iNGOs and Impact Investing

Over the last half decade, impact investing has rapidly emerged from a niche innovation to an increasingly mainstream investment strategy. With double-digit growth as an asset class and increasing focus from leading financial institutions and MBA programs, impact investing is becoming an important tool for achieving social and environmental impacts.

As impact investing continues to grow in magnitude and importance, international NGOs (iNGOs) are increasingly entering the space.  Organizations as diverse as WWF, Mercy Corps, RARE, FHI360 and CRS have dedicated impact investment units.

Reflecting this growing importance, InsideNGO recently organized two impact investing sessions at its annual conference.  I had the pleasure of moderating the second session, “Risk, Returns and Impact: The Investor Perspective,” which brought together three investors – Chris Jurgens of Omidyar Network, Stephen Murray of Aldwych and Alex Hadden of OPIC- to talk about how  they approach impact investment and what opportunities and challenges they see in working with iNGOs. Here are some key insights for iNGOs coming out of the session:

  • Get Clear on Strategy and Role
    Chris Jurgens described impact investing as ‘a big tent’ where there are a wide range of actors. Given the broad and emergent nature of the space, it is essential that iNGOs enter the space with a clear strategy and role. iNGOs need to decide whether they will be investors or play other roles –advisory, incubation, etc.  As investors, iNGOs need to have a defined investment strategy and be able to communicate that strategy to fellow investors, potential investees as well as internal stakeholders within iNGOs themselves.
  • Understand the differing roles of investors along the Continuum of Capital
    The Omidyar Network has coined the term Continuum of Capital to describe the spectrum of capital on offer in the impact investing space from fully commercial to fully philanthropic.  As iNGOs enter the impact investing space, they need to understand how and when different types of capital are deployed and how that capital can be used to crowd in others.
  • Leverage Additional iNGO Strengths
    Alex Hadden and Stephen Murray both highlighted the additional strengths that iNGOs bring to the table as impact investors, such as advocacy, ability to improve the enabling environment and local networks of staff and partners.  While these assets can often be hard to quantify, they are often valued by other investors, and iNGOs need to leverage these unique capabilities as they enter the impact investing space.

Impact investing – as a field – is at an early stage in its development much like micro-finance in the mid to late 90s when MFIs were beginning to seek commercial capital to scale, but the field was far from settled.  As an emergent field, iNGOs have a tremendous opportunity to work alongside foundations, investors and governments to shape impact investing and ensure that it becomes a powerful tool in driving social and environmental change.

by Steve Schmida, Managing Director of Resonance

Steve is an international development generalist who is intensely curious about all aspects of the field and regions of the world. He has specific expertise in public-private partnerships, entrepreneurship and organizational development.