The world’s most pressing social issues cannot be fully addressed through government aid and traditional philanthropy alone:
Official development assistance provided in 2015 stood at $141.5 billion1
Philanthropy in 2012 channeled over $59 billion to developing countries and private remittances provided another $210.5 billion2
And yet we continue to live in a world with:
A Development Mechanism where Traditional Aid Fails
Traditional development aid and philanthropy often falls short of its goals due to the “Samaritan’s Dilemma” – receipts stating to rely on charity as a means of survival
Development projects often fail after the sponsor withdraws, as there is no economic incentive or skilled management to sustain operations
Aid has an irreplaceable role in extreme situations such as famine or disaster relief, but is not enough to foster long-term economic and social development in frontier markets
Impact investment solves the problem of sustainability by focusing on creating self-sustaining enterprises that deliver a positive economic, social, and environmental impact.
Impact businesses are profit-generating and do not require continuous capital inflow after initial investments
Targeting market-rate or above market-rate returns, impact investment incentivizes capital allocation. Investors can utilize recuperated principal and returns from one investment to fund new impact projects.
OECD: 2015 Preliminary ODA Figures
2013 Index of Global Philanthropy and Remittances, Hudson Institute
UN Sustainable Development Goals: Poverty
UN Sustainable Development Goals: Hunger
World Economic Forum. “What If the World’s Soil Runs Out?”