Impact Investors Are Raising Their Game
To bring impact investing into the mainstream, the World Economic Forum is using market-simulated games to advance the conversations.
A group of social entrepreneurs and traditional investors are thrown into a room. Their mission: to create a pitch for a large impact investment, combining actively measured social impact with economic returns. Neither has done this at scale before, and time is tight. Together, they discover many constraints and challenges to making this happen. Their final pitch is to representatives from the millennial generation, who tell them: “Good effort, but as the next generation, we need more from you.”
Although it might sound like an episode of Shark Tank or Dragon’s Den, it’s not. It happened at the World Economic Forum (WEF) 2012 Annual Meeting in Davos, where we held a session on impact investing. That year, $8 billion was committed to impact investment—a mere fraction of the tens of trillions of dollars in available global capital. The challenge was to bring impact investment from the margins to the mainstream.
We purposely structured the session in the format of a competitive and dynamic game. The game not only helped break down barriers between participants from different sectors, but also allowed them to creatively explore what impact investment needs to move to the next level.
That day made a difference to the impact-investing sector. Nearly 50 senior decision-makers collectively concluded that while impact investing had great potential, there was a long and concrete list of challenges holding back the sector. Rather than insurmountable obstacles, they became the starting point for multi-stakeholder engagement that catalyzed impact investing.
As the interest in and appetite for impact investing has grown, the sector is gradually addressing the challenges we raised two years ago. Efforts include those by the G8 Social Impact Investment Taskforce, the Global Impact Investing Network, TONIIC, and others. Mainstream investors—ranging from sovereign wealth funds and pension funds, to global banks such as UBS, Credit Suisse, Deutsche Bank, and Goldman Sachs—have increased their commitments to impact investing. The first-time pioneer funds are already raising follow-on capital.
Change is never easy, especially with a heavily debated topic and in a highly fragmented sector. But we can make it fun. This involves approaching the problem from multiple angles and incorporating multidisciplinary thinking—including understanding how your professional background can create entrenched perspectives and limited flexibility for innovation, how engaging in solution-building can lead to mindset change because of counter-attitudinal advocacy, and how relaxing the constraints of a problem set can lead to more innovative solutions.
We at WEF have continued to develop more sessions around competitive games. At this year’s annual meeting, we used a market simulation exercise where participants built portfolios with impact investments. The simulation demonstrated the benefits of such diversification against shocks like climate change events, cyberattacks, and regional political instability. In 2013, a similar game explored how products such as social impact bonds to tackle childhood obesity could make for sensible—and financially rewarding—investments.
In developing these sessions, we have come to see that understanding people’s current mindset is important to figuring out how to engage them. An open atmosphere that embraces diversity is crucial; it creates an understanding of what makes the contributors different, and what mandates, interests, and loyalties they must balance and navigate to be effective in their own worlds. These positions should serve as respectful starting points and not as constraints. It is important for change-makers to keep in mind that conversion or persuasion is not the goal here. Instead, it is about opening up new ways of thinking or approaches that could be beneficial to each individual. It is similar to giving master chefs access to first-class ingredients and an excellent kitchen, but letting them figure out what menu they will ultimately prepare.
Above all else, we realized that what starts in Davos should not stay in Davos, which is why we’ve decided to make all our intellectual property, game design, and supplemental resources available on our website. Our hope is that the impact investment field continues to grow through both our efforts and those of others.