Panel, Conference Presentation
Investing for Impact: What's in Your Portfolio?
Milken InstituteMatthew Bishop, Michael Schlein, Tracy, David Kwong, Robb Boydston, John Hempton, Alex Friedman, Sean Green
- The impact investing sector is anticipated to undergo a "hockey stick" growth trajectory, potentially evolving into a major market-based alternative to traditional aid, with expectations to scale from serving tens of thousands to 200 million people globally over a 20-year period.
- Financial performance outlooks cite modeled annual returns in the high teens for specific ventures like Hux Power Systems and historical 15.6% annual returns for the Axiom Investment Fund, while foundations are expected to find a middle ground between capital loss and market-rate returns through Program-Related Investments (PRIs).
- A 2010 G8 task force report was projected for release the following September to map national ecosystems and propose reforms, with social impact bonds estimated to generate $300 to $500 million in deals within the U.S. domestic market in the next 18 months.
- Institutional capital, including 401k plans and sovereign funds, is expected to increasingly integrate impact investments as risk mitigation strategies strengthen, alongside a predicted rise in tools and screens to verify that capital enriches the world within a few years.
- Growth sectors are identified as for-profit vocational education models in India and the Philippines, clean energy access in rural Cambodia and India, and the expansion of social impact bonds into health outcomes, early education, and services for the elderly in poverty.
- Industry risks include current over-lending in microfinance, the perception that financial services for the poor are too risky for certain institutional plans, and the need to address growing pains through improved regulation before the sector fully re-establishes itself as a serious asset class.
- Strategic shifts include the expectation that companies will increasingly address global challenges like brain cancer and climate change using core skills, while the industry may move past microfinance "fashion" to establish new structures operating alongside philanthropy.
- Future innovations are predicted to involve the combination of mobile phones and big data to create sophisticated lending profiles for financial inclusion, the emergence of radical capital approaches similar to cryptocurrencies, and the maturation of certification based on intent, measurement, and transparency.
- Execution is highlighted as the critical factor for success over business planning, with specific examples like the Brain Trust Fund successfully completing its first exit for brain disease research to demonstrate the viability of addressing capital gaps.
- A historical precedent suggests that while a 2010 prediction estimated $1 trillion in assets under management, the market is currently in early stages where a tipping point has not yet been reached, though the long-term mission remains to satisfy faith in capitalism's ability to build a better world.