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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Serie: Little Books. Big Profits
- Sprache: Englisch
Explore the strategies of impact investing that deliver financial gains and positive results for people and the planet
In The Little Book of Impact Investing: Aligning Profit and Purpose to Change the World, veteran investor and author Priya Parrish delivers a timely, inspiring, and practical exploration of an investing discipline that is rapidly taking center stage in contemporary finance. In the book, you'll explore how and why impact investing has become an essential strategy for retail and institutional investors around the world and how it can help you build and manage high-performing portfolios while making a positive difference in the world around you.
The author explains the universe of opportunities made available by impact investing by diving deep into both the public and private markets. You'll learn how the discipline is related to modern portfolio theory, diversity considerations, issues of climate change, sustainable investing, and recent controversies about ESG investing.
You'll also discover:
- Where impact investing came from, how it's shaping markets today, and where it's going in the near future
- Impact investing goals and how they relate to financial returns and risk
- The management tools utilized by leading impact investors to improve performance.
An essential resource for retail and institutional investors, The Little Book of Impact Investing is destined to become the gold standard in impact investing reference books for anyone seeking and up-to-date and insightful discussion of one of the most exciting and influential investment disciplines in contemporary finance.
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Seitenzahl: 241
Veröffentlichungsjahr: 2024
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Table of Contents
Cover
Table of Contents
Series Page
Title Page
Copyright
Dedication
Preface
Part One: A Brief Introduction to Impact Investing
Chapter One: What Is Impact Investing?
Chapter Two: Why Now? The Right Time for Creative Disruption
Chapter Three: Hold On, What About ESG?
Chapter Four: My Journey to Impact Investing
Chapter Five: How Impact Investing Grew Up
Chapter Six: Who Can Be an Impact Investor?
Chapter Seven: Other Roads to the Same Place
Going All-In on Impact: Jessica Droste Yagan
Using Private Capital for Public Good: Martin Nesbitt
From Investment Banking to Impact Venture Capital: Victor Hu
Part Two: How to Be an Impact Investor
Chapter Eight: How Impact Can Drive Returns
Chapter Nine: Where Do You Start? Deciding Where Impact Belongs in Your Portfolio
Chapter Ten: Beyond the Label: Identifying Impactful Companies
The 5P Framework
Developing a Theory of Change
Chapter Eleven: If You Don’t Measure It, Is It Real?
Developing a Logic Model
The Impact Management Project
How to Evaluate Impact Metrics
Chapter Twelve: Building Better Businesses: Impact Management
Communication and Engagement
Terms and Incentives
Legal Structures
Chapter Thirteen: Stuck in the Mud: When Impact Gets Complicated
A Business Model Shift and a Leadership Transition: OnlineMedEd
Mergers and Acquisitions: Regroup Therapy
Exits: Edovo
Part Three: The Impact Opportunity Set
Chapter Fourteen: Where Can You Find Impact Investments?
Chapter Fifteen: Economic Opportunity
Finding the Right Solutions to Create Economic Opportunity
Chapter Sixteen: Health and Wellness
Impact Investing Trends in Health and Wellness
The Impact Edge: Win-Win Investing
Impact Opportunities in Food and Agriculture
Chapter Seventeen: Environmental Sustainability
Impact Investors Are Key to Fighting Climate Change
The Climate Investment Opportunity: Energy Transition, Resource Efficiency, and Adaptation
Chapter Eighteen: Public Markets
Chapter Nineteen: Social Impact Bonds
Chapter Twenty: Alternative Ownership Structures
Conclusion
Notes
Preface
Chapter One
Chapter Two
Chapter Three
Chapter Four
Chapter Five
Chapter Six
Chapter Seven
Chapter Eight
Chapter Nine
Chapter Ten
Chapter Eleven
Chapter Twelve
Chapter Thirteen
Chapter Fifteen
Chapter Sixteen
Chapter Seventeen
Chapter Eighteen
Chapter Nineteen
Chapter Twenty
Conclusion
Acknowledgments
About the Author
End User License Agreement
List of Tables
Chapter 11
Table 11.1 Logic Model
Chapter 14
Table 14.1 AUM Allocation by Business Stage
Table 14.2 Impact AUM Across Asset Classes
Table 14.3 Capital in Different Geographic Regions
Table 14.4 Dollars Allocated Across Sectors
List of Illustrations
Chapter 1
Figure 1.1 Sizing the market
Figure 1.2 The spectrum of returns
Chapter 5
Figure 5.1 Stages of development for the impact investing field Courtesy of ...
