A JVI Research Project in collaboration with Georgetown Law & International Development Society
Today, investors around the world are thinking on a broader scale than ever before about the potential impact of their investments. All investors expect a financial return, but what if those same investment dollars could have a secondary effect: changing lives and building communities? In this kind of investment opportunity, called impact investing, there is a “social return on investment” – a benefit bestowed not directly on the financial investor but on society. The Global Impact Investing Network describes this growing field as “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”
In recent years, micro-lending, selective mutual funds and other programs have given investors the opportunity to incorporate personal values and aspirations into their financial investments. Consumers and business are continually growing more aware of their connection to the evolving global marketplace and the transformative power of their investment dollars. They are looking for ways to make a difference, and at JVI we wanted to know how those investments could work with us to fight human trafficking. Law students at Georgetown University Law Center were willing to take on this question and collaborated with us in a JVI-sponsored research project. (Available here)
Research Project Key Highlights:
- Our research traces the evolution of socially conscious investing, beginning decades ago with Socially Responsible Investing (SRI) Mutual Funds. These funds appealed to those seeking to avoid investing in companies that made products such as alcohol or tobacco, and later weapons and fossil fuels. In recent years, funds have been able to more narrowly target their desired impact, such as companies with practices that will fight human trafficking.
- We highlight successful types of strategies that are being used today in impact investment and profile a number of trailblazing organizations, such as the Omidyar Network.
- In Part II we review legal provisions and standards commonly found in impact investment and loan agreements that are used to achieve the social and economic goals of an impact investor. We discuss under what circumstances these provisions might be valuable to include and what these terms mean in the context of the impact investment goals. Specific examples of legal provisions for use in agreements are included in the report.
- We give recommendations to ensure investment agreements will act as intended with regard to impact. In measuring the social benefit generated by their investment efforts, investors seek to fulfill two main goals: monitoring the impact to improve the program and evaluating the impact to prove the social value. Measuring social impact is not as simple as measuring a financial return, but multiple methodologies have been developed to help quantify these social returns.
- Finally we discuss the importance of deciding a methodology and compare and contrast the “Social Return on Investment”, “Theory of Change and Logic Model”, and “Mission Alignment Methods” strategies.
Building on this research, JVI is exploring how impact investing could be used to disrupt slavery-prone industries. For example, in slavery-prone industries like construction materials (bricks), agriculture, and textiles, impact investing could be used to help grow businesses that take affirmative steps to hire former slaves and ensure no slave labor is used in their supply chains. This business-oriented, anti-trafficking strategy could be used in conjunction with law enforcement efforts against those practicing slavery to drive illegal exploitative companies out of business.You can download the full report here.
For more information, contact us at info@justiceventures.org
