 billion in investments that intentionally generate sound financial return as well as measurable social or environmental impact.

At the same time a new private sector report proposed policy interventions it said could help grow the global impact economy significantly.

The private sector U.S. National Advisory Board to the Social Impact Investment Task Force released its report called Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing – and Why It’s Urgent.

The Advisory Board, which participated in White House event, included 27 leaders from across the investment, business, foundation, academic, and Not for Profit sectors.

The report said that for impact investing to reach massive scale—bringing private capital to bear on our greatest problems—it would require a more intentional and proactive partnership between government and the private sector.

“This report highlights strategies for how the government can partner with impact investors to unleash new capital, talent, and energy for social, economic, and environmental good,” it said.

The report’s recommendations include:

• Remove regulatory barriers to unlock additional private impact investment. Innovative impact oriented businesses are in need of investment, and certain regulatory barriers stand in the way—leaving much private capital on the sidelines. For example, the IRS could further clarify and refine its rules about foundation investments in for-profit enterprises to help fill the funding gap between grants and commercial capital. This would be cost neutral.
• Increase the effectiveness of government programs. Government agencies frequently lack the flexibility and range of tools needed to achieve social and environmental goals. For example, Congress could revise the longstanding investment restrictions under which the Overseas Private Investment Corporation operates, so that it could participate in a wider range of impact investments, reinvest its proceeds for portfolio growth, and develop next-generation financial instruments and models. These policies would increase the environmental and social impact of programs while lowering costs or potentially increasing revenue.
• Provide incentives for new private impact investment. Some markets need a push to get off the ground. By putting the first dollar on the table, government can attract private investment to support important social and environmental goals. More federal agencies should have the authority to replicate successful impact investing programs, such as the Community Development Finance Institution (CDFI) Fund, which marshals $20 of private capital for every $1 of federal funds invested. These policies may increase agency expenditures, but they often repay their costs over time or attract considerable private funding.

As part of the June 2013 G8 meeting, an international effort was undertaken to explore the possibilities for impact investing to accelerate economic growth and to address some of society’s most important issues.

The United States National Advisory Board was formed to focus on the domestic policy agenda. The group’s purpose is to highlight key areas of focus for US policymakers in order to support the growth of impact investing and to provide counsel to the global policy discussion.

Firms such as Prudential and the Capricorn Investment Group; foundations such as the McKnight, Ford, and MacArthur Foundations participated in the White House discussion on new impact investments.

The White House statement said as a result the Administration will take a number of significant steps to encourage even more investors, foundations, businesses, and entrepreneurs to embrace the impact investment model.

For more information on all of these commitments, see the Background on the White House Roundtable on Impact Investing.