What’s not to love about Impact Investing? It takes the most benevolent aspects of capitalism, i.e., innovations and creative destruction and then tries to ensure the most benefits to the society. However, despite the potential and recent rapid growth of the sector, even a simple observation shows that the public in general has not fully embraced it yet. Is there something that the Impact Investing community has not done right in term of spreading the idea around?
In the past fifteen years, the Impact Investing community is focusing on building and perfecting its “product”, i.e., bringing the return on investment to be on par or even exceeding the returns of mainstream investors. It is a gruesome and challenging work, as investing in remote geographies and engaging low-income segments is harder and most of the time riskier. Attracting more investors to the space is also not easy, creating a chicken-and-egg problem: Good returns can be achieved only when the market is relatively mature, with capital available to provide co-investments and exits to early-stage investors, but maturity can be achieved if consistent track records are already there. Meeting this challenge¹ has been consuming a lot of energy of the impact investors, and as a consequence, the soft aspect of marketing the idea to the general public has been neglected.
The Impact Investing community must strive to not only touch the mind and the heart of the larger finance community as the provider of capital, but also the general public, who’s wielding a large influence over the actions of the financial regulators and the large financial institutions. With the finance community, we can talk about IRRs and risk factors, but with the general public, we have to explore what kind of messages that can resonate the most with their mindset, even those with very low exposure to finance or development issues. In order to be able to develop such messages, there are five questions that we need to answer.
1) What Are The Right Metaphors?
Finance is an inherently complex topic, and adding impact equation to a finance discussion can make it even more complicated. There should be ways to make impact investing layman-friendly.
Both capitalism and socialism started as complex scholarly work with Adam Smith’s “The Wealth of Nations” and Karl Marx’ “Das Kapital” lengthy and largely inaccessible to people on the street. But it does not make the ideas less popular. Today, they can be simplified into something as simple and relatable as the problem of “two cows” meme circulating on the Internet.
To date, no one have boiled down the concept of impact investing into catchy metaphors. I am offering two suggestions here: Perhaps impact investing can “detox” the economic system trampled by rampant crony capitalism? Or may be impact investing be viewed as “restoring the biodiversity of forests damaged by the fire brought over by an economic crisis”? Since those two are quite raw, I am sure there are better metaphors out there waiting to be invented and evangelized by others in the community.
2) What Are We Fighting Against?
We do not have any enemies, other than “poverty”, which is too abstract to be framed as a proper enemy. Even, as we conduct our business, we encounter issues such as crony capitalism, money-laundering, or messy bureaucratic multilateral organizations, impact investors usually just look the other way. The lack of enemies is actually hurting the image of Impact Investing. If we really want to fix something, why are we not sufficiently mad at the root causes of the problems?
Impact Investing also does not have BHAG (bold, hairy, audacious) plan that energizes people. Dr. Jeffrey Sachs boldly executed his Millennium Village Project to empower few local villages in Africa, convinced that it is necessary to bring all the solutions at once to a small population rather than having small projects in a large area. It is a radical plan, drawing the attentions of both supporters and opponents half-hoping it would fail. The project ultimately failed, but there are tons of lessons learned that are actually insightful².
3) Who Are The Figures?
The most commercially successful story in Impact Investing is in the microfinance sector, and the ‘father’ of microfinance is, of course, Dr. Muhammad Yunus. However, Dr. Yunus is not a proponent of Impact Investing as he has his own “Social Business” concept that is substantially different than Impact Investing. Another prominent figure is Bill Drayton, founder of Ashoka who coined the term “social entrepreneurship”. Bill Drayton hates Impact Investing.
At the moment, Impact Investing does not have a recognizable face at the front, let alone somebody close in term of popularity to Malala Yousafzai or Greta Thurnberg. This is a bigger problem than it might seem — having a figure can invite its own controversies (which to some extent is also a good publication), but not having a figure is robbing Impact Investing from the attention that it deserves.
It probably takes some kind of serendipity for Impact Investing to bump into the right figures, but the community must be ready to embrace the opportunity when such person appears.
4) What’s In It For An Ordinary Person?
This is probably the most abstract and philosophical point I am making, but bear with me for a while.
In space travel, there is something called the overview effect, which is a cognitive shift in awareness reported by some astronauts during spaceflight, often while viewing the Earth from outer space. It is the experience of seeing firsthand the reality of the Earth in space, which is immediately understood to be a tiny, fragile ball of life, “hanging in the void”, shielded and nourished by a paper-thin atmosphere.
Michael Collins said “The thing that really surprised me was that it [Earth] projected an air of fragility. And why, I don’t know. I don’t know to this day. I had a feeling it’s tiny, it’s shiny, it’s beautiful, it’s home, and it’s fragile.”
Impact Investing, as much as we can, should re-create the overview effect experience.
The current understanding of Impact is limited to economic impact to the low-income communities, most of them in developing countries. However, as the world is increasingly more connected both physically and virtually, the impact of poverty in one remote part of the globe can be felt everywhere. As an example, famine in East Africa can bring the world’s grain prices up, that in turn can increase the poverty level in our neighborhoods, that in turn makes our families slightly less secure than before. It is probably just a little made-up example, but imagine having thousands or even millions of this kind of connections affecting our lives, making not doing anything about it stop making sense anymore.
It is of course super tough to make this kind of connections apparent to everyone, and it is inevitable that we will still have the classic free-rider problem. However, we might have underestimated the power of creating the a-ha moments in everyone’s mind when they realize that “impact” is not really just for someone else, but for everyone, including themselves.
5) What Should Be The Narrative?
Human minds are by-evolution wired to stories and narratives. The famous author Neil Gaiman wrote the novel “Neverwhere” based on the tribe of homeless people in underground London, and it captures readers’ imagination better than any textbooks and documentaries on homelessness do. Don’t get me wrong, some documentaries can be powerful too. In the hands of good storytellers, they can be made to be gripping as well, although fictions still rule when it comes to leave lasting impact in people’s mind.
Impact Investing and the causes it is championing need to tell its narratives both in term of world-class documentaries (or other format of non-fiction) and fiction. There is currently a dearth of good tales about impact investing in the popular media and this is not something that has not been addressed or even discussed within the Impact Investing circle.
With traditional product marketing, the marketers need to do the whole spectrum of work within the marketing funnel, from generating customer awareness until the moment of purchase. Fortunately, in marketing of the Impact Investing idea, we don’t need to get the “customers” to do any actions today.
Some people might be immediately converted to join the cause and becoming fervent advocates, which is a fine outcome in any case. A small minority will still dismiss Impact Investing as a ploy of the capitalists.
However, for the majority of the general public, there would be just enough awareness so that people are familiar with the idea and the debates around it and have a somewhat positive image about the sector. We will never know when and in what kind of shape will we need their support, but we will grateful if we have it when we need it the most³.
 At the same time, the sector is also busy fixing the lingering issues on integrity (impact-washing/green-washing) and finding better ways to monitor impact metrics
 Evaluation of small projects are typically very subjective as the evaluators are coming from the same organization, so lessons learnt from MVP is particularly useful, because there is no way such a prominent program can escape a public scrutiny
 The Andhra Pradesh microfinance crisis is an example when public (and politician) backing was needed the most. It was unexpected, and the industry did not pay much attention to projecting the right image