By the Blouin News Business staff

Impact investing and business innovation

by in Global Economy.

Captura de pantalla 2014-09-23 a las 12.56.27The ways businesses maximize innovative potential today has taken a predominant position in conversations on the management level. What kind of innovation do we need? What type is currently taking place? Where does it start? Big companies, generally speaking, are trying to be faster and leaner, and are hence innovating and growing. However, customers and consumers aren’t always benefiting from innovation in the corporate sector even if they want to be part of the decision-making process and want their voices to be heard. More and more people want to make sure that their daily decisions – the food we buy, where we buy our clothes or what phone company we should use – are having a positive effect around the world.

During the BCLS panel on “Business Innovation –  Rethinking Organizational Design and Culture”, the idea that took center-stage was impact investing – an investment approach intentionally seeking to create both financial return and positive social impact, which is actively measured. Years after the global financial meltdown, greed has lost all its appeal and is no longer acceptable on any level. The moment has come for the emerging investment approach, which many believe has the potential to reconcile key shortcomings in traditional financial markets. This stems from the need of organizations and companies to take new and fresh approaches in businesses.

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Last week the Social Impact Investment Taskforce — established by British Prime Minister David Cameron at the G8 Social Impact Investment Forum in June 2013, and which aims to catalyze the development of the social impact investment market — published a critical paper: “Impact Investing: The Invisible Heart of Markets – Harnessing the power of entrepreneurship, innovation and capital for public good.” Led by Apax Partners founder and the “father of British venture capital,” Sir Ronald Cohen, it presents the path to follow to bring impact investment into the financial mainstream.

“This is ground zero of a big deal,” said Lawrence Summers, Treasury secretary from 1999 to 2001 and economic adviser to President Obama from 2009 through 2010, after investing in one of the U.S.’s first social impact bonds in May 2014. The impact investment sector is valued at less than $40 billion around the world. The report echoes Summers’ message: “One of the strongest reasons to be optimistic about the outlook for impact investment is the growing number of impact entrepreneurs applying their creative energy to find innovative and sustainable ways of addressing social problems. There is an untapped latent supply of the talent needed to build successful impact organizations”

Millennials are looking for a sense of purpose. Impact investment builds on that desire and will only grow in importance and predominance in the global economy. “We all have a vital leadership role to play in catalyzing the market for impact investment, through how we invest and how we participate in helping to create impact,” says the report. Policy-makers and investors should be quick to jump on this new impact trend — a business innovation that can benefit us all since financial return and positive social impact go hand in hand.