Impact investment for Social Enterprise

Contributing to the social and environmental well-being of society has historically taken the form of philanthropic contributions. These contributions that only seek to generate a positive change in society and the environment, have been developed in a dissociated way from traditional investments focused on financial return. The recent phenomenon of impact investing has come to challenge this dissociation by proposing the confluence of both worlds, in models where the search for positive impact coexists with financial sustainability. This form of hybrid investment, which emerged just over a decade ago, has made it possible to channel new capital and attract new actors committed to a comprehensive and sustainable social development in the future.

Impact investing is an emerging phenomenon that has positioned itself within the social innovation agenda of developed and developing countries. It emerged, as a concept, in 2007 when the Rockefeller Foundation coined the term impact investing, giving a change in the definition of some aspects of socially responsible investment. We can define Impact investments as those that: “… are intentionally aimed at solving social or environmental problems by optimizing risk and financial performance, as well as impact, through the measurement of results of specific social, environmental and financial objectives” (EVPA, 2021).

One of the first global efforts to be made was the Social Impact Investment Taskforce (SIIT), an international collaborative group created in 2013 under the UK chairmanship of the G8. In 2014, this group, after consulting experts from the government, private and social sectors of the G8 countries, Australia and the European Commission, generated eight high-level recommendations, which were reflected in the report “Impact Investment: The Invisible Heart of Markets”, which involves all key impact investing players.

Nowadays, social entrepreneurship’s ecosystem lives a special dynamism and shows a great capacity for innovation, even generating “export models” of intervention for increasingly urgent complex challenges. In this framework, contributing knowledge to the phenomenon of social investments is especially relevant. Knowledge of a sector is a necessary element for its development; it allows identifying growth barriers, comparing local and international realities, defining points of origin and projecting its trajectory into the future.

According to the Global Impact Investing Network (GIIN), impact investments “are those investments in companies, organizations and funds with the intention of achieving a social or environmental benefit for the community, and at the same time a financial return for the investor” (Global Impact Investing Network (GIIN) & J.P. Morgan, 2015) This definition goes one step further than responsible and sustainable investments since it requires the investor to have a double objective of results (World Economic Forum & Deloitte Touche Tohmatsu, 2013). 

Rethinking a new paradigm 

The paradigm shift for investment seeks to generate a change in the mentality of investors so that they not only consider the return and economic risk in their decision-making, but also the impact they can generate on society. To consolidate this change, it is necessary to work on the first two recommendations made by the European Commission. The first of these is to establish social and environmental objectives in investments, which can be validated by measuring the impact generated. Secondly, we must encourage investors to consider return, risk and impact in their decision-making.

Regarding the establishment of social and environmental objectives, and the use of impact metrics, impact investments, in addition to considering financial return measurements, must also include impact measurement criteria. The study shows that the Irish private sector, which is already making impact investments, uses mainly five measurement systems: Impact Reporting and Investment Standards (IRIS), The Global Impact Investing Rating System (GIIRS), Progress out of Poverty Index (PPI), Global Reporting Initiative (GRI), and Sustainable Return on Investments (SROI). Also, many of these actors have developed their own performance metrics in accordance with the goals of their company or organization.

Other types of investors and actors also show interest in adopting social and environmental objectives. However, this has not been enough to use an impact evaluation system, which leaves this type of investment in a vulnerable situation, where the lack of evidence can lead to doubts about the value and impact it generates. “Social Impact Investment works by identifying public sector benefits that can be achieved by tackling social problems early and raising private capital to fund these interventions upfront” (Irish Government Economic & Evaluation Service (IGEES), 2015).

At the level of encouraging investors to consider return, risk and impact on their investments, efforts have focused on building the market and generating evidence that supports the hypotheses posed by impact investment, mainly through the creation of organizations. 

The need to generate a new paradigm means that in the management, promotion and implementation of impact investment schemes, actors from different sectors and characteristics participate, forming a diverse ecosystem that in order to function properly requires the participation and articulation of all. Enabling this ecosystem requires work on the last three recommendations of the European Commission: Develop capacities within the ecosystem, mainly those that generate the supply for investment; create appropriate legal forms for impact investing; and include impact investing within the development agenda of the region and the country where it is operating (European Commission, 2021).

In conclusion, impact investing is a growing phenomenon in Ireland.However, it has yet to consolidate and position itself as an option for traditional investors and for those who have started to opt for socially responsible investments. To achieve this, it is necessary to recognize the current state of impact investing in Ireland and the good practices that exist internationally, in order to generate actions in the short and medium-term.

