Dear Reader,The world is on the brink of a revolution regarding how we solve society’s toughest problems. The force capable of driving this revolution is ‘social impact investing,’ which harnesses entrepreneurship, innovation and capital to power social improvement. Similarly, doing good and doing well are no longer seen as incompatible. There is a growing desire to reconnect work with meaning and purpose, to make a difference. This is leading to a multiplying supply of people looking for employers with an explicit commitment to improve the world. Additionally, there has been a rapid rise globally in the number of impact entrepreneurs who want to find innovative ways to solve society’s problems, and they are increasingly deploying the methods of business and private capital if that helps them to do so. They include people in the social sector who can now tap the markets for finance in addition to seeking grants from donors, and philanthropists who are willing to fund businesses rather than social sector organizations if that offers a greater likelihood of achieving the social impact they desire. They are leading a shift in philanthropy and partnership from a focus on the act of giving to the impact it achieves. The Social Innovations in Social Impact Investing and Public/Private Partnerships edition examines the innovations occurring in the Social Impact Industry and through Public/Private Partnerships across the private, government and not-for-profit sectors.Social impact investing runs from philanthropy to responsible and sustainable investment, which includes all those seeking to achieve positive impact. Impact investment is growing quickly. The amount invested by the 125 leading impact investors is forecast to grow by nearly 20 percent this year, according to the latest study by the Global Impact Investment Network (GIIN) and JP Morgan. Given that $45 trillion in mainstream investment funds have been publicly committed to incorporate environmental, social and governance factors into their investment decisions, it would only need a small fraction of this money to start moving into impact investment for it to expand rapidly along the growth path to the mainstream previously taken by venture capital and private equity. The financial crash of 2008 highlighted the need for a renewed effort to ensure that finance helps build a healthy society. This requires a paradigm shift in capital market thinking, from two dimensions to three. By bringing a third dimension, impact, to the 20th century capital market dimensions of risk and return, impact investing has the potential to transform our ability to build a better society for all.A generational shift is underway in how people, especially younger people, see their role in solving society’s problems. This new approach is built on a number of shared beliefs: that, in some cases, investment can be more effective than donations in helping the poor; that social motivations harnessed to financial ones can sometimes do good more effectively; and that in many situations there is no inevitable trade-off between financial and social return. It is also becoming ever clearer that there is an increasing need for innovative and effective solutions to society’s problems. Impact investment is a response to the growing awareness in both the public and private sectors that the challenges facing society in the 21st century are too large and too complex to be solved by government and the social sector alone. Impact investing can also greatly strengthen social sector organizations. Until now these have had to make their essential, and often considerable, contribution to society without access to the full range of financing options available to regular businesses. Although there are outstanding examples of big, impactful social service organizations, too many struggle to make the large-scale impact that the success of their methods deserves. Impact investment, with its emphasis on scaling up activities that achieve measurable social outcomes, can transform how social sector organizations are financed, and in doing so make it likelier that they will succeed in achieving their mission at significant scale.Impact investment, like any market, is a combination of demand (for capital to finance impact-driven organizations), supply (of impact capital) and intermediaries (helping to connect supply and demand). The principal components of the impact investment ecosystem are:
- Impact-seeking purchasers – These provide the sources of revenue that underpin investment in impact-driven organizations. Such purchasers can include governments, consumers, corporations or foundations.
- Impact-driven organizations – Inclusive of all types of organizations that have a long-term social mission, set outcome objectives and measure their achievement, whether they be social sector organizations or impact-driven businesses.
- Forms of finance – Needed to address a range of different investment requirements.
- Channels of impact capital – Connecting investors to impact-driven organizations in situations where the sources of impact capital do not invest directly in impact-driven organizations.
- Sources of impact capital – Providing the investment flows needed.We can conclude that the social sector is changing whether you work in private, not-for-profit, or government organizations. The public, as well as leaders in government, social impact and mission-aligned investors are demanding new social models that are cost-effective, financially self-sustainable, adaptive to feedback and metrics, with clear outcome accountability measures, and have the potential for large-scale impact and systems/policy influence. Social sector-oriented leaders from the nonprofit, government and private sectors are increasingly drawn to social models that have a lasting impact on communities, create systems change, are financially self-sustainable, and have the potential to be taken to scale. At the same time, social innovators and entrepreneurs working in community-based nonprofit settings often find that their new ideas are stymied by organizational culture or funding limitations. A recent survey of nonprofit leaders conducted by Johns Hopkins University found that more than two-thirds of organizations developed at least one innovation in the past two years that they were unable to adopt, due to funding or other considerations.We can all agree that the social impact and public/private partnerships are dynamic and will continue to evolve into the future. Our hope with this edition is that our readers can be part of the strategy to shape the future and to assure that the direction the future takes us will support social innovation at all levels of the public, nonprofit and private sectors.Finally, we thank our newly constituted supporters and advisors (as listed on our website) as this will be the first publication for the now national Social Innovations Journal: Anne Callan, PHMC and Public Health Fund; David Castro, I-LEAD; Christopher Creswell, New Enterprise Ventures; Peter Hotz, 5 CAP Ventures and Vynamic; Heather Falck, Independence Blue Cross Foundation; Kevin Leigh, BNY Mellon Wealth Management; Laura McKenna, Patricia Kind Foundation; Gavin Kerr, Inglis Foundation; Mike Pearson, Union Packaging; Joseph Pyle, Thomas J. Scattergood Behavioral Health Foundation; James (Jim) Rowley, Lincoln Benefits Group; Sandy Festa Ryan, Walmart Care Clinics, and Frank Schaeffer, The Commission on Graduates of Foreign Nursing Schools.
Very truly yours,
Nicholas Torres, Co-Founder
Tine Hansen-Turton, Co-Founder
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