The hype around Black Friday is building. It's reaching its annual fever pitch. Let's compare it to something much less important to americans like "global warming", shall we? Here we go:
Note how, as time passes, we become more interested in Black Friday and less interested in global warming.
How do you resist, if not the day itself, the next few weeks of crazy consumerism that is relentlessly plied?
This past week I continued supporting the team with the same project, where we were screening over 100 entrepreneurs to see which will be the 10 enterprises that will receive an intensive academic training paired with a 6 month period with sessions which cover varied topics that range from marketing through business models. The entrepreneurs will also receive help on how to create, fund and implement a business growth plan and form a network of contacts.
I really enjoyed talking with the entrepreneurs and getting to know the diverse business models and ideas behind their enterprises.
As 2012 approaches its final month and President Obama is elected for another 4 year term, it is only natural that many people are contemplating the future and what it will bring. For those involved in social entrepreneurship and impact investing, the big question is “what does the future hold for the emerging field of social business?” Last week marked the 5th annual Global Entrepreneurship Week, a UK based initiative to promote entrepreneurship. The campaign had a presence in 115 countries and got people thinking about the future of social entrepreneurship. The month of November will end with Bill Drayton, founder of Ashoka and the man responsible for the term “social entrepreneur”, giving his predictions on the future of social entrepreneurship in an interview with David Bornstein.
In anticipation of Drayton’s predictions, many in the field of social business have taken it upon themselves to make their own predictions. In a recent article in Forbes, Eli Malinsky, executive director of the Centre for Social Innovation, got the ball rolling by publishing his own predictions and started a conversation on twitter #FutureSocEnt. In the spirit of making predictions and speculating about the future, here are 4 of mine:
1. Widespread emergence of MicroConsignment Models (MCM): Microfinance and Microcredit have become widely used models of financial development and have inspired similar models such as that of MicroConsignment. Under this model, strategic partner organizations employ and train local entrepreneurs to sell health-care related goods and services (eye-glasses, water filters, cook stoves, solar lamps, etc.) to rural communities using a consignment mechanism (the partner organization covers the overhead costs and the local entrepreneurs ”borrow” the products until they are sold). The MCM was developed less than a decade ago in Guatemala by Greg Van Kirk. His company is known throughout the country as Soluciones Comunitarias and has proven to be scalable, replicable, and sustainable. There are a number of social entrepreneurs in the process of replicating the MCM model in a variety of health-care and technology related endeavors.
2. Impact assessment will become more formal and more important. As the competition grows between social entrepreneurs, impact investors will have many more options. These investors will become more critical and will demand transparency. As a result, formal assessments, ratings reports, and certifications will become the norm. The emerging leader in this field of analytics is B Lab, a non-profit that supports GIIRS ratings and B Corp certifications.
3. Hybrid Value Chains will grow in size and complexity. Gregory Dees, founding faculty director of CASE, defines these chains as “partnerships between nonprofit and for-profit organizations that help make markets for products that help the environment or serve the poorest of the poor in a constructive way” [1]. Instead of maintaining the traditional separation between non-profit, for-profit, and governmental organizations, I believe all sectors will collaborate and work together by pooling resources and utilizing a variety of talents to achieve common goals. Hybrid Value Chains are starting to emerge around the world and I predict they will grow and become more integrated and complicated as they work to solve increasingly complex social and environmental issues.
4. Growth and reliance on accelerator programs. Agora Partnerships, Village Capital, and the Unreasonable Institute run some of the largest and most well-known accelerator programs in which early-stage social entrepreneurship gain business development assistance and access to established networks of impact investors. As the field of social entrepreneurship expands and competition grows, impact investors will become more picky about where they place their investments. The accelerator programs mentioned above are very selective and ensure quality from the entrepreneurs who undergo their programs. I predict that as the graduates of these programs build successful business, impact investors will become more likely to enter these networks and focus their investments only on companies who have gone through accelerator programs.
