Impact Investing and Social Renewal

Conclusion

The financial crisis has provoked a thorough assessment of the contribution of enterprises and financial institutions to the greater public good and economic prosperity. One of the results of this assessment is a demand for social enterprises and impact investing. The objective of this chapter was to explore the social enterprise and the impact investor against the background of the financial crisis. This is a very promising field but still at an early stage. More research is needed on the long-term viability of these approaches. But it does appear that social entrepreneurship represents a serious attempt to build business on new moral and social foundations.

The first conclusion is that social enterprises and impact investors have a focus on the long term with the intention of solving social and environmental problems. They believe that business principles can address these problems in a financially sustainable way.

The second conclusion is that social enterprises and impact investors embody a new paradigm. They differ from profit-driven enterprises in every aspect: focus, managing shareholders, and worldview and basic beliefs. They differ from the idea of corporate responsibility in their main objectives: social and environmental problems.

The third conclusion is that social enterprises and impact investors may be a key in addressing several difficult problems facing Western society and the world such as the bottom of the pyramid, green growth, reconfiguration of the welfare state, and consumers focused on sustainable behavior. The amount of money involved in this field is relatively low but its impact is expected to be relatively large.

Interestingly, Maximilian Martin shows that the financial returns of impact investments are in fact larger than the financial returns of 'normal' investments. This has a lot to do with the focus on the long term and the sustain- able development of thriving communities. Much earlier, Collins and Porras have also shown that value-driven organizations are - in the long term - more profitable than profit-driven organizations. This data suggests that values, beliefs and fundamental motives make a big difference. It is a challenge for economists and philosophers to understand the mechanisms that underlie this difference - but a sound economic analysis must also learn to look at what cannot be counted.