The rise of impact investing: identifying leaders at the nexus of finance and social change

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In our contemporary landscape, where social and environmental concerns are intensifying, the financial sector is undergoing a paradigm shift. Impact investing has surged in popularity and importance. As the field grows, there’s an increasing need to identify and nurture leaders at the intersection of finance and social change. But who are these leaders, and how do we find them?

Impact investing requires a balance between financial return and social impact, which at first glance, may seem at odds. Still, leaders need to prioritise and reconcile these factors to yield positive returns. Chief Executive of the Impact Investing InstituteKieron Boyle, challenges the notion that finance and social impact are incongruous forces. Instead, he suggests that they’re wholly compatible.

Especially over the longer term, investing in things that create a healthier planet and more stable societies will be vital for financial returns… How sustainable are approaches that don’t consider impact? Consumers are calling for it, governments are increasingly regulating it, and the best talent wants to work in support of it.” says Kieron

“In the short term, there can be a trade-off. Not necessarily, but often. And this is where leaders must be really clear on their ‘why’. That’s because there’s no one right answer. What are you solving for? Pace and scale, or depth and fit? Both have an important and complementary role to play in addressing the world’s biggest challenges. The clearer your why, the more likely you are to be able to attract the right sort of capital to achieve it.”

Cliff Prior, Chief Executive Officer at The Global Steering Group for Impact Investment (GSG), echoes this idea. He asserts that the most significant investment opportunities in the coming years are social and climate-oriented, namely climate infrastructure, healthcare, education, and addressing an ageing society. “While there are challenges, innovations help us find solutions… Impact investing spans a wide spectrum, from more philanthropic efforts to market-rate initiatives that achieve social and climate goals.”

Identifying and recruiting leaders who excel in financial acumen and commitment to social change presents unique challenges. This dual expertise is crucial; but financial proficiency often follows a different trajectory than social activism, and assessing genuine dedication to social change can be complex as it goes beyond conventional metrics used in finance. These factors make pinpointing and attracting the right talent a nuanced task.

According to Servane Mouazan, Founder and Chief Purpose Officer at Conscious Innovation, the challenge is finding people comfortable with holding paradoxes. She posits, “These people can engage with the grim and the beautiful in this world; they will also be cynical AND hopeful. These people can talk about the here and now and the technicalities of finance whilst being totally connected and comfortable with designing the future together with others. It may sound woolly, but this actually requires maturity, the ability to zoom in and out, to think critically about the short-term and the long-term.”

Kieron identifies two main practical challenges in recruiting leaders in this space. “Firstly, the worlds of social change and financial investments often use very different language. So, it’s important to learn how to spot talent in both. Secondly, people can have quite varied expectations about what this work actually involves. So it’s important to be clear what the job is and isn’t.”

Among those passionate about social change, there is a palpable level of scepticism about the genuine impact of impact investing. It’s crucial to interrogate the nature of this caution while considering a leadership role in this sector.

Servane sees a healthy dose of cynism as necessary when navigating a career in impact investing. “It’s normal to be sceptical if you see impact funds continuing to operate on an extractive basis, pursue growth at all costs and even leak cash. However, a few funds are currently experimenting with their governance structures and incentives and are genuinely looking at how they support positive social and environmental impact. As someone passionate about social change, you can help inform and shape this growing industry.

We also know that VC funding is not a solution for every venture. Village Capital, for instance, helps entrepreneurs find reliable information about funding options that make sense for their vision and mission and where to find them. So when communities come together and share their concerns, their lived experiences, and when they think critically, they can redesign the landscape and make it more relevant. The sector is changing, maybe slowly, but someone passionate about social change has a role to play in these conversations.”

Kieron’s advice for exploring one’s attitudes towards impact investing is as follows: “I would first invite them to consider the status quo and who that serves well and who it doesn’t…I would say it’s not what sector you’re in but how effectively you’re using that leadership position. I would then point out the scale of financial capital — it’s many times bigger than public spending and philanthropy combined. And so the questions are whether that capital addresses issues or creates them, and what leadership is needed to fulfil its potential for good. Finally, I would encourage them to keep their scepticism about impact. It would serve them well in this field. Impact investing isn’t the only tool for social change, but when done right, it’s a powerful one.”

Servane recommends that for those with traditional finance backgrounds looking to transition into impact investing at a senior level, it’s an opportunity to pause and reflect on one’s ways of working, ways of thinking and ability to contribute to systems change. Her insights include: “Be ready to question and challenge your old ways or what was important before; Be critical of operations and governance structures that are actually perpetuating problems; Do your research on which organisations, fund managers etc., are innovating, operate differently than the pack, move away from extractive practices and will stretch you to hold paradoxes; What kind of power do you hold, and what responsibility comes with it?; What is your vision for change in pragmatic ways?; How do you see yourself serving communities now and in the future who directly depend on your decisions as a senior impact investor and what do you do with that “power”?; What does risk mean to you, really? Are you ready to be challenged and challenge others about it?; What do you know about the communities you want to serve?; What and who can help you uncover your biases and blind spots?”

Kieron advises, “There are lots of different ways you can use these skills, so do take the time to explore where they can have the biggest impact. That could be as an investor, or working within an organisation that wants to take on impact investment, or a role with other actors in the field — for example, in the public sector or advisory firms. You’ll want to think about ways to increase your understanding of impact finance, especially if you hope to work on a particular type of issue. For example, that might be impact in housing, renewable energies, health, food, transportation, and so on.  Finally, impact investing really is attracting the best talent. There’s often a lot of competition for these roles, so do stick at it!”

Cliff’s guidance is simple and to-the-point, “First, ensure you’re knowledgeable about environmental and social issues. Once you’re confident in your discipline, dive into impact investing. It’s the future of finance, and it also holds personal rewards, including fulfilment and satisfaction.”

Impact investing is much more than a buzzword or a trending financial product. It represents a deeper shift in how society views the role of capital, looking beyond mere profitability to include genuine positive societal change. But for this vision to be realised, capable leaders must be at the helm. These leaders are not just financial experts but compassionate visionaries and collaborators. As the sector continues to grow, identifying, nurturing, and empowering these unique leaders will become even more crucial. With the right individuals leading the charge, the potential of impact investing to reshape the world for the better is boundless.

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Date: 9 January 2024 | Posted In: Helpful Guides | Posted by: Careers4change


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