You may have heard about it from your friends, or seen the news. Its all the rage in business schools, and its called “Impact Investing”.
This is a part of the broader trend in non-profit to move from charitable solutions to sustainable solutions. At its core, impact investing is a type of venture capital or private investing that looks for sustainable, returns-based investing with other social criteria in mind, and targeting specific social needs. This encapsulates a broad array of funds including those focused on renewable energy, community investing, backing minority-led startups, innovative health care solutions, bottom-of-the-pyramid solutions and so on.
Its certainly in the news a lot more, and in vogue, but that doesn’t mean its a fad. Experienced investment managers are using these approaches to finding “alpha” — by investing in previously neglected areas and creating goodwill and positive social change. Like any asset class, it will likely be cyclical and prone to over-enthusiasm (read: “booms”) and under-enthusiasm from the market. Big banks and institutions are setting up impact investing desks and services to serve impact investing funds, and that infrastructure, along with government policy and private patronage from foundations like the Clinton Foundation and the Omidyar Foundation can accelerate and grow this nascent sector. Some even expect that this could be the next trillion dollar investment opportunity on-par with traditional VC investing. We suspect that once it gets that large
At many of these funds, it is like working at any other smaller or middle-market funds. Its a great way to build a career in investment management and finance and you tend to work with people with traditional investing backgrounds. At larger funds / banks, the culture and work style is similar to that of those larger firms and you will likely work on or close to the prop trading desks at those firms. At foundations and non-profits, these roles can involve a more hands-on feel, they could potentially involve field work and give you a chance to better understand the social, economic and geopolitical issues in play.
No. Demand is definitely out-pacing supply. These roles are also hard to find which is why we have created a couple of channels on them so you can find them easily and better understand the organizations offering these roles. As the industry grows, these roles will grow more plentiful. If you are looking to do impact investing, also consider looking for investing and other buyside roles since that experience can be an excellent stepping stone to a future career in impact investing.