Raising Impact Investing From Niche to Mass Market
- by Durreen Shahnaz
I started my company, Impact Investment Exchange (IIX), in 2010 a few months before I gave my first TED talk titled “Defiant Optimism.” I had four minutes to convince the world about the benefits of creating a social stock exchange. Four minutes and four years later, I have not only created an exchange but am now taking on the new challenge of issuing a financial product which can change the way we look at finance.
Since its birth in 2008 impact investing has gained momentum, but it is still the field of a few. To participate directly often requires a sophisticated investor, given the potential illiquidity of the investments. Platforms such as Kiva and Kickstarter (which are based on donations) make it clear that the potential for involving retail investors in impact investing is immense.
One solution to unlocking this supply of capital is issuing a retail impact bond (RIB) on a social stock exchange. RIBs create a liquid market for private investments that generate social and environmental value and shift impact from a niche to a mass market vehicle. This can catalyze the democratization of capital markets and hopefully bring about equitable and sustainable growth in our lifetime.
Watch: Durreen Shahnaz presents on “Defiant Optimism for Social Development” during a TED Fellow Talk.
Launched in July 2013, Impact Exchange, a collaboration between IIX and the Stock Exchange of Mauritius , is the only full-scale social stock exchange with an ability to issue and trade shares and bonds of social enterprises from across the globe. The proposed RIB, to be issued on the Impact Exchange, allows social enterprises to tap into the large retail investor base to raise funds immediately, offering a different approach to their existing funding channels.
The social impact bonds create value for all stakeholders within the ecosystem. Retail investors gain access to financial and social returns with liquidity options, social enterprises gain flexibility in their funding options, and most importantly, beneficiaries gain from immediate access to life-changing services. The proposition of the retail impact bond is simple: to provide social enterprises with funds up front, which allows the enterprises to act now and save more lives.
Issued on the Impact Exchange, RIBs will not only unlock mainstream capital for social investment, but also set the stage for democratizing capital markets—a much needed task for creating sources of equitable growth.
The first RIB is in the works. IIX will seek out suitable social sector organizations as potential issuers for the bond, focusing on key areas such as clean energy access, sustainable food sources, urban planning, health care and education.
As for TED, the nonprofit dedicated to spreading ideas (famously through short, inspiring talks), my latest talk, “The Third Way,” was about combining the best of philanthropy and capital markets to create social capital markets that work for all. That talk is being debated on TED groups online.
You can choose to agree or disagree in the virtual world, but if you want to be a part of the real world, join the movement today and be a part of this amazing change.
Editor’s note: Durreen invites you to find out more about RIBs and other innovations at the Impact Forum, the largest gathering for impact investing in Asia, June 12 to 13 in Singapore and Paris. Learn more here: http://www.impactforum.asia/