THE PROCESS IS THE KEY: FINANCIAL PROFITABILITY WITHOUT EXCLUSION OF SOCIAL AND ENVIRONMENTAL PERFORMANCE THROUGH IMPACT INVESTMENT

The Impact Investment is the investment made in companies with the intention of generating financial returns and positive environmental and social impacts at the same time. The concept was coined ten years ago. Some authors... [ view full abstract ]

The Impact Investment is the investment made in companies with the intention of generating financial returns and positive environmental and social impacts at the same time. The concept was coined ten years ago. Some authors associate this kind of investment with an evolution of the "Socially Responsible Investment", and others to a diversification of investment portfolios in the face of the financial crisis of 2008.  Anyway, the Impact Investment has had an important growth in the last years, from US $ 4 billion in 2011 to US $ 60 billion estimated for 2015 worldwide; in Latin America it has developed significantly in Mexico, Brazil, Colombia and Peru, these four countries would reach 8.5% of the total Impact Investment globally by 2015.  This fast process of growth implies that, compared to traditional investment, the actors involved in the impact investment are newcomers in this kind of investment. Investment funds, invested companies and support organizations, such as incubators and accelerators, have little experience in jointly managing the key elements of impact investment: financial returns and social returns, including environmental return.  The accelerated growth of an investment model that includes new dimensions to traditional investments, social and environmental, makes the management of the organizations involved in these processes a challenge so that their management really contributes to sustainability.  The value promise in the sector is a positive return in financial, social and environmental dimensions. This paper explores the question of how to find an “appropriate positive return” on impact investment, using the results of investment processes supported by the New Ventures Colombia Program, operated by the School of Management at Universidad de los Andes, between 2008 and 2014.  The investment process becomes the mechanism to determine the possibility of return required on the investment impact, which goes beyond the financial profitability of the investment.  

IMPACT INVESTING, IMPACT INVESTMENT, FINANCIAL AND SOCIAL BENEFITS