What is Impact Investing?
Impact investing has been defined by the Monitor Institute as:
Actively placing capital in businesses and funds that generate social and/ or environmental good and at least return nominal principal to the investor, in many cases, offering moderate to market rate financial returns.
Some characteristics of the impact investing marketplace:
- projected that this asset class will grow to $500 billion globally by 2019
- difficult to estimate the baseline for impact investing
- In the US, socially responsible investment (SRI) funds total $2.71 trillion of a total $25.1 trillion marketplace
- core SRI in Canada: $54.2 billion in assets invested in 2008
- mission related investments (MRIs) and program related investments (PRIs) are one sub-class of impact investments. Community investing – which includes PRIs and MRIs, as well as community development finance institutions, community development banks, and community venture funds has total assets of $25.77 Billion in US (2007)
- best estimate is $50 billion in 2009
Example: Calvert Community Investment Notes
- allows investors to select a return of 0% to 3% over a term ranging from one to 10 years
- structured as an Intermediate Term Note, with security enhancements (net assets, loan loss reserves and subordinate loans and guarantees) of 15% of risk-weighted assets (essentially, non-cash assets) and are much like a bank’s Tier 1 and Tier 2 capital structure
- available to more than 400 broker dealer firms around the country by Incapital. Technically, one holds them to maturity, but Calvert Foundation has always afforded for early withdrawal to date at any time
- Calvert lends its capital from raised through their Community Investment Notes to small business community and housing development groups to help create economic opportunity