Alan Patricof of Apax Partners and Greycroft Partners discussed with Forbes how social impact investing is “the next big thing.” He wrote, “The world is on the brink of a solution of how we solve society’s toughest problems, ” as a task force recently said to the G8. The U.S. Small Business Administration devoted $1 billion to “support individual impact investing funds and assist in building a growing and dynamic impact investing sector.”
Patricof comes at a time when social activists realize that grants aren’t enough to create change. What is required are new investing vehicles to promote social advancement and create a return for investors. The vehicles can be used to improve the environment, promote education, spur on employment and addressing health problems.
One way to achieve this is through benefit corporations, which were first established in Maryland in 2010, and have spread to 27 states. These corporations pursue financial and social goals. Also Patricof recommended the adoption of Global Impact and Investing Reporting Standards (GIIRS) as a measuring tool.
Sir Ronald Cohen, who was chair of the G8 taskforce, has developed the social impact bond. These bonds, with 20 already in existence in five countries, use private funds to address social issues with the government repaying investors based on metrics measuring social outcome such as the GIIRS.