As you come up with your own predictions for the future of social entrepreneurship, ask yourself: “What would the world look like if all entrepreneurs were social entrepreneurs?” [2]
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[1] http://www.caseatduke.org/documents/deesinterview.pdf
[2] https://twitter.com/Ashoka
Craft makers are common in Mexico. Their wide variety of textiles, pottery, leather pieces, etc. are enthusiastically searched by locals and foreigners.
This weekend I met Sonia, she lives in Pátzcuaro a small town in the state of Michoacan about 4 hours from Mexico city. Sonia sells beautiful sweaters, jorongos (ponchos) and shawls most of them hand made by herself. Actually, she is among the few craft makers still selling authentic work. But Sonia has a problem: she is the main source of support for her family. When I asked why, she said:
” there are no jobs for men”…”women here are the ones who usually support the family”…”we make our living from what tourists buy”…”if there are no tourists we do not eat”.
Unfortunately, for many craftmakers as Sonia, the best way for surviving is not the most appealing anymore. Although craftmaking provides unique pieces to wear or use, the disloyal competition of industrial products makes it very difficult if not impossible for craft makers to make a living with the miserable profit they obtain from the products they make.
For instance, take Sonia. She spends nearly 12 hours finishing one sweater. If we consider the base salary in Mexico, she would deserve to earn about $12 dollars for her work. In addition, she would need to cover the cost of yarn which according to my own estimates should be about $20 for 600 grams of wool. There you have a cost of at least $32 needed to cover basic expenses for producing the sweater.
And we end up with a sweater that can easily be found in stores as Macys for above $50 at regular price but that she is selling for only $25. A very good deal ah!. But she is loosing about $7 which obviously represents some of her own working hours and, probably, at the end she obtains a net profit of only $3 after discounting the cost of rent.
Why in the world would someone want to run a business like this? Because of need? Because of lack of alternatives?
According to Marta´s Turok book How to approach craftmaking (Como acercarse a la artesania) the way craftmakers have survived is by splitting their time between several jobs. In any case, modes of production that used to represent modes of life for entire communities have almost entirely disappeared with the appearance of serial production. People also have had to learn to leave behind the bondage with their traditions and costumes which many times were linked to their economic activity.
What can be done to support these communities??
Examples of socially responsible businesses working in this area in Mexico and other countries which are my favorites include the following:
Just a few facts about our impact on the environment that cannot be denied:
1. Oil is a non-renewable resource. Practically everything we do depends upon de availability of oil. No alternate source of energy has been found that can sustitute this resource without also depending on it for production.
2. Climate change is a reality which will cause places to disappear either due to flooding or droughts.
3. We all will suffer when this happens.
The question is what type of (near) future do big corporations envision for themselves given such facts? And countries? Why still these issues are not at the headlines of every major newspaper everyday?
Most probably Henry Ford didn´t even think about all this when he made mass production a reality. Did he ever realized the cost for the environment against the benefits of shortening distances (mile distances obviously) between people? Did he envisioned having an average of more than 2 cars per family and the great ecological footprint that this means?
What is true is that no matter the circumstances that made inventors in the past ignore environmental damage in the search for “progress” we should learn to rethink the effect that decisions can have when not taking into account the interconnections of our planet.
Moreover, we are in a truly urgent need for people proposing intelligent ways of living. People who search for sustainable ways of progress and who translate strong ethical values to the global stage.
Here is where the important role of social entrepreneurs comes in. Sustainable modes of life have to emerge at every corner of our world and need to be adopted by everyone. Will we do it ontime to avoid a collapse? Well, at least we´ll be better prepared for anything if we start envisioning and testing better alternatives now.
Last week was pretty busy, as I am supporting with the screening of entrepreneurs for a program. We need to go through over 100 applications, which is quite a task. The funny thing is that the most difficult part is scheduling phone interviews with entrepreneurs, as they always end up re-scheduling again and again. Although I am a Latin American, I never had the opportunity to work over here, so I guess I am now experiencing the Latin American working culture!
