The Power of Impact Investing.

In 2004 five Indian social entrepreneurs launched an emergency medical service in Mumbai starting with 2 ambulances.  A year later they added 10 more and formed Ziqitza Healthcare Ltd.  The business model was simple.  Patients going to private hospitals paid and those going to government hospitals didn't.  The plan worked and the company became cash positive.

Charitable contributions and help in-kind, including from the London Ambulance service, facilitated its growth.  Then, in 2007, a venture fund specialising in impact investing to tackle world poverty took a $1.5m equity stake.  Others followed suit.

The company now operates in 17 states, has helped 25 million people and, as of writing, 7,238 babies have been delivered on board their ambulances.  This is the power of impact investing.  Charitable donations alone would never have achieved this result.

Impact investors are driven by the dual goals of achieving a financial return and, at the same time, generating significant social and environmental outcomes.  It goes beyond ethical investment, where unprincipled companies are excluded, and instead makes a positive investment in companies that seek to address the issues they care about.  Impact investing takes philanthropy way beyond the traditional idea of charity.  It potentially unlocks huge resources to address the world’s pressing social and environmental needs by enabling impact investors to invest a significantly greater proportion of their wealth than they might otherwise consider donating to charity.

Prior to considering impact investing, it is essential investors determine the issues they want to address and ensure any potential investment’s values and expectations are aligned with their own.  Furthermore investors must understand and accept that there will be a potentially reduced financial return for a greater social outcome and, as with any purely financial investment, they need to establish what returns, both economic and social, they consider acceptable. 

There is no need to search for specific enterprises, such as Ziqitza Healthcare Ltd., as there are a growing number of specialist funds focusing on specific sectors and geographies (health, education, environment, etc.) and they offer a way in.  As the market grows, good support systems are developing and the Global Impact Investment Rating System (GIIRS), among others, can provide comparable performance data on impact investment funds’ financial and social performance.

Impact investing provides the investor with a whole new way of supporting the causes they care about while potentially providing a financial return; a win-win for all involved.