Figure 5.2 Sustainable Development Goals Source: United Nations Department o...
Chapter 11
Figure 11.1 Understanding impacts
Guide
Cover
Table of Contents
Series Page
Title Page
Copyright
Dedication
Preface
Begin Reading
Conclusion
Notes
Acknowledgments
About the Author
End User License Agreement
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Little Book Big Profits Series
In the Little Book series, the brightest icons in the financial world write on topics that range from tried-and-true investment strategies to tomorrow’s new trends. Each book offers a unique perspective on investing, allowing the reader to pick and choose from the very best in investment advice today.
Books in the Little Book series include:
The Little Book of Investing Like the Pros by Pearl and Rosenbaum
The Little Book That Still Beats the Market by Joel Greenblatt
The Little Book That Saves Your Assets by David M. Darst
The Little Book That Builds Wealth by Pat Dorsey
The Little Book That Makes You Rich by Louis Navellier
The Little Book of Common Sense Investing by John C. Bogle
The Little Book of Value Investing by Christopher Browne
The Little Book of Big Dividends by Charles B. Carlson
The Little Book of Main Street Money by Jonathan Clements
The Little Book of Trading by Michael W. Covel
The Little Book of Valuation by Aswath Damodaran
The Little Book of Economics by Greg Ip
The Little Book of Sideways Markets by Vitaliy N. Katsenelson
The Little Book of Big Profits from Small Stocks by Hilary Kramer
The Little Book of Currency Trading by Kathy Lien
The Little Book of Bull’s Eye Investing by John Mauldin
The Little Book of Emerging Markets by Mark Mobius
The Little Book of Behavioral Investing by James Montier
The Little Book of Hedge Funds by Anthony Scaramucci
The Little Book of Bull Moves by Peter D. Schiff
The Little Book of Alternative Investments by Stein and DeMuth
The Little Book of Bulletproof Investing by Ben Stein and Phil DeMuth
The Little Book of Commodity Investing by John R. Stephenson
The Little Book of the Shrinking Dollar by Addison Wiggin
The Little Book of Stock Market Profits by Mitch Zacks
The Little Book of Safe Money by Jason Zweig
The Little Book of Zen Money by The Seven Dollar Millionaire
The Little Book of Picking Top Stocks by Martin S. Fridson
The Little Book of Robo Investing by Elizabeth MacBride and Quian Liu
The Little Book of Trading Options Like the Pros by David Berns and Michael Green
THE LITTLE BOOK OF IMPACT INVESTING
Aligning Profit and Purpose to Change the World
PRIYA PARRISH
Copyright © 2025 by Priya Parrish. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data is Available
ISBN 9781394257560 (Cloth)
ISBN 9781394257584 (ePDF)
ISBN 9781394257577 (ePub)
COVER DESIGN: PAUL MCCARTHY
To Mom and Dad, for inspiring a higher purpose.
To Rebecca, for helping me find my path.
To Sai, Aadi, and Diya, for making sure I’m still having fun.
Preface
WILEY’S LITTLE BOOK SERIES has a long history of sharing finance strategies in understandable terms. The addition of impact investing to the series is an important milestone as it cements this once controversial idea as a widely accepted, powerful, and more thoughtful way to invest.
Impact investing, a term coined in 2007, allows investors to do social and environmental good while still making a profit.1 What was once seen as a radical idea is now common sense. Businesses that solve society’s biggest challenges are financially valuable and often make for great investment opportunities. As impact investing gains more adherents and credibility, it is time for it to be well understood and utilized by everyone.
This book is my attempt to make sense of the confusion, as it is difficult for a newcomer to understand the jargon, sort through the many false or exaggerated claims, and follow the heated debates about this topic. It is written for anyone who expects more than financial returns from their investments or is curious about what their investments can do when aligned with purpose.