The attitude towards time is less rigid than among Europeans, which can be sometimes pleasant, but may also be a challenge when you have a full day! But I am really enjoying other habits such as the abrazos (embrace), which I think is the nicest form of greeting people.
List of Pueblos Mágicos:
This last week I have been working a lot with the accelerator’s analysts in a project in conjunction with a University and a bank. Its main objective is to promote social entrepreneurship helping promising enterprises grow, consolidate and develop through a training period and the deployment of capital.
I have been supporting in the filtering of the participating companies (which come from a broad variety of sectors) in order to determine the finalists. It is a very interesting activity as it gives you insight into very different industries and business models.
The conversations I am having with entrepreneurs for this matter have made me realiaze that in the past 2 months I have learned a lot! Being almost at my half-way point, I must say there has never being a dull moment, and I feel as if I am gaining lots of skills.
This week I had the opportunity to attend an event of iniciativa Mexico (iMx).
iMx started as a joint project of the most important media companies in Mexico seeking to promote and support citizen initiatives with true social impact. The project was launched towards the celebration of the bicentennary of the Mexican independence and the centennary of the Mexican revolution. It was seen as a way to bring up the best of Mexicans in face of the raising violence that prevailed in the country.
In 2010 and 2011 they received a total of 104,007 idea and project applications. About 100 projects passed to a second round and, after being evaluated by Ashoka, each year about $116 MMx were distributed among the selected projects.
The finalists of iMx were awarded capital to invest in their operations. In addition they were provided with periodic training to help them improve the management and operations of their organizations.
Being among so many citizens that are in the field working hard to generate a positive change in their communities was a humbling experience. They are common mexicans with an outstanding empathy for what happens around them.
I also had the opportunity to learn about the many challenges they face to keep their organizations going. Among them, the most commonly mentioned were resistance to change and economic strugless.
Even though the program was launched for all types of initiatives (for-profit and not-for-profit), I was surprised to see so many not-for-profit. Indeed only about 1 in 10 were for-profit organizations. As I was talking to a few of the NGOs that seemed to be able to generate a viable business model. They all seemed to be quite interested but, at the same time, afraid about the uncertainties faced with a for-profit model. Moreover, I perceived in them the conflict between doing good and being profitable.
In other parts of the world we´ve seen how some well known companies have struggled making this decision and others have opted for a hybrid model to better achieve their altruistic goals. What´s the best approach for organizations is there to be determined by each. In the mean time, in the mexican social environment, the existence of Bcorporations and L3C (low-profit limited liability company)s represents an opportunity for making money, attracting investors and addressing social issues that most probably will receive much attention in the coming years. Let´s see how well accepted these new models are and whether they can see the same or better growth compared to what NGOs saw in Mexico in the 80´s and 90´s. Right now only about 5% of mexican citizens participate in non for profit organizations which is very low compared to the 21% of participation overall seen in Latino America(1). The major causes seem to be a very poor civic culture supported by lack of mechanisms to make laws easy to implement (2).
(1)(2) Source: DIAGNÓSTICO DE LA SITUACIÓN DE LOS ACTORESSOCIALES QUE PROMUEVEN EL DESARROLLO SOCIAL. SEDESOL 2009. Mexican Government.
I am super happy for being back in my home country to live and work in it and learn more about it!.
Impact investing means to me the possibility of creating a life with a purpose.
We work not only with the purpose of making a living (or it might be better to ask what “to make a living” means for each of us -you might want to follow the discussion started by Etsy´s founder). We live while we work so, why not making our work experience something we are thrilled about as we want to make the time we spend when we are on vacation or when we are with family and friends?. I can not agree with seeing our jobs as something separated from the fun of life because it implies that we haven´t learnt to value our own lives.
