NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, August 18, 2014

There’s a lot of excitement about impact investing these days. The industry’s main goal, to make money while making a difference, is very enticing. However, with the lack of information on successful impact investments, it’s hard to know if impact investments are truly making an impact.

I became fascinated with impact investing during my graduate study, and decided to study its effectiveness on achieving both financial and social returns. After interviewing 25 impact professionals for my graduate thesis, I found that the most successful impact investments are tied to effective social enterprises. These enterprises shared several common characteristics, such as:

• A clear impact mission: it is important to have both a clear mission and plan to achieve the mission. Several investors pointed to the fact that the best financial returns come from enterprises that already have an established impact mission and execution plan. Similarly, an enterprise with a solid business model is crucial. They should already have an established product that addresses local needs and market demands. This differentiates impactful enterprises from those that simply have a good mission.