To discuss this and other topics, we invite you to be part of our next online event where we will be developing the new challenges of the “Impact Investors”. Click here for more information and to reserve your place.

Pablo Müller

Bibliography 

European Commission, 2021. European Commission. [Online]
Available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2023
[Accessed 14 03 2021].

EVPA, 2021. European Venture Philanthropy Association. [Online]
Available at: https://evpa.eu.com/knowledge-centre/publications/investing-for-impact-evpa-impact-strategy-paper
[Accessed 14 03 2021].

Global Impact Investing Network (GIIN) & J.P. Morgan, 2015. Eyes on the Horizon: The Impact Investor Survey, s.l.: Rockefeller Philanthropy Advisors.

Irish Government Economic & Evaluatation Service (IGEES), 2015. Social Impact Investments in Ireland, Dublin: s.n.

World Economic Forum & Deloitte Touche Tohmatsu, 2013. From the Margins to the Mainstream. Assessment of the Impact Investment Sector and Opportunities to Engage Mainstream Investors, Geneva, Switzerland: s.n.

Mental Health: The Great Challenge of 2021

In recent years, the subject of mental health has moved from referring to the wide range of existing mental illnesses which affect us physically and mentally, to also including the way we live with ourselves, inhabit collective environments and feel reality. 

(Image by chenspec from Pixabay)

The development of the ongoing pandemic has brought mental health into sharp focus. In this environment, multinational organisations have been developing strategies to ensure health and wellbeing is the key factor of the business and its employees. Elaine Arden of HSBC says, “by relying on robust data and lived-experiences, businesses will get to the heart of what really matters most, develop suitable solutions and measure their impact on the mental health of their people….as businesses continue to navigate through periods of uncertainty and volatility, the need to collaborate and share best practices with peers and experts has never been more important” (Jan 2021).

The impact of Covid-19, which has caused an abrupt change in most people’s lives, is beginning to leave its mark with episodes of stress, anxiety and insomnia, among others. That being said, it is worth asking what role companies play in promoting optimal employee mental health.

(Photo by Sydney Sims on Unsplash)

A recent study Living, Working and Covid-19 Survey, which tracks labour market shifts, found that “approximately 40 percent of paid hours worked by employees were performed from home at the height of the crisis” (Burke-Kennedy, 2020).

This implies a sudden change in the lives of workers who, although don’t currently feel the costs of taking public transport or the discomfort of traffic congestion, are faced with sharing their intimate and restful space with their workspace.

This added to the overwhelming fear and confusion as a result of excess information about coronavirus, its progress and the uncertainty that threatens the future of employment and the economic crisis. It is vital for remote working to involve the creation of certain limits allowing workers to have a balance between personal or family life and work responsibilities.

Companies must be one step ahead by creating strategies to promote compliance with healthy working hours and also motivational activities and active breaks. This will mitigate day-to-day stress and, therefore, avoid mental health problems that end up seriously affecting not only the performance of the employee but also their quality of life. Actions as simple as giving each worker the right tools to carry out their work from home can make the difference between a stressful workday and a fully productive and calm one.

(Photo by Dustin Belt on Unsplash)

It is clear that the organisation’s productivity is a fundamental factor for business success and ultimately safeguarding jobs. However, insufficient attention to the wellbeing of the employees can lead to losses that even affect the financial situation. According to the World Health Organisation “depression and anxiety cost the world economy an estimated US $1 trillion in lost productivity annually” (Brunier, 2016). 

Clearly, a happy worker with low-stress levels will be more productive at work and positively contribute to and impact the social and family ecosystem.

On the other hand, isolation has brought the dehumanisation of things we took for granted such as hugs, kisses and visits to a family member or a close friend. These have resulted in higher rates of anxiety, depression, disorders of the sleeping or eating, substance abuse and even suicide risks.

Promoting and strengthening conversation spaces in companies, using cameras as much as possible in conference calls and opening more moments in the day where there is direct contact and support between teams, will have an impact on the humanisation of all employees, the activities they perform and the time they spend working from home.

Although we are facing a higher level of unpredictability, employers can take the reins to take charge to support people. Remembering that we are in this together is the first step. Mental health care and the promotion of healthy habits must transcend lockdowns to be a pillar of management and monitoring to build healthy and happy societies that build a better future.

Pablo Müller

References:

Burke-Kennedy, 2020

Brunier, 2016

www.weforum.org/agenda/2021/01/6-global-employers-on-how-to-improve-workplace-mental-health/ 2021

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