Of course, we have the opportunity to enjoy our jobs no matter the type of organization we work at… The problem as I see it is that many organizations (especially businesses but not only businesses) have lost the sense of their value to the purpose of profit. Employees get disconnected from the purpose of their jobs and great corporations don´t measure their growth to the extend they preserve healthy ecosystems and the dignity of all the stakeholders they interact with.
Impact investing is an opportunity to measure organizations for the good they do beyond the profit they make. It is an opportunity to regain focus on the value of service and of relationships. An opportunity to redirect the flow of benefits only seen by about 1% of the world´s population to be enjoyed in a more balanced manner by each person in the way she/he wants (e.g. not only by getting the latest car model or pair of tennis shoes). Because, at the end, economic prosperity only can be enjoyed to the extend we can live safe, happy and healthy lives… and see that others around us do the same.
This is why I don´t see impact investing as an option but as the path to follow and I hope my experience as an FMS will help me to strengthen this position.
A new generation is entering the post-graduate workforce laden with an entirely different perspective on the role of business and purpose of charity than their predecessors and an ambition to solve the world’s most daunting social and environmental problems. I consider myself part of this idealistic group of young people, commonly referred to as the “Millennials“, who wholeheartedly believe that it is possible to “do good and make money“.
In a New York Times opinions piece titled Generational Self, William Deresiewicz describes this new generation of Millennials.
“The millennial affect is the affect of the salesman….
Nonprofits are still hip, but students don’t dream about joining one, they dream about starting one. In any case, what’s really hip is social entrepreneurship — companies that try to make money responsibly, then give it all away….The small business is the idealized social form of our time. Our culture hero is not the artist or reformer, not the saint or scientist, but the entrepreneur….The characteristic art form of our age may be the business plan.”
Some would argue that this new surge of start-ups and small businesses is a response to the recession and the downtrodden job market. If you can’t find a job when you graduate, why not create your own? Others, such as myself, believe that these social enterprises are emerging in response to the global struggles the millennials have witnessed and endured in the past 2 decades. We grew up in a very different world than our parents and grandparents. Social media, affordable travel, and other technologies have bridged the knowledge gap between the privileged classes and the realities of those living in poverty in the developing world. In addition, the effects of global warming that so many have both feared and denied have finally begun visibly affecting developed countries. It is more than just an increased social consciousnesses that is driving the millennials to find their own solutions; it is a frustrating lack of answers and support from the generation that currently leads our society. The millennials are looking for a way to alter the current economic and political systems that have created rampant inequality and allowed for the unbridled exploitation of our world’s natural resources, systematically causing increasingly destructive natural disasters.
Not everyone shares the same optimism as the millennials. David Brooks wrote a very popular op-ed in the New York Times earlier this year.
“It’s hard not to feel inspired by all these idealists, but their service religion does have some shortcomings. In the first place, many of these social entrepreneurs think they can evade politics. They have little faith in the political process and believe that real change happens on the ground beneath it. That’s a delusion. You can cram all the nongovernmental organizations you want into a country, but if there is no rule of law and if the ruling class is predatory then your achievements won’t add up to much.” [2]
I have never met a social entrepreneur who thinks they can evade politics. They often complain about how corrupt local politics are and how the widespread culture of bribery in many developing countries interferes with their social missions. These frustrating legal barriers inspire many entrepreneurs to get involved in political activism. As a recent college graduate, I have countless socially-minded friends attending law school and pursuing masters in public policy so that they can make a difference on the political side of inequality. The social enterprises that grace the covers of progressive magazines and news-stations are generally those who are on-the-ground in the developing world, selling water filters and solar lamps to rural villagers. The political activists play more of a behind-the-scenes role in the world of social entrepreneurship. They are the ones tirelessly studying the legal systems that have caused this inequality and drafting new bills and policies with enormous potential but may take years to adopt.
