The World’s Most Undervalued Asset Class
Educating girls. Vaccinating children. Cleaning the oceans. There is obvious value to these. Value that benefits the individual, communities and the planet.
Yet somehow, investing in impact is not easy and not profitable. Noone wants to invest. Everyone expects the funding for impact to come from the generosity of individuals — people “giving back”. The amounts that go towards impact every year are a ridiculously small fraction of the total money invested or spent globally, much of it in ways that harm individuals, communities or the planet.
Investing in Impact should be profitable
Because it has intrinsic value, impact should be a legitimate asset class in which any savvy investor puts a few % of their investments and can expect a return, along with a clear understanding of their impact.
The reason why that is not happening yet is that it is very hard to gauge and track impact. People stay away from things they can’t easily understand and that is true for investors as well.
RELATED: Inputs vs. Outputs vs. Outcomes in Impact Monitoring and Evaluation
Unique Impact Events
We need to start by recording individual impact events as they happen: Girls educated, Vaccinations. Tons of CO2. Healthy babies. Clear, unique events, verified, that correlate strongly with impact. These events have to be recorded in such a way that everyone trusts them AND that it won’t be possible to record one event twice or to record spurious events.
We then list these events on a marketplace. At first, the buyers will be donors simply getting attribution for their donations and visibility into how their money gets spent. Historically, donors gave money to charity and expect little in return — an annual report, maybe a postcard once a year. The least they should expect is a clear understanding of what relevant outcomes their money has funded. This will reassure them that their money is not wasted and will give them impact 100% attribution — impact events that were funded by them were not reported to any other donor.
This alone would be a great improvement on the status quo.
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Global Impact Marketplace
Then, institutions can buy these unique events to put them on their balance sheet and/ or to execute on their brand purpose — proof that they have funded impact. Perhaps Governments will buy them off of investors when bigger milestones are achieved.
Eventually, a market will emerge where bonds, derivatives and other financial products will be structured, listed and traded, bringing efficiency to impact markets and mobilizing capital where it is needed most.