There are many reasons why you might want to become an impact investor. First, it has the potential to enhance your returns and lower your risk. Impact investing, like entrepreneurship, centers around disrupting the status quo with more effective solutions. Moreover, taking this approach can help you avoid investing in companies that are taking unnecessary risks (e.g. in the way they mismanage their employee base and culture or are exposed to costly environmental hazards in their supply chain).
Impact investments are also a more efficient way to achieve social goals. It’s inefficient to disregard the social impact of how you invest and expect philanthropy or government programs to deal with any negative effects. Impact investing is a more effective use of capital because it considers the long-term costs and benefits for investors and other stakeholders from the outset.
Finally, it’s emotionally rewarding to align your values with your dollars. As Mahatma Gandhi said, “Happiness is when what you think, what you say, and what you do are in harmony.” We seek this alignment in how we vote, what we buy, where we donate, and possibly even our choice of work. How we invest is another opportunity to live a life of integrity.
Regardless of your motivation, this book is intended to help define smart impact investing and give you a toolkit to become an effective impact investor. This might mean investing for yourself, pushing your financial advisor to do better for you, or inspiring the foundation board you sit on to align its finances with its mission. Impact investing is for everyone, regardless of values, political views, or how much they have to invest. If you do it well, it can make you a better investor, and I’m going to help you understand how.
My journey to impact investing began when I was an undergraduate student studying economics and entrepreneurship. I could not understand why we were so obviously underutilizing the power of business to improve the world. This was 20 years ago, before impact investing was a recognized strategy. At the time, just about everyone in the field was an entrepreneur experimenting with investment tools to do well financially and to do good for the world. I joined right in.
I’ll share more about my journey in Chapter 4, but for now, you can rest assured knowing that I’ve been at this for many years and have done everything from investing in to managing and creating impact funds. Along the way, I have also spent years in the hedge fund and family office world, as I felt strongly that to be a good impact investor, you must be a great investor. Today, I serve as chief investment officer at Impact Engine, a $250 million institutional venture capital and private equity firm based in Chicago driving positive impact in economic opportunity, environmental sustainability, and health equity.
I’ve taught a course on impact investing for MBA students at the University of Chicago Booth School of Business for several years. Much of the content in this book comes from that curriculum. As the demand for that course grew, I added courses for executive MBA students, as well as for the accomplished leaders in the Leadership & Society Initiative who were transitioning their longstanding careers toward purposeful next chapters. The increasing demand for my courses underscores that society finally welcomes, and perhaps even expects, the business and finance community to be part of the solution to society’s greatest challenges.
With more than $1 trillion of assets under management, according to the Global Impact Investing Network, the field is growing quickly, and many asset management firms are crowding into the space.2 This includes pure-play funds completely dedicated to impact investing, as well as some of the largest diversified asset managers. From Bain Capital to Blackrock, investment firms have entered this field as it has become more proven and have catapulted it to one of the most in-demand investment strategies today. This means that today young professionals can go straight into impact investing, and so too can experienced professionals who want to apply their investment skills in a more mission-driven way.
While the industry tailwinds are strong, we are in an important period where the diverse approaches to impact investing need codification. Asset owners, from retail investors to pensions, drive demand, and asset managers respond with products, some better quality than others. This book will lay out not only what impact investing is, and how and why it has evolved to its current state, but also its limitations. I’ve intentionally included many examples of companies and funds striving to generate impact, both success stories and those that faced difficulties. It is important to note that I primarily discuss impact investing by venture capital and private equity investors in for-profit companies to simplify and focus the discussion. However, there is a long and successful history of philanthropic capital making other types of impact investments (including loans and guarantees) to bring economic opportunity to people and places not served by the financial sector.
Impact investing will inspire you, but it is not the solution to our society’s challenges. We still require the government and philanthropy. We still need voters and volunteers. The rise of impact investing is about systems change, or how we can harness the massive power of the financial industry toward solving our most pressing problems. Impact investing is not easy; it is not perfect, but it is an underutilized and powerful tool that the world needs more of right now.
Part OneA Brief Introduction to Impact Investing
Chapter OneWhat Is Impact Investing?