I agree with David Brooks that “There’s little social progress without political progress“.[2] However, I believe the opposite is true as well. In Guatemala, there are countless villages where the average daily earning is less than $1 or $2. The corrupt political system in Guatemala has pushed these people so low down on the economic ladder that they are forced to use every last ounce of energy they can muster to feed and house their families. The thought of organizing some kind of political activist group is the furthest thing from their minds. Even if a group wanted to form, the majority of the people in these communities lack the basic education and resources necessary to make their voices heard. NGO’s and for-profit social enterprises are not trying to evade politics, they are merely attempting to afford these people the basic necessities of life that their governments have failed to provide. Once their basic needs are met, then the billions of people living in poverty will have the opportunity to create the necessary political change.
The millennials are infiltrating the current economic structure with a combination of NGOs and for-profit social enterprises where the focus is not profit-maximization and giving charity to the poor. Instead, the mission is first to help those living at the BOP (bottom of the pyramid) escape extreme poverty and then to offer affordable and sustainable products, services, and employment opportunities to empower these people and guide them slowly but surely forward along the inverted u-shape of the Kuznets curve, as taught in every development economics course. As they near the center of the curve, more time, energy, and resources will be afforded to creating political change, bringing us one step closer to a world in which every persons needs are met and their rights are respected.
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[1] http://www.nytimes.com/2011/11/13/opinion/sunday/the-entrepreneurial-generation.html
[2] http://www.nytimes.com/2012/04/13/opinion/brooks-sam-spade-at-starbucks.html?_r=1&
Last week I had the opportunity to travel to the south of Mexico. I visited some ancient buildings in the Yucatan Peninsula. I particularly enjoyed the ruins of Uxmal, with its harmonious well preserved structures. I stayed at Merida, a beautiful small metropolitan city with a colonial architecture.
I also went along the Caribbean Sea coast staying in many beautiful beaches. There were also some ruins which were incredible, especially the ones located by the ocean.
Regarding my work, I summarized the outcome of my last Strategy BC, one of the activities of the acceleration process, where entrepreneurs received feedback from consultants in order to strengthen their companies. I coordinated the next meeting and I am preparing in order to help the entrepreneurs make the most of the next session.
F123′s founder, Ashoka fellow Fernando Botelho, was selected as one of the six finalists for the eighth edition of the Prêmio Empreendedor Social (the Social Entrepreneur Award). This competition is renowned as one of the top social entrepreneurship awards in Latin America.
Fernando Botelho, Founder of F123
The criteria for selection in this competition include: 1) innovation, 2) sustainability, 3) direct social impact, 4) influence in public policy, 5) the social entrepreneur’s background, 6) scope and distribution, and 7) potential scalability.
F123 is extremely excited to have been selected as a finalist. The other finalists include: 1) Kaninde/Metareilá, which helps indigenous populations in the Amazon, 2) Instituto Chapada, which addresses the eradication of illiteracy, 3) Imaflora which helps with natural resource conservation projects, 4) Raízes, which is involved in sustainable tourism projects, and Graacc, a children’s cancer treatment hospital for low-income families.
F123 was founded by Fernando Botelho, an inspiring individual who is blind himself, to create software for the visually impaired at an affordable price, providing access to job and educational opportunities that they couldn’t otherwise easily attain. F123 software is a high-quality, low-cost software that enables the visually impaired to use computers via a USB flash drive or CD. Given that the competitor software on the market is extremely expensive and unaffordable for the average person in a developing country, F123 software can truly help address the low employment rate amongst the visually impaired in the developing world through this more affordable solution.
To vote for F123, go to http://f123.org/vote, scroll down and click on “Vote Neste Candidato” (Vote for this candidate).
