Giving Compass' Take:

•  Jenna Liang, writing for avpn, discusses four ways to be better impact investor by using a collective impact framework and applying critical systems change thinking toward investments. 

• Why is it important for investors to understand environmental and social returns through a systems change lens? 

• Read the Impact Investing Giving Compass Magazine.

An increasing number of philanthropists and socially-minded investors around the world are making investments in order to generate financial returns in conjunction with social and environmental returns.

Unfortunately, many investors fail to fully address the negative effects to the environment or society we might create.

In response to criticisms and in an effort to do better, foundations have evolved and introduced new rigor to their work. This includes using a collective impact framework, increasing transparency and trust between donors and grantees, introducing monitoring and evaluation for feedback and applying systems thinking.

Four Ways to be a Better Impact Investor

  • Be open to understanding the system and your role in it- Traditionally, impact investment has focused on a small number of indicators which translate into or link to financial return.
  • Design for impact and the unexpected- Mapping out the system shows all the effects of an investment.  Intervene preemptively to avoid unintended negative consequences or monitor a sensitive situation.
  • Identify leverage points and lean into the challenge of change- Using systems thinking helps us on where to intervene most effectively for better performance by spotting bottlenecks, potential problems and opportunities.
  • Listen- In philanthropy we speak often of the power imbalance between a funder and charity. A similar dynamic can exist in impact investing. It is thus vital to solicit feedback from those whose lives you are changing.

If time or cultural differences are factors, consider working with on-the-ground investment teams instead of making international ‘airplane investments’, or collaborate and co-invest with other social investors.

Read the full article about impact investing by Jenna Liang at avpn.