Integral Impact Investments (i³)

Introduction:

I3 impacts Venn diagram

The global investment landscape has changed and evolved significantly towards impact investments over the past decade along several macro trends:

  • Low yield environment diminishing returns from economic growth driving fund managers to seek IRR’s and prospect within previously uncharted territories.
  • Thinking beyond purely financial impact is reaching into the investment field with the introduction of GIIN and its metrics system IRIS which now has over 5000 participating organisations
  • Large supranational development financial institutions (DFI’s) such as the EIB and IFC insisting on the inclusion of metrics for e.g. environmental and social impacts.
  • An increasing trend by the fund management community to not only create differentiation but also a competitive advantage in their approach in impact investments.

Given other significant global initiatives and government policy in these areas across sectors and industries, it is likely that these trends will not diminish but rather accelerate the pace of change for the industry. As such, it would be imperative for each firm to define and design from an early stage perspective, its philosophy and investment strategy around impact in combination with its expertise combined with affiliated and near lying resources in this field, this is a significant opportunity to carve out and solidify its approach in this developing area.

Model outline:

The I³ model has been constructed as a transformational tool for the user and his/her immediate environment and organisation. Each quadrant follows the GENE and the methodology is to be expanded to overlap and expand on the current matrix as outlined by IRIS.

The integral methodology will differ in four important areas:

  1. Go beyond Environment and Social impact to include Culture, Knowledge etc. and also integrate and deepen the conventional “Western” approaches.
  2. Incorporate transformational design elements for the users.
  3. Include a deepened timeline approach based on the theory of change.
  4. Develop a multidimensional approach and mapping of change and impact that builds on Alfred Korzybski’s work on dimensions of change and also about impact as having three primary dimensions:
  1. Type of impact: Nature of the impact(s) on each person, organization, or ecosystem;
  2. Scale of impact: Number of people, organizations, or ecological units affected; and
  3. Depth of impact: Amount or intensity of change experienced, per type of impact, per person or ecosystem affected.

Type of impact may be articulated as outputs or ideally as outcomes, while depth of impact is the change in subjectively experienced wellbeing (or, in economists’ terms, utility) or ecosystem integrity associated with those outcomes. In theory, then, the total impact of a loan is the sum of changes in wellbeing (e.g., depth), for all types of impact, for all people affected (e.g., scale).