Our contrarian views on impact investing
While we applaud the goal of impact investing, our practical experience of supporting social enterprises around the world leads us to hold some contrarian views:
- Most well-run and impactful social enterprises only generate low and slow returns. This is hardly surprising given that they serve poorer communities in fragile markets. We do not believe the financial return expectations of most impact investors reflect these market realities.
- No investor can have two primary purposes. Most social enterprises experience fragile growth. In times of duress, a primary motive will always surface – either seek to maximise impact, or financial return. This leads to non-alignment among impact investors that exacerbates underlying fragilities and leads to mission drift.
- Investment alone will never enable social enterprises to achieve impact at scale. The efforts of most social enterprises are frustrated by the poorly developed market ecosystem in which they operate. Tackling wider market barriers is essential, such as social marketing, distribution channels and consumer financing.
Philanthropic capital, if effectively deployed, is ideally suited to addressing all these challenges.