Impact investing has been growing in popularity in recent years, as more investors seek to align their capital with positive social and environmental objectives. Chicago in particular has emerged as a hub for impact investing, thanks to its vibrant social impact and startup scene. However, despite the momentum, there remain challenges and barriers when it comes to deploying impact capital effectively in Chicago. In this article, we will examine the key opportunities as well as limitations around impact investing in Chicago.
Strong Presence of Impact Investing Firms and Professionals
Chicago is home to a number of leading impact investing firms and funds, such as Impact Engine, Sears Social Investment Fund, and Chicago Community Trust. These established players provide valuable sources of capital and expertise to grow the local impact investing ecosystem. There is also an engaged community of professionals from the impact, philanthropic and financial sectors actively involved in advancing the field in Chicago.
Active Support from City Government and Philanthropic Sector
The city government and philanthropic foundations in Chicago have demonstrated meaningful support for impact investing. Initiatives like City of Chicago’s City Council resolution to promote impact investing and the Chicago Community Trust’s aligned investing efforts have helped raise awareness and directed more capital into impactful projects.
Growing Pipeline of Social Enterprises
Chicago has a thriving social startup scene, with sources like the Impact Engine accelerator producing many investable ventures annually in sectors like healthcare, education, sustainable consumer products and financial inclusion. This deal pipeline gives investors solid options to place impact capital.
Gaps in Early-Stage Capital
While Chicago impact investors are active in the growth equity and mezzanine financing stages, there appears to be a relative lack of risk tolerant, early-stage impact capital. This shortage of seed and Series A funding makes it tough for some promising social enterprises to get off the ground.
Need for More Mainstream Capital
Beyond the dedicated impact investors, more work is required to attract traditional banks, asset managers and corporations to embrace impact investing mandates and opportunities in Chicago. Creating more ‘crossover’ capital would accelerate the growth.
In summary, Chicago hosts a growing impact investing community taking advantage of the strong social enterprise pipeline, but still faces gaps when it comes to risk-tolerant early stage capital and participation from mainstream investors. Continued coordination and education efforts can help deploy more impact capital at scale in the city.