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Advisory board on impact investing to drive SDGs

Pension funds, corporates, foundations commit to allocating funding to impact assets.

The Global Steering Group Summit (GSG) on impact investing was a good example of how nations can collaborate on the most pressing issues of our time. More than 550 people from 43 countries met in Chicago to discuss how to deploy sufficient private capital to fund the Sustainable Development Goals over the next 13 years. It was a ringing response to recent cries for nationalistic policies regarding the insufficiency of planetary resources. It is an opportunity to think seriously about financing our own National Development Plan.

Impact investing is defined as the use of private capital for public good and requires investors to be both intentional about generating social and environmental impact as well as measuring that it has been achieved. The next frontier and noble prize worthy achievement articulated by GSG chairman, Sir Ronald Cohen, is for those in the field to determine the interplay between not only risk and return, but impact as well. David Blood, from Generation Investment Management, went further to instill a sense of urgency considering the challenges we are facing and that all investing should be considered impact as we consciously price in positive and negative externalities along the continuum of capital.

According to the latest Global Impact Investment Network (GIIN) Annual Survey, which is based on an analysis of 209 of the world’s leading impact investing organisations, there is currently USD 114 billion such assets under management. Certainly the hosts of the event were leading by example with the MacArthur Foundation building an impact fund and the Ford Foundation committing USD 1 billion of their endowment towards sustainably funding the SDGs. Amit Bouri of GIIN predicted an increase in the overall figure to over USD 300 billion by 2020.

Many agree that the best way to get there is to develop cohesive national strategies and policies aimed at accelerating the growth of the market and then sharing best practice among countries, hence the formation of the GSG. The role of the National Advisory Boards is to do just that with 13 in existence and 16 more in development, including South Africa. The Bertha Centre for Social Innovation and Entrepreneurship is convening and providing secretariat to an alliance of private, public and civil society individuals and organisations that are committed to deploying capital for the purposes of socio-economic justice.

The rallying cry of the summit revolved around the international tipping point in the market challenging participants to reach these targets over the next three years.  

·       That 10% of start-ups and corporates would commit themselves to impact aligned strategies;

·       That 100 leading pension funds would allocate between 5-10% of their portfolios to impact investments across asset classes;

·       That 50 foundations would allocate at least 5% of their endowments to impact assets and 10% of their grants to outcome funds;

·       That government would spend 10% of their outsources expenditure on “profit for purpose” enterprises and publish the cost of social issues.

Impact investing offers an alternative to a climate of compliance and fear driven capital allocation. If South African investors can learn to optimize financial, social and environmental returns, we can build an inclusive economy in which the majority thrives. Countries around the world are starting to reap the benefits of this approach and so can we.

Dr Susan de Witt is a Senior Project Manager at the Bertha Centre, a specialised centre at UCT’s Graduate School of Business.

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