Global Handbook of Impact Investing

“Global Handbook of Impact Investing: Solving global problems via smarter capital markets towards a more sustainable society”

By Elsa de Morais Sarmento and R. Paul Herman

Since the start of economic thought that experts have been struggling to find solutions to overcome inequality, poverty, and gaps related to education and health. We have more recently added empowerment of women and the vulnerable, and climate change.

Impact Investing’s innovative approach and tools have helped rethink and reshape solutions for a more inclusive economy from which anyone can benefit from.  Its seeds were sown in the last quarter of the twentieth century with the socially responsible investment and corporate responsibility movements. Since then, Impact Investing has allowed individuals and micro and small companies, to be support through commercial loans – from microfinance to direct investments in the form of private equity – rather than the most traditional instruments, such as grants or development aid and cooperation.

The increasing popularity that Impact Investing is enjoying stems from the massive efforts by the pioneers of this industry, who have worked unrelentingly to put theory into practice, by establishing a framework, a formal network, and a dedicated market for this nascent industry.

The recently launched Global Handbook of Impact Investing, published by Wiley (2021) offers the most complete and updated information of how this is all unfolding and how Impact Investing is driving this change by providing an integrated alternative approach towards the creation of more inclusive markets, fighting poverty through wealth creation, fostering regional national cohesion and work in favor of countries’ competitiveness and inclusiveness objectives within the framework of Sustainable Development Goals (SDGs).

This Global Handbook is intended for you – whether an academic, student, faculty, investor, family office, foundation, pension, endowment, retirement plan, development financial institution, multilateral bank, bilateral donor, donor-driven organization, non-governmental organization (NGO), civil society organization, or other role. We have sought to bring you the latest insights and wisdom from around the world to inform and inspire you.

With this Global Handbook we expect to help you understand why investing for impact is beneficial. We provide evidence on its systems-level inner workings by engaging stakeholders from all geographies. This volume assembles over 50 authors from four continents, who are innovators, pioneers, experts, and academics, drawing heavily on their professional and personal experiences in this field.

The Global Handbook ´s authors showcase the full spectrum of capitals to be invested and allocated, beyond financial capital. Human capital, natural capital, and social capital are other three primary types of capital which ought to be considered in the equation. In traditional economic terms, these are known as labor, land, and networks. These have now been termed as people, planet, and trust, summarized in the 17 SDGs – such as no poverty, gender equality, and climate action, as well as peace and partnerships.

The Handbook describes how Impact Investing has grown globally, how different frameworks are being created and evolving to measure impact, and what actions and strategies can be pursued towards positive impact and profit potential. It touches upon social capital, and the networks of relationships underlying multi-stakeholder initiatives, public-private partnerships, and value chains.

Moreover, it offers practical advice and tools on how to engage as an impact investor, bearing in mind that many different types of impact investors pursue a variety of impact objectives and varying financial return targets. In addition, the Impact Investing community at large can lead policymakers and institutional actors towards smarter approaches that blend solutions across sectors and instruments.

Justin Rockefeller´s foreword offers insights on his tool belt for effective change, arguing we can all be changemakers if we exact with precision our capital, time, knowledge, passion, influence, network, voice, and vote.  The way each of us makes, spends, donates, and invests money has moral consequences. We can leverage this influence within the various communities and networks which we are part of, as they have a greater potential for effecting change than our own.

The Global Handbook of Impact Investing is segmented into six parts. To learn how the investment ecosystem is becoming more sophisticated in all types of impacts, Part I, “The Expanding Boundaries and Sophistication of the Impact Investing Ecosystem,” informs about the field, through the characterization of the Impact Investing ecosystem and the drive towards social change and social impact creation, exploring why investors are increasingly leaning into Impact Investing and how it can make a difference.

Part II, “The Value of People in Impact Investing,” describes how value is created from many sources that are known but typically ignored. People are a valuable asset, and can be half the cost structure of an organization. Gender lens investing (GLI) is explained in four insightful chapters.

Part III, “The Value of Nature, Climate, and Planet in Impact Investing,” illuminates how a portfolio can adapt to the energy revolution and climate action, as well as new financial instruments for promoting transparency, performance, and accountability.

Part IV, “Measuring and Reporting Impact: Approaches, Standards, Methods, and Tools,” brings the leading-edge thinking and how-to’s of more rigorously quantifying the results of Impact Investing. Three chapters cover the next generation of impact measurement frameworks, offering the latest perspective for measuring, evaluating, and reporting impacts. These summarize the primary methods for evaluating impact, and illustrate which are appropriate for varying scenarios, providing examples of the latest evaluation approaches used by leading foundations. “Transformative evaluation” is also showcased as a method to ensure that stakeholders of all types are purposely included in any impact measurement scorecard of results.

Part V, “The Call to Action: Impact Experiences from Around the Globe,” offers perspectives and experiences of successes, inspiring cases, and best practices from around the world. We include cases and examples from Africa, and contrast them with those in Latin America, Asia and other parts of the world. Part VI concludes with “Where Is the Future of Impact Investing Headed?”.

Following the production of this Global Handbook, we are curious to hear of your personal experiences and wishes, and the lessons you learned in pursuing Impact Investing. We look forward to your experimenting, testing, and piloting of the book´s compelling approaches in your portfolios and social assessment work. We encourage you to provide us your feedback on the book and the sharing of these insights with us.

Yours in impact,

Elsa de Morais Sarmento and R. Paul Herman