Stanford SSIR examines the work that the John D. and Catherine T. MacArthur Foundation is doing to stimulate impact investing activity through market-making, an important role that is used in conventional markets to promote liquidity and long-term growth through the incentive of bid-ask spread profitability.
Key Message
The field needs institutions who have global but flexible reach, understand what investors and capital seekers need, and know how to scale capital gaps across multiple sectors.
***
..the reality is that there is no straight line from increased interest to increased impact. While there are proven and pioneering enterprises capable of dramatically improving health, reducing poverty, expanding education, or tackling the challenge of climate change, many have unconventional investment profiles that leave billions of dollars in potential investment on the sidelines.
The many reasons for this mismatch are well known. Risks may be too high relative to modest projected returns. Timelines to profitability and eventual investor exit may be long, with no alternative liquidity option in sight.
That is why impact investing needs more market makers. I do not mean that only in the conventional sense of standing between buyers and sellers to facilitate transactions. I am talking about institutions that work globally across multiple sectors to raise, structure, and deliver flexible capital to high-impact enterprises and funds. The field needs players who understand what investors and capital seekers need, and how to bridge even the most challenging capital gaps. They can unlock and accelerate investments with an eye toward maximizing impact, not just profit.
Think of it as market making for mission. That is what we are doing at the John D. and Catherine T. MacArthur Foundation. In addition to our traditional grantmaking of about $250 million each year, we have expanded our impact investing strategy, working in new ways and tapping a dedicated pool of $500 million to help make the global impact investment marketplace more inclusive, efficient, and effective. Our goal is to drive impact well beyond what we can achieve with our capital alone, and to create high-impact investment opportunities for other investors who are unwilling or unable to engage on their own …
More readings:
Philanthropic Pioneers, Vermont Common Good
Making Markets Work for the Poor, Omidyar Foundation
Bill Gates Foundation Saves the Lives of over 122 million children with Buffett’s $30B Investment, Bill Gates 2017 Annual Letter
***
