Impact investing aims to transform capital into answers for common challenges such as access to education, financial inclusion, housing, health care and climate change, while at the same time generating returns sufficient for these investments to stand on their own in the market. OPIC has a 40-year history of investing with impact, and today, OPIC is continuing to innovate with new products and services to support impact investing.
Impact Investing builds on the concept of socially-responsible investing (SRI), which screens projects for high standards related to the environment, human and worker rights, and corporate governance. But impact investing goes further than SRI, by seeking a developmental return as well as a financial return. Investors are increasingly holding their investments to a higher standard, wanting to ensure not only that they do no harm but to see that they are having a positive social contribution.
The potential to achieve significant financial returns from impact investing is great. J.P. Morgan estimates that impact investments in five sectors – housing, rural water delivery, maternal health, primary education, and financial services – will reach between $400 billion and $1 trillion over the next 10 years, generating as much as $667 billion in profits. In terms of achieving a social benefit, investment dollars can often have a greater impact than aid dollars alone; the amount of aid money available worldwide is small in relation to the trillions in financial markets.
One of the keys to successful impact investing is to develop investment pools with qualified managers who see the opportunity in these sectors and are willing to engage all sizes of business. OPIC is tailoring its financing and insurance products to support impact investors with products including certificates of participation for portfolio managers seeking to fill portfolio allocations with fixed-income instruments; multi-party and multi-project financing facilities for foundations, private equity funds and social entrepreneurs; supply chain financing; partial guaranty of financing facilities to mitigate risk; and political risk insurance for investment funds.
“Socially responsible investing has evolved to the point that investors want to do more than ensure that their capital is used in ways that do no harm. They want to see that they are using their capital to make a positive social contribution.” Six questions about Impact Investing
“Every dollar that we catalyze from the private sector to invest in development is one more dollar that does not need to be spent by the public sector or philanthropists and can be shifted to other priorities or back to the taxpayer.” Putting the “Impact” in Investing