Impact investment aims to create positive social change alongside financial returns, thereby creating blended value. Impact investments differ from earlier forms of socially aligned or socially responsible investments in that the intention behind the impact investment is to have a positive effect on society as opposed to merely avoiding negative effects (Flynn, Young, & Barnett, 2015 p.11). Assessing the intended and actual blended value created is an important part of impact investing.
History of impact investing
While impact investing was coined as a term in 2006, its origins go back at least as far as the 1970s when concerns were raised about the social and environmental costs of financial returns. The 1980s saw growth in the number of funds that appealed to socially responsible investors. This movement continued growing in the 1990s; including, for example, the launch of the Domni Social Index.
However, it was only in 2007 that the term impact investing was coined by a group of investors convened by The Rockefeller Foundation at the Bellagio centre. This was the first time a name was put to the type of investment that was made to generate both financial returns and social and/or environmental impact. Moving into the 2000s until the present, impact investment has continued to grow in prominence and, along with it, impact measurement practices that serve to differentiate this type of investment from others.