Impact investing seems to combine the best of both the philanthropic and the traditional financial worlds. However, there has been a great deal of skepticism and precautionary warnings about this new and growing field. The most common criticisms include:
1. Youth. Everything about the industry is young. The first impact investment fund, Acumen Fund, is just reaching the decade mark. The majority of social enterprises invested in are in early-stages, translating to high-risk investments. In addition, according to the Skoll World Forum on Social Entrepreneurship “a typical investment associate is in her late 20s, still learning the ropes on the investor’s dime.”[1]
2. Transparency. Due to its youth, the impact investing sector lacks a widely agreed upon and transparent definition and set of metrics. “An internet search for ‘social enterprise’ is as likely to lead to a non-profit urban garden in London as it is to an African mobile payments scheme, and little consensus exists on how investors and companies should balance social impact and financial return.”[1]
3. Returns. Again, due to the youthful nature of the industry, few impact investors have have achieved full ROI (return on investment). As a result of this limited track record of success, it is difficult to convince the world that it is possible to “do good” and make money. In addition, profit margins are often very small (or even negative) in the early stages of most social businesses.
4. Opportunity. Impact investors struggle to find the “right” companies in which to invest. Investors look for a social enterprise’s ability to reach its target population, capacity to scale, financial sustainability, impact metrics, ect. It is rare to find an early-stage enterprise with all, or even some, of these aspects. In addition, most investors are based in the developed world while the majority of social enterprises emerge in the developing world. This makes it very difficult and expensive to find early-stage companies (preferably with the traits mentioned above) and even more costly to preform the necessary due diligence on a company located half-way across the world.
5. Balance. It is very difficult to balance profit and impact. The visions and goals of social entrepreneurs don’t always match up with those of impact investors, creating a challenging environment in which to make deals. The investor should not ask an entrepreneur to compromise his/her social mission but the investor must be conscious of the enterprise’s ability to return the investment.
6. Uncertainty and Risk. The portfolio director at the Mulago Foundation writes about impact investing, “Cash flow projections are wildly unrealistic, management teams untested, and market failures unacknowledged. There’s 10 times the risk profile of a standard US venture deal without the same potential upside.”[2] There is a lot of trust involved in impact investing since the social entrepreneur usually knows much more about his/her target population and market and often can’t afford extensive market testing.
Despite the warnings and skepticism, I am a firm believer in the potential of impact investing to help solve some of the worlds greatest social and environmental issues. The critiques mentioned above stem from the youthful nature of the industry. We must be patient and give the industry time to develop. However, the critics play an important role in the development of the industry because they bring to focus issues at a very early stage, allowing them to be addressed in an effort to create a stronger industry.
There are a number of organizations and networks that have already emerged to address many of these issues. GIIN (global impact investing network) was created to increase the efficiency, effectiveness, and scale of impact investing. Its website provides impact investor resources including up-to-date research, news, events, publications, profiles, investor spotlights, useful links, and a career center. GIIN also created an investors council, ImpactBase (an online global directory of impact investment vehicles), and the Impact Reporting and Investment Standards (IRIS) (set of metrics used to measure and describe an organization’s social, environmental and financial performance). Another useful tool is the Global Impact Investing Rating System (GIIRS), “ a comprehensive and transparent system for assessing the social and environmental impact of companies and funds.”[3] Companies such as Mission Measurement have also emerged with similar goals to help companies measure the impact of social projects.
Impact accelerators and major conferences are also playing a role in overcoming the challenges and criticism associated with impact investing. Agora Partnerships dramatically reduces the cost to investors as well as the risk involved by doing the scouting themselves, hosting an extensive business development program, and matching their entrepreneurs with an Agora employee to preform due diligence and create an investor-ready business plan. Major conferences focused on social entrepreneurship and impact investing have sprung up all over the world to bring people together, share ideas, and address common problems in the emerging sector. SOCAP (social capital markets) is one of the biggest and most popular of these conferences. It was held earlier this month in San Francisco and attracted more than 2,000 people from 50 countries. The conference highlighted accomplishments, addressed mistakes, and discussed the future of impact investing and social entrepreneurship.
