Bridging the Worlds of Impact Investing and Inclusive Business
Both are effectively about using private capital to bring about positive social and environmental change. Very often both are focused on supporting small and medium enterprises in the "missing middle". Impact investors direct their investment capital and know-how to entrepreneurs that generate a social as well as a financial return, while the latter look for commercially-viable business models that include poor people as suppliers, distributors, consumers and employees (tomorrow, the Business Call to Action, in partnership with the Business Innovation Facility and Business Fights Poverty, is hosting a webinar that looks at inclusive business models that target climate change).
Both impact investors and inclusive businesses reject the notion of a simple trade-off between profit and social good, and in fact believe that finding ways to tackle social issues in financially viable ways results in longer-term and more sustainable impacts.
At the same time, both worlds face similar challenges: scaling results; measuring impact; finding ways to move into / influence the mainstream; convincing traditional development actors that the for-profit private sector has an important role to play – to name just a few.
So here’s the opportunity: by finding ways to collaborate, impact investors and inclusive businesses can massively increase the scale of their impact, and share ways to overcome the challenges. An obvious example is an impact investor investing in the value chain of a large corporate. I have been directly involved in helping a beverage company wanting to source more inputs locally in a number of African markets, which requires a significant degree of smallholder farmer development and aggregation. Bringing impact investors into the picture (instead of or in addition to the aid agencies we typically speak to) can help strengthen farmer productivity and/or develop commercial hubs to aggregate, process and deliver the supply of raw materials.
It is surprising then that in general the worlds of impact investing and inclusive business seem to be running forward in the same direction but in isolation. The impact investors – from financial institutions to family offices and philanthropic foundations – don’t appear to be connecting enough with the corporate employees driving the inclusive business agenda. SOCAP has energised me to start building these bridges and finding tangible opportunities, and about how to build a new cross-over space of “Impact Business”. If you are an impact investor or sit within an inclusive business, and would like to build the connections, please get in touch and we can work this out together.