Impact investing refers to investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return. The impact investing industry has experienced significant growth over the past decade, but its origins can be traced back decades. This article will provide a historical summary of the key events and milestones in the evolution of impact investing.
Impact investing pioneers explored aligning social causes and investment in the 20th century
The basic concepts behind impact investing began to emerge in the early 20th century. Pioneers such as George Peabody, Julius Rosenwald and Gordon Battelle contributed some of their wealth to charitable causes with the aim of solving social problems. In the 1950s and 1960s, Program Related Investments were introduced, where foundations provided capital to socially beneficial projects that generated financial returns. The Ford Foundation was an early proponent of this approach. In the 1980s and 1990s, community investing gained traction, with institutions directing capital to economically disadvantaged communities.
Emergence of socially responsible investing in the 1990s
The 1990s saw the emergence of Socially Responsible Investing (SRI), which avoided investments in companies involved in activities considered unethical. SRI focused more on screening out ‘bad’ investments rather than proactively seeking social impact. But it planted the seeds for impact investing by raising awareness of how investment decisions could align with ethical values.
Rockefeller Foundation coined the term “impact investing” in 2007
A landmark event was the Rockefeller Foundation’s launch of the term “impact investing” in 2007. This differentiated impact investing from other approaches by its intentionality in seeking social outcomes. The Rockefeller Foundation, along with the consultancy Bridgespan, published influential reports conceptualizing impact investing as a distinct strategy and outlining ways to grow the industry.
Industry infrastructure expanded through the 2010s
In the 2010s, the impact investing industry saw rising participation from mainstream financial institutions. Several major banks launched impact investing units. Global standards emerged such as the UN Principles for Responsible Investment and the Impact Management Project. Groups like the Global Impact Investing Network (GIIN) and B Lab drove standardization and provided resources. The proliferation of impact investing funds provided more opportunities for individual and institutional investors to participate.
Impact investing evolved from a niche practice to a growing industry, underpinned by a belief that capital can intentionally target social and environmental solutions. Key developments included pioneering programs aligning finance with ethical goals, the emergence of SRI, Rockefeller popularizing the term itself, and the expansion of infrastructure to mobilize impact capital.