New Bridgespan Group Report Sheds Light on Potential of “Impact-First” Impact Investing to Catalyze Social Change

04/05/2021

Summary

Wealthy families are uniquely positioned to put impact first and accept less than market-rate returns to achieve greater social and environmental good
BOSTON—April 5, 2021—A new Bridgespan Group report examines what it describes as an opportunity to unleash capital and catalyze social change with an impact-first approach to impact investing. Impact-first investing stakes out a middle ground between market-rate impact investments and philanthropic grants. Authors say that wealthy families are well positioned to achieve tremendous social and environmental good by adopting this approach.
 
“Impact-first puts people and planet ahead of financial gain,” said report coauthor Matt Bannick, former managing partner of the Omidyar Network and a Bridgespan Fellow, “and there is no shortage of impact-driven opportunities.”

Putting impact first does not mean that you don’t care about returns; rather that the returns that matter most are measured in lives changed, not financial gain. As such, the Catalytic Capital Consortium, a champion of impact-first investing, explains that it is well-suited for investors “who want to support enterprises or funds that have high-impact potential but struggle to raise suitable financing because they are too early-stage or otherwise risky, expect to generate only modest returns, or require a longer investment time horizon.” That leaves high-net-worth individuals (HNWIs) and family investment offices in a unique position to take the lead.

The report features interviews with a number of family offices and HNWIs describing their experiences with impact-first investing. While conducting our research, we heard a lot about the barriers that thwart more impact-first investing, but we also heard how pioneers in the field have overcome those barriers by pursuing a three-step process:
  • Clarifying the values and beliefs behind their goals
  • Relying on trusted collaborators, including peers, fund managers, advisors, and investees
  • Choosing how to invest (e.g. hire advisors or outsource), and where to invest (e.g. funds or individual enterprises)
The report further covers how the COVID-19 pandemic and heightened concerns about climate change, racial injustice, and income inequality have injected fresh urgency into the need for more impact-first investing. It points to the pandemic’s devastating health and economic effects’ disproportionate impact on poor people everywhere and the role of systemic racism and income inequality in exacerbating the pandemic’s deadly toll. “Impact-focused enterprises are purpose-built to take on these challenges,” said Bridgespan Partner and Bannick’s coauthor Michael Etzel.
 
“A growing number of HNWIs and family offices are taking advantage of the opportunities created by fund managers and intermediaries to explore investment opportunities in the middle ground between philanthropic grants and market-rate impact investments,” continued Etzel. “If impact-first means leaving returns on the table in exchange for social or environmental benefit, it is a tradeoff we believe is worth making.”
 
Bridgespan’s full report can be found at https://bspan.org/3fBxTFE
 
About The Bridgespan Group
The Bridgespan Group (www.bridgespan.org) is a global nonprofit organization that collaborates with mission-driven organizations, philanthropists and investors to break cycles of poverty and dramatically improve the quality of life for those in need. With a presence in Boston, Johannesburg, Mumbai, New York, and San Francisco, Bridgespan’s services include strategy consulting, leadership development, philanthropy and nonprofit advising, impact investing strategy and diligence, and developing and sharing practical insights.
 
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