LATELY, IT SEEMS LIKE every financial institution, from Vanguard to KKR, wants to sell you something with impact in the name. But with no clear definition of impact investing, how do you know if there is anything different about these investment funds? This also begs the question—what impact is each of these funds striving for? And do you agree with the goal?
There are also many mistruths and misconceptions about impact investing that lead to unsubstantiated skepticism. One myth is that impact investing is a socialist conspiracy theory to redistribute wealth. Some critics conversely suggest impact investing is the capitalist way of extracting more profit from those in need. I’ve had people tell me it’s only for liberals, and others say it’s only for religious conservatives. It won’t make money. It won’t do good.
As impact investing found its way to mainstream media, I found it difficult to understand the logic behind such sensational and contradictory depictions. It’s misunderstood, as the field has a long, winding history and a large tent that includes many approaches. I stumbled upon the idea 20 years ago and have had my own journey trying to figure out how to turn impact investing into a career. I can assure you, it does not have to be complicated, and you can apply it to your own portfolio if you break down the core principles.
Before I provide an accurate definition of impact investing, let me first set the record straight on some of the myths.
Myth: Impact investing won’t make money, as you have to sacrifice returns to do something good.
Truth: It is possible to generate a range of financial returns while driving a positive impact. Many impact investments target returns that are in line with nonimpact investments. Other impact investments purposely target lower returns to create a type or amount of impact that otherwise wouldn’t be possible but are often necessary to prove a market or catalyze future investment by those seeking market-rate returns. The common thread is an objective to create some amount of financial returns and social impact, with the investor needing to be clear about what amount of each in order to be held accountable for that.
Myth: Impact investing is just a marketing scheme.
Truth: Unfortunately, there are investment funds that use the label impact investing opportunistically with little to no intentional strategy or process to create any impact. However, those are simply bad investments. They don’t define what one should expect. This same misbehavior can be found in other investment strategies and industries. I’m confident that with time those misusing the label will face consequences, from lawsuits to obsolescence.
Myth: Impact investing is a driver of woke capitalism.
Truth: The myth to bust here is the very idea of “woke capitalism,” which is the belief that corporations seeking to communicate and operate in a way that is aligned with social goals—such as gender diversity, climate mitigation, or voting rights—is an overextension of their role in politics. Corporations have always tried to influence public policy. Just take a look at the billions of dollars spent yearly on lobbyists.1 The rise of impact investing has also led to more CEOs feeling empowered and incentivized to speak up and change their management practices around impactful issues, making their involvement and position on topics more transparent to their employees, customers, and the public.
Myth: Impact investors are trying to displace philanthropy and nonprofits.
Truth: Nonprofits take on many challenges affecting vulnerable communities that only they can address, and philanthropy is an essential resource for this work. Impact investors believe that for-profit companies can help address or lessen many of the large challenges facing society and be partners to both philanthropy and government. Impact investing is not the solution, but it is an important part of the solution. For example, no amount of impact investing dollars will solve climate change; the challenges facing the planet require grant funding and other forms of philanthropic capital. Impact investors seek to provide an additional type of capital and alternative solutions to help mitigate and adapt to climate change.
Myth: You can’t “prove” the impact of impact investing as it’s not measurable.
Truth: Reputable impact investors can and do measure impact in accurate and verifiable ways. However, there are practical considerations, from cost to time horizon and privacy, that affect the level and type of measurement methodology. This variety in approach creates a lack of standardization, leading to the myth that measurement isn’t possible. Foundations that provide philanthropic capital to nonprofits face the same measurement constraints despite decades of standardization attempts. Leaders in both impact investing and philanthropy support improvement in this area.
Myth: Impact investing is a fad, and real investors and business leaders don’t care.
Truth: The consistent growth in impact assets under management throughout boom and bust markets shows no sign of waning (Figure 1.1). This trend is apparent in nearly every asset class and geography. The number of investment firms and business executives showing an interest in developing expertise or offering in this space supports that the industry is here to stay.
Myth: Impact investing is only for liberals, for the religious, for the rich, for the young, etc.
Truth: Impact investing is not a monolithic appli-cation but is based on a set of core principles to allow for a diversity of objectives and approaches.