The bottom line is patience. It is important to address the challenges and weaknesses of impact investing but it is just as crucial to stay positive and be patient. As the industry develops, the kinks will work themselves out. Impact investing is about deploying capital in creative manners to solve social and environmental problems. I am confident that this very same creativity will be utilized to overcome the barriers that currently face the young, emerging industry. We are all still learning and it is way too soon to cast a shadow of skepticism over impact investing and its tremendous potential.
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[2] http://www.ssireview.org/blog/entry/the_trouble_with_impact_investing_part_2
Articles about impact investing have been flooding the internet and everyone seems to have a different definition. The Global Impact Investing Network (GIIN), defines impact investments as “ investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.”[1] They emphasize that these investments can be made in both emerging and developed markets and can expect a wide range of returns (as long as they don’t exceed market rate). The Mulago Foundation provides a slightly different definition: “impact investing is the practice of putting money—loans or equity—into impact-focused organizations, while expecting less than a market rate of return.”[2] JP Morgan views impact investing as “creating positive impact beyond financial returns” and “distinguishes impact investments from the more mature field of socially responsible investments (“SRI”), which generally seek to minimize negative impact rather than proactively create positive social or environmental benefit.”[3]
Although these definitions are varied and somewhat vague,
“The glue that binds those who operate in the impact investing industry is the shared conviction that creative investments can play a crucial part in addressing social and environmental challenges. This investment interest is sparking the emergence of a new industry that operates in the largely uncharted area between philanthropy and a singular focus on profit-maximization.” [1]
As inequality across the globe increases, impact investing is becoming a very important tool to bridge the gap between donor-reliant philanthropy and the estimated $100 trillion in opportunity currently in for-profit capital markets.[4] However, impact investing fills more than just the funding gap. Jacqueline Novogratz – founder of the pioneer impact investment fund, the Acumen Fund - writes “Philanthropy alone lacks the feedback mechanisms of markets, which are the best listening devices we have; and yet markets alone too easily leave the most vulnerable behind”.[5]
Impact investing combines the socially conscious values and desire to “help the poor” traditionally held by non-profit organizations with the competitive nature and demand-drive of the market. It eliminates the need for entire departments dedicated to grant-writing and outlandish efforts to keep donors happy. With impact investments in place of grants and donations, socially-focused organizations can focus all of their talents and resources on improving and expanding their mission. The social consciousness of impact investors also allows for-profit ventures to use slightly more expensive inputs that are significantly better for the environment and/or the people they are serving. For example, Tegu, a social business that produces high-quality wooden blocks, uses wood that has been sustainably forested in Tegucigalpa, Honduras. Cheaper wood of equal quality could be used, but the founders of Tegu are willing to accept a slightly lower profit margin in return for the knowledge that they are supporting and promoting sustainable forestry. Likewise, impact investors would choose to invest in Tegu over a more profitable wooden-block company that harms the environment.
As the industry continues to develop, expect to see more definitions of impact investing emerge, not less. One of the shortcomings of current development projects is the strict definitions and metrics required by donors. The versatility of impact investing is one of its strongest attributes because it allows for investments over a wide range of projects with flexible terms. The problems impact investors are looking to solve are not clear cut or easy to define. Therefore, the definition and terms of impact investing should be versatile and creative in order to finance the best solutions and create maximum impact.
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[1] http://www.thegiin.org/cgi-bin/iowa/resources/about/index.html
[2] http://www.ssireview.org/blog/entry/the_trouble_with_impact_investing_part_1
[3] http://www.trilincglobal.com/news/2010/12/10/jp-morgan%E2%80%99s-definition-of-impact-investment/
[4] http://www.huffingtonpost.com/judith-rodin/investing-for-impact_b_1937524.html
[5] The Blue Sweater: Bridging the Gap Between Rich and Poor in an Interconnected World, location 3621 of 2849.
