“Impact investing,” as a term of art, was coined at Rockefeller Foundation retreats in northern Italy in 2007 and 2008. The attendees visiting the foundation’s Bellagio Center near Lake Como—people working in organized philanthropy, asset management, social enterprise, and consulting—discussed how to describe the wide variety of their activities that had for decades engaged private sector money to help solve social problems. Their goal was to unite the disparate investment practices—involving everything from community development to clean energy to microfinance—into a larger field that could bring the scale of private capital markets to bear on the kinds of issues that philanthropy addresses.
In many ways, the ambitions and anxieties driving their conversations embodied a world that I have spent time in and work with—a collection of unique practices, people, outlooks, events, and organizations I think of as “Foundationland.” In this realm, philanthropic practitioners and those they fund gather at convenings like Rockefeller’s to debate and refine theories of change, all in the hope of making a better world. They build new mechanisms to measure and manage social impact. They identify levers essential to achieving their goals and use grants to help pull them. But those who live in Foundationland know that they do this at a remove from the world. In their conceptualization of impact investing, they view finance as a potent force in a real economy that is separate from philanthropy, a force that can be influenced toward better social outcomes. Impact investing also reflects the idea that foundations see themselves as less powerful than finance—it is a strategy that hopes to persuade institutional investors and wealthy families to do better for the world with their vast financial resources.
In 2009, the term “impact investing” made its public debut in Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry, a report from the Monitor Institute that was funded by the Rockefeller, Annie E. Casey, W.K. Kellogg, and JPMorgan Chase Foundations. The document laid out a plan for growing the field to both promote impact investing and change how conventional investment engaged with social issues. By promoting impact investing as an industry, organized philanthropy could do what it had helped do for microfinance—grow the field into a mature, commercially viable financial practice and make it, for a time, “the best brand in development,” as Antony Bugg-Levine and Jed Emerson wrote in their 2011 book Impact Investing: Transforming the Way We Make Money while Making a Difference.