It’s hard to believe that impact investing is now a fifteen-year-old investment practice that has surpassed $1 trillion in assets under management worldwide last year.

We are just beginning to see the early maturation of a long-standing dream and movement to have capital serve just, regenerative, and restorative social and environmental purposes.But how does that help mainstreet economies and underserved communities? Are we really there yet?

Some of the more promising growth in impact investing has been from including diversity, equity, and inclusion as a practice, not just a program. After the death of George Floyd in 2020, US private corporations pledged $50 Billion to support funds designed to bring more equity and justice to underinvested communities and spur BIPOC ownership and governance.

This measure of impact is part of a more extensive set of standards that will help ensure common good social and environmental impact and grow the amount of impact capital available long-term.

So, why are these standards and measures important?

Impact investors must be able to make meaningful comparisons and demonstrate true impact in the assets, projects, and causes they support. Think of this as a way to measure social impact return on investment. Some of the leading industry standards for classification include The United Nation’s 17 Sustainable Development Goals (SDGs) which helps codify the type of target impacts. Another tool is IRIS+ which is a side-by-side comparison of common impact data metrics that provides streamlined, practical, how-to guide to impact investors; made available by Global Impact Investing Network (GIIN).

We have also seen more philanthropic, government and private investments targeting climate change initiatives through funds and capital products to help reduce the impacts of global warming and build a smarter infrastructure with a mix of renewable and alternative energy sources shifting away from an extractive carbon-based economy.

Last year, Green Bonds were the fastest growing asset class among impact investing. The Connecticut Green bank was able to raise $80 million in “liberty green bonds” backed by their portfolio of solar loans as security. New public-private partnerships between Green Banks and private sector impact investors will spur the greening of our country’s infrastructure,thanks to a $27 billion investment in the new federal Green Bank created by the Inflation Reduction Act with oversight by the Environmental Protection Agency. Ten percent of these funds are reserved for underserved communities and technical assistance to help those local governments to establish their own public-private partnerships for green infrastructure.

So, what does this mean for your local communities and small businesses?

1. More options and opportunities. Impact capital is beginning to level the playing field for under-resourced communities. More mission lenders, community-based funds, and public-private partnerships will invest in BIPOC and distressed communities. However, these resources will require a commitment to the fund’s purpose and promise.
2. Get to know the language and standards of practice that impact investors are learning. Ask yourself: “Who can this help?”. Align your common good businesses, projects, and causes with one or more of the metrics that get investments. Be proactive in adopting these practices for equity, inclusion in business and philanthropy.
3. Educate yourself. If you are interested in learning how to access impact investments to grow your common good business, social enterprise, or community project, check out our Investment Lab Cohorts and other learning resources available at wvscourses.com.

What does impact investment mean to you? How could it make a difference in your community?