Bìznes Inform (Feb 2020)
The Conceptual Approaches to Defining the Essence of Impact Investment
Abstract
The article is aimed at theoretically identifying the essence of impact investments, i.e. investments that, in addition to financial returns, are directed towards social and environmental influence (effect) and which are an efficient instrument for solution of «failures» of both the market and the State. This category requires a closer definition, as practice develops faster than theory, there are contradictions in understanding the rate of returns and its assessment, efficient distribution of financial benefits and the social, environmental effects between stakeholders. It is generalized that investments relate to impact investments if targeted for significant social and environmental benefits; have a financial benefit; their influence is measurable; impact management is monitored and managed; there is accountability that demonstrates the achievement of social goals; successful experiences of social and environmental influence are being transmitted. Unlike philanthropy and socially oriented or socially responsible investments, they are focused on quantitative results (profitability), not limited in time, oriented towards the positive influence proactively. The following restrictions on the development of impact investment have been identified: traditional investment theories are not able to explain the motives and values of impact investment; desire to have a social or environmental impact does not mean that investors will do so; undeveloped infrastructure; the State actions can lead to both positive and negative externalizations; confidence is an important element, but this market is new, so the level of uncertainty and risk is high. It is proposed to form clear standards and practices on the identity of impact investments, ways and methods of assessing their influence, approaches to designing impact-investment products in accordance with the needs of different types of investors, regulation policies, incentives and removal of barriers in order to balance the interests of stakeholders.
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