To achieve the United Nation’s Sustainable Development Goals by 2030, it’s estimated that between US$ 5 and 7 trillion is needed each year[1]. Impact investing plays not only a central, but a critical role in plugging this widening gap, as well as in funneling capital towards founders and businesses and creating social and environmental value alongside financial return.
The Wharton Impact Venture Associates (WIVA) program (under the WISE Fellowship) is dedicated to achieving that same goal. As a WISE Fellow, my experience has been unparalleled and truly reflective of the path many impact investors experience. I’ve had the opportunity to shape an investment vehicle that builds upon the research of the Wharton Social Impact Initiative, deeply question what sectors should command our highest attention and time, and deliberate the age-old question: “What standard should be used to measure impact?”
While there are numerous lessons to share from this experience, many of which will be applicable to my professional endeavors beyond Wharton, these are the top three that come to mind.
1. Now is a good time as ever to be an impact investor.
As the asset class matures, I believe there is no better time to be involved. At WIVA, our team has had the chance to meet like-minded impact and angel investors, and learn about the investment criteria they use to evaluate mission-driven organizations. We are in a constant dialogue with passionate entrepreneurs, each challenging the other on the key metrics to focus on. Internally, I’ve gained unique perspective of the merits of investment opportunities by drawing on the experiences of other Fellows. We’re all learning from each other. This is an exciting time for WIVA as the world of impact investing evolves and capital markets become more sophisticated.
2. There is a large gap between capital needed and capital committed. However, it also presents an opportunity.
Coming from a fundraising background, I understand what it feels like to be in a founder’s shoes. They are keen to have their story heard, have their venture validated by others, and actualize this endorsement in growth funding. When I first joined WIVA, I initially thought it would be easier being on the other side of those introductory meetings, as an investor. You’re exposed to the amazing stories and feats of dedicated entrepreneurs. But it’s actually not any easier. There simply isn’t enough capital targeting the intersection of commercial, social, and environmental returns. Therefore, there is a high bar for the level of impact and investments being made. At the same time, this capital gap presents a compelling opportunity for early-mover impact investors like WIVA that see the long-term value being created.
3. There is a lost opportunity if the impact can’t be quantified.
Building off the knowledge base of the Wharton Social Impact Initiative, one key insight we discovered was how qualitative measures of impact — like increased morale or engagement at school — were important considerations but not a sufficient base to justify an impact investment. Quantitative or semi-quantitative measures also need to be present. Moreover, measures differ widely from sector to sector to the point that even industry specialists have difficulty reaching agreement on best practice standards. As measures get more standardized and as entrepreneurs focus on quantifying the difference they’re making, I see a whole lot of growth potential.
— Sam Brown
[1] Pineiro, Dithrich & Dhar, Global Impact Investing Network (September 2018). Accessed here: https://thegiin.org/research/publication/financing-sdgs
Posted: January 25, 2019
