Antony Bugg-Levine, CEO Nonprofit finance fund, and Jed Emerson, Executive Vice President, Impact Assets, authors of their recent book Impact Investing, offer their thoughts on the occasion of the World Bank spring meetings and the election of the new president of the World Bank.
As the leaders of the World Bank gather this week for their annual spring meetings, the attention of most who pay attention to such things is focused on is the new World Bank President, Jim Yong Kim. As we point out in our new book Impact Investing: Transforming How We Make Money While Making a Difference, he will need to confront a new operating context that demands new thinking.
The rise of impact investing—for-profit investments that actively seek to address social and environmental challenges—is creating new challenges and opportunities to the basic work of the international development banks.
The growing presence of impact investors in poor countries around the world necessitates a reexamination of how the World Bank claims to be making a difference. In an impact investing world, where the private sector can be harnessed to social good, simply providing loans to governments (the World Bank’s core mission) is not necessarily the best way to address poverty. And simply making investments in poor countries (as its International finance corporation arm has been doing since 1956) is not necessarily the best use of subsidized capital either, as private sector investors now generate more investment flows than government agencies in many countries.
Instead, international development bureaucrats and their supporters should ask how they can best use their access to expertise, policy influence, and subsidized capital to help foster an impact investing industry that can complement their resources to address growing social problems that no one side can address alone? As we show in our book, impact investors are already pioneering innovations that have the potential to provide water and sanitation to the 2 billion people without adequate access, decent homes for the world’s 1 billion slum dwellers, and educational opportunities for all children. But we need to transform systems of regulation, leadership development, measurement, philanthropy, and capital markets to realize this potential.
We look forward to welcoming the new World Bank president to this new world of impact investing opportunity and challenge.
