Impact Investing in 2022 – A Look Ahead

We want to look to 2022 with hope. While the pandemic will continue, with a fair wind we will move from “epidemic” to “endemic” and we will start to get back to the in-person discussions, debates and human interaction that add so much enjoyment to our everyday, even as we continue to help clients grapple with opportunities in education and employment. Below, senior members of our impact practice team share forward-looking insights based on our work in 2021.

Over the next twelve months, we are keen to engage with you around these predictions, particularly if we can help with opportunities or challenges that your organization may be facing.

Education is an Essential Impact Investing Sector – Sean Crowley

Cracks