Enabling Social Innovation through Developmental Impact Investing
Sean Geobey, Frances Westley, Olaf Weber
May, 2011
In this paper we will explore social finance as a new form of investment and a new field for risk assessment. We will briefly review microfinance, social banking and impact investing as forms of social financing and their common inability to measure non-financial risk. The growth of impact investing in particular is stifled by this challenge. We will explore why risk assessment is so challenging in social finance and suggest three reasons: the difficulty in setting boundaries, the difficulty in integrating heterogeneous values and finally the difficulty in responding with sufficient speed and flexibility to support innovation. We suggest a modified version of a portfolio strategy called developmental impact investing as tool to help investment decision makers and give six suggestions on how to implement this approach.