In the preface to their annual letter to investment magnate Warren Buffet, Bill and Melinda Gates wrote, “The best investment any of us can ever make is in the lives of others.” Unlike the Gateses and Buffet, the average person does not have billions of dollars at his/her disposal to invest in the betterment of mankind. However, with the rise of impact investing, more people can invest their money in ways that are financially and socially beneficial.
The term “impact investing” first arose less than a decade ago and has been defined by the Global Impact Investing Network as “[investing] made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.” While the social good targeted by impact investors can be varied, several social venture capital firms are focused on the world’s poor. Among them are the Acumen Fund, Gray Ghost Ventures and Root Capital.
The Acumen Fund invests in companies with the potential for social impact in Africa, India and Pakistan. In India, Acumen successfully partnered with WaterHealth International to bring clean water to rural areas. Acumen helped WHI expand from two water systems to over 500 all over the globe. WaterHealth International’s systems now provide safe drinking water to over five million people.
Gray Ghost Ventures began with a focus on microfinancing but has since become a pioneer in impact investing. GGV aims to improve the lives of the underserved in emerging markets by investing in technology and financial services companies. Since 2003, it has invested more than $125 million in businesses that have helped to alleviate poverty and expand access to quality education. To improve access to education, Gray Ghost ventures established the Indian School Finance Company in Hyderabad, India. The company provides loans to credit-worthy private schools in order to improve infrastructure and increase enrollment.
Root Capital was established with a mission to grow rural prosperity by investing in agricultural businesses. Since 1999, it has distributed over $1 billion dollars in loans and reached more than five million household members. The businesses that have benefited from Root Capital’s impact investing have generated $6 billion in revenue.
While every investment in the lives of others is worthwhile, impact investing provides financial returns for altruism. Rather than simply providing handouts, impact investors can empower the global poor to positively influence their communities.
– Rebecca Yu