I don’t know how this myth got started, as in-dividuals and organizations of various social, religious, and economic statuses participate equally. For example, the Catholic Church and the Ford Foundation are known to invest their dollars in alignment with their unique missions. At Impact Engine, we have investors ranging from those in their 80s to those in their 20s, and often, generations come together within families to invest with impact.
Myth: Impact investing is a small market with limited options.
Truth: With more than $1 trillion of assets under management and growing, there is an increasing depth and breadth of impact investment options. As more dollars and talent roll into the field, this will only improve further. Many families and foundations, like the Nathan Cummings Foundation’s $500 million endowment or the California Endowment’s $4 billion, have already committed to investing all their capital with an impact lens.
Figure 1.1 Sizing the market
Source: GIIN Annual Impact Investor Survey. The GIIN. (2015–2022). https://thegiin.org.
With some of the myth-busting now behind us, let’s explore what defines an impact investment. While impact investing has a history rooted in the environmental, social, and governance (ESG) industry, which we will cover in Chapter 3, impact investing as a defined investment approach began in 2007 thanks to the leadership of the Rockefeller Foundation.
That year, the Rockefeller Foundation hired Anthony Bugg-Levine to lead a new effort in-house and brought together roughly 40 practitioners to their retreat center in Bellagio, Italy, to collaborate on bringing a clear definition to the marketplace.2 They knew it was possible to drive impact outcomes with their investments, but there were such wide-ranging strategies and results that a unified view of impact investing was needed to understand its growing role in the portfolio.
For example, the Acumen Fund was started by Jacqueline Novogratz, who invested philanthropic dollars in revenue-generating social enterprises in East Africa and South Asia to recover most but not all of the capital invested.3 Muhammad Yunus established the Grameen Bank to lend directly to women in Bangladesh, taking on risks that other lenders would typically avoid while also innovating a support model that allowed for positive financial returns.4 In U.S. markets, DBL Partners (at the time called Bay Area Equity Fund) managed a $75 million early-stage venture capital fund that invested in high-growth startups, including Tesla.5 Despite the wide range of security types, risk and return targets, and impacts each investment firm was striving for, something in common connected them all and separated these strategies from other socially responsible investments and ESG funds. They were all attempting to have a social and environmental impact with their capital while also delivering some level of financial returns.
The Rockefeller Foundation was not the only organization that had begun to explore how these kinds of investments would further their charitable grants. W.K. Kellogg Foundation, JPMorgan Chase Foundation, MacArthur Foundation, and the Annie E. Casey Foundation were among the other early leaders. Additionally, a number of prominent family offices, including Mitch Kapor, Justin Rockefeller, Liesel Pritzker Simmons, Jeff Skoll, and Charlie Kleisner, were beginning to invest their personal wealth in this manner. Initially, these were mostly mission-oriented organizations and families committed to exploring the potential financial and social return of these strategies.
One issue the Rockefeller Foundation identified early was the need to accurately measure the impact of these kinds of investments. There was not enough data to categorize the myriad of approaches into likely outcomes. Still, the Rockefeller Foundation and some of the other early impact practitioners did have a common belief that sharing their learnings could create a broader market and crowd in more capital. Subsequent to the Bellagio convening, the Rockefeller Foundation created the Global Impact Investing Network (GIIN) to share learnings with the goal of educating the broader public about impact investing and advancing the various approaches.6 Headed up by Amit Bouri, the first job of the GIIN was to bring definition and clarity to the impact investing space.
The Bellagio attendees also created, and the GIIN helped build consensus for, the following definition of impact investing: “Investing with the intention to generate measurable financial and social returns.”7 Since this early definition of impact investing has proved seminal to so much of the industry’s subsequent work, it’s worth dissecting the meaning of the three keywords to this novel and groundbreaking definition: intention, generate, and measurable.
Intentionality means an investor has an impact objective at the outset. Unfortunately, there are many examples of large asset managers claiming they have decades of experience and billions of dollars invested in impact, but these claims are made in retrospect as these firms had no impact strategy until recently. If you double-click to review the depth or magnitude of the impact they’ve created, there is little to show. This is because businesses that create meaningful impact require intentional, strategic decisions throughout their life.
