Around the world, ‘impact’ is gradually moving to centre stage. Reported impact investments are up from 1,105 in 2010 to 2,213 in 2011 (see Insight into the Impact Investment Market); the number of impact-oriented funds targeting a wider range of regions and themes is rising fast. Fully 93% of CEOs believe that sustainability issues will be critical to the future success of their businesses (UN Global Compact-Accenture CEO Study 2010). We are now starting to see curious new developments such as ‘impact gaming’, asking how the 3 billion online gaming hours played every week around the world can start to drive revenue for social change.
To reflect on these phenomena, Impact Economy gathered 60 distinguished guests from the investment and innovation community for a lunchtime discussion session at the historic Metropolitan Club at the beginning of the annual UN and Clinton Global Initiative week in New York. This occasion also saw the launch of Impact Economy’s North American operations.
The event included a keynote speech by Matthew Bishop, US business editor and New York bureau chief of the Economist, and table discussions covering the main building blocks we need to master in order to move sustainable capitalism from the margin to the mainstream and how investment strategies and tools can be used to accelerate this shift. From Rainer Scheppelmann (Ministry for Urban Development and Environment of Hamburg, European Green Capital 2011) we learned why metropolitan regions and cities are in a unique position to combine ecological with economic benefits – and how to get the job done through Regenerative Energies for Metropolitan Regions and Cities (reMAC), the world’s most advanced climate consensus tool. Acknowledging that personal transformation and meeting likeminded folks is bound to play a key role in the emergence of the new forms of leadership required to make all of this happen, participants explored with Christian Krüger (Krüger & Co AG and host of the Greifenstein Sustainable Capitalism retreat) how events like this can build the movement and drive change in practice.
The moment for impact has come in the guise of a fundamental shift in the economic paradigm, said Matthew Bishop in his keynote speech. Accentuated by the global financial crisis in 2008, the shift is still moving at a tectonic pace, waiting for discontinuities to be addressed. Three distinct groups need to be influenced and we need different strategies and instruments for each.
For Group 1 – Doing well by doing bad a combination of regulatory action, political activism, legal changes, sanctions and altered incentive systems is needed. Making ‘bad’ behaviour less profitable than ‘good’ behavior is key. Think, for example, about market-based incentive systems aimed to curb pollution.
Group 2 – Doing well by doing good is in urgent need of a serious ecosystem if it is to succeed. This includes generating and disseminating knowledge on best practices and capacity-building to get meaningful deal flow started and cut transaction costs. To foot the bill for building capacity, philanthropists and subsidies are needed.
Finally, Group 3 – The masses in the middle are especially tricky. The number of public companies has dropped by 38% since 1997 in America and by 48% in Britain – despite an increasing focus on shareholder value! Investment institutions, asset managers and consumers are generally risk-averse and short-term oriented. Changing their focus requires a fundamental systemic shift away from yield-only and short-term thinking towards more long-term, sustainable outcomes.
Across all three groups, brave investors willing to take risks are needed to establish the impact economy. The substance and enthusiasm of the event left participants with a sense that this can be done; that frameworks and models are around the corner that will have a transformational impact comparable to what happened in the age of industrialization between 1870 and 1900, when Cornelius Vanderbilt cut the price of rail freight by 90%. His grandson later signed the original lease of the Metropolitan Club. With the launch of Impact Economy in North America, we sign a new lease – a lease that will seize this unique moment in history where we can shape the future of capitalism and trigger the sea change. Welcome to the age of impact.
Maximilian Martin is global managing director of Impact Economy.