US National Advisory Board’s Policy Recommendations Are Incorporated to Spur Investment in the United States
WASHINGTON, DC (September 15, 2014) – The Social Impact Taskforce, created by the governments of the G8 in June 2013 to catalyze a global market for impact investing, released a global report today outlining its recommendations to unleash billions of dollars of private sector investment to address social problems. The report, The Invisible Heart of Markets: How Impact Investing is Harnessing Innovation and Capital for Public Good, represents the most comprehensive initiative to date to define what is needed from all stakeholders in the effort to advance the tremendous potential of impact investment to improve society and the environment.
“This is not about increasing or reducing public expenditure, but helping government to benefit from innovation and private sector capital in order to achieve more impact with the money it has. In driving the achievement of impact, social impact investment harnesses the forces of entrepreneurship and capital and the power of markets to do good. It brings the invisible heart of markets to guide their invisible hand,” said Sir Ronald Cohen, Chairman of the Taskforce.
In June, the US National Advisory Board (NAB) on Impact Investing released its report of policy recommendations to mainstream impact investing within the United States. The report, Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing — and Why It’s Urgent, was incorporated into the work of the global taskforce.
“We look forward to working together to support the promise of impact investing worldwide. This report represents a joint effort of many stakeholders, including government, business, the social sector and foundations, institutional and private investors, and most importantly impact entrepreneurs, to develop a comprehensive set of recommendations that are critical to the success of impact investing on a global scale,” said Matt Bannick, member of the Taskforce and co-chair of the US NAB.
The global effort was initiated at the June 2013 G8 meetings in London to explore how impact investing can accelerate economic growth and solve the world’s most pressing social challenges. At that time the Social Impact Taskforce (Taskforce) was created and charged with recommending policies to accelerate impact investing, establish a common global approach for measuring social outcomes, and encourage greater engagement across foundations, institutions and private investors with input from the G8 countries.
The report lays out eight high-level recommendations devised by government and private sector experts from across the G7, EU and Australia to increase impact investment worldwide:
1. Set measurable impact objectives and track their achievement.
2. Investors to consider three dimensions: risk, return and impact.
3. Clarify fiduciary responsibilities of trustees: to allow trustees to consider social as well as financial return on their investments.
4. Pay-for-success commissioning: governments should consider streamlining pay-for-success arrangements such as social impact bonds and adapting national ecosystems to support impact investment.
5. Consider setting up an impact investment wholesaler funded with unclaimed assets to drive development of the impact investment sector.
6. Boost social sector organizational capacity: governments and foundations to consider establishing capacity-building grants programs.
7. Give Profit-with-Purpose businesses the ability to lock-in mission: governments to provide appropriate legal forms or provisions for entrepreneurs and investors who wish to secure social mission into the future.
8. Support impact investment’s role in international development: governments to consider providing their development finance institutions with flexibility to increase impact investment efforts. Explore creation of an Impact Finance Facility to help attract early-stage capital, and a DIB Social Outcomes Fund to pay for successful development impact bonds.
The full report may be viewed at www.socialimpactinvestment.org
US National Advisory Board on Impact Investing
The US National Advisory Board on Impact Investing was formed to coordinate with and advise the global effort while actively reaching out to key stakeholders and communities to get feedback, ideas and input about what policy changes are necessary to drive social impact investing in the United States.
Private Capital, Public Good Recommendations:
The US NAB’s report, issued in June and incorporated into the Task Force report, offers policy recommendations on opportunities in the short-term, as well as supporting policy ideas that would encourage the impact investing market over the long-term. The recommendations are focused on executive and legislative strategies for updating existing regulations and laws to make it easier for social impact investors to work with government agencies. Although the policies are focused on opportunities at the federal level, the report does intentionally include both examples and opportunities at the state and local level. Most recommendations are budget neutral and sometimes even result in cost-savings. They include:
· Remove regulatory barriers to unlock private impact investment. Innovative impact-oriented businesses are in need of investment, and unnecessary regulatory barriers stand in the way—leaving much private capital on the sidelines.
· Increase the effectiveness of government programs. Government agencies frequently lack the flexibility and range of tools needed to achieve social and environmental goals.
· Provide incentives for new private impact investment. Some markets need a push to get off the ground. By putting the first dollar on the table, government can attract private investment to support important social and environmental goals. More federal agencies should have the authority to replicate successful impact investing programs such as the Community Development Finance Institution (CDFI) Fund, which marshals $20 of private capital for every $1 of federal funds invested.
· Support innovative impact enterprises. Every entrepreneur needs support to get off the ground. Congress, the White House, and government agencies command powerful public platforms for spreading the word about the benefits of impact investing. They can support the development of field-building organizations.
· Standardize metrics and improve data access. Measuring the impact is critical to the development of the impact investment field. The government can support and accelerate private sector standards while promoting open access to data.
The report can be viewed at www.NABimpactinvesting.org.