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As the Global Impact Investing Network (GIIN) meets in Paris, I thought I would add some provocative tonic to conversations about the field. Reflecting on four decades as a social entrepreneur, and 23 years of investing in small enterprises I want to suggest some things to think about:

1.      See the sector as part of a broader movement for economic justice that includes political, community and environmental organisations and progressive states and cities. Change is not going to come from acting in the markets alone, and the most important changes will come from changes in the governance of the global and local economies.  You can contribute to that.

2.      Don’t think about “the world’s most intractable problems” as a sea of poverty “out there” that “we” can solve while pocketing the fortune at the bottom of the pyramid. Think of them rather as inherent in the structure of the global economy in which we are all complicit, and which we need to commit to changing

3.      Forget about mimicking private equity, investment banking or commercial lending. Creating economic justice demands a willingness to lose money or break even and sometimes to subsidise new kinds of enterprises or forms of economic activity.

4.      Don’t worry so much about distorting markets. Markets have been distorted for centuries by slavery, colonialism, rich countries’ control of terms of trade and massive subsidies to agriculture and key economic sectors. Nothing impact investors do can match that. Let’s try to redress the inequity in access which has become the norm that we are told should not be distorted. 

5.      Decide on investments based (in substantial measure) on the extent to which they help to seed institutions and practices for a new redistributive and regenerative economy rather than simply trying to solve a local problem of poverty or service delivery through market mechanisms.   

6.      Devote substantial energy and resources to evaluating the success of what you do by asking the question: “how might this contribute to a fairer global economic system? How can we maximise its contribution to that greater vision?” This may lead you to working with actors and activists outside of the investment comfort zone.

7.       Stop thinking that the poor can “self-employ their way out of poverty” through small enterprises in marginalised areas with the help of micro loans priced for every kind of risk.

8.      Abandon the notion that investors and entrepreneurs can achieve the MDGs one project or one investment at a time, if only they could mobilise $1 trillion dollars (or so) from the capital markets.

9.      Some kinds of service delivery or social action needs to be supported by the state or donor funding – trying make everything a self-supporting social enterprise either drives the activity up market (depriving the poor of something they need) or it collapses as people who are good at service delivery fail to make a success out of something that has no business being a business.

Where does all this come from? I have tried to spell out the logic behind these ideas in two prior blogs:

A unifying theory of change

The universe of international development has become very seized with “problem statements” and “theories of change”. In many institutions every project proposal and strategy document is required to spell these out, which is odd if you think about it: you can’t have a new theory for every course of action, unless its a very small theory indeed.

In a previous blog I quoted an article by 15 prominent economists in the 

Guardian(1) that to address the structural roots of poverty “requires changing the rules of the international economic system to make it more ecological and fairer to the world’s majority. It is time we devised interventions and accountability tools appropriate for this new frontier.” 

That sounds to me like a good problem statement for the impact investing community to apply to all its work.

What kind of changes and interventions are needed? A good place to start would be “Doughnut Economics” by Kate Raworth  She does a great job of showing how economic theory and practice have led us to the brink of ecological disaster and the worsening global crisis of inequality and poverty. Its difficult to read this book and come away thinking that any kind of a solution lies in more of the same: - extending the markets to places “that have been left behind”.

Raworth sets 21st Century economists the task of laying the basis for a new economic order, in which the markets, the state, the family and the commons all play a role in serving humanity(rather than humanity being servile to the markets). It would be wonderful if impact investors and social entrepreneurs could join that journey.

I urge everyone to read this book and others that are starting to challenge the orthodoxy which has dominated economics for the past four decades at least, and to begin to think and act like 21st century impact investors.

I don’t claim to know exactly where this would lead, but it is a journey we should all begin, and help each other find the way.  I plan to write about possible directions investors might take in future blogs. I hope others will join the conversation.

"Buzzwords and tortuous impact studies won't fix a broken aid system". Guardian 16 July 2018.