Nearly 80 percent of impact investors believe they have a responsibility to ensure that their investments create lasting impact, a report from the finds.
Based on interviews with impact investors and entrepreneurs, the report, (44 pages, PDF), outlines the strategies investors employ throughout the investment lifecycle to ensure long-term success and sustainability of the projects they invest in. The report describes how, in the pre-investment phase, investors assess whether impact is deeply embedded in the business model or operational practices of the enterprise, what growth trajectory can be expected based on that model, and what exit paths and options are likely to be available. Considerations at the time of investment include selecting the appropriate instrument, structuring the deal to ensure sustainable growth, and seeking strategic alignment with co-investors. Then, during the investment phase, investors work with the investee's management team to implement policies and practices designed to ensure long-term impact. Lastly, investors try to time their exit to ensure not only their own financial benefit but the investee's continued access to resources, networks, and knowledge.
The report includes four case studies detailing the different aspects of a "responsible" exit — Adobe Capital's exit from a natural gas conversion company, Lok Capital's exit from a microfinance institution, Beartooth Capital's sale of ranchland, and LeapFrog's exit from an insurance provider.
"Impact investing has huge potential to generate positive long-term outcomes for society and the environment," said GIIN research director Abhilash Mudaliar. "But investors need to have the confidence that they will be able to exit responsibly. There are many more exit approaches to meet financial objectives and ensure sustained impact post-exit than investors may be aware of. This report should provide impact investors with proven strategies that they can use to exit their investments in ways that won't jeopardize the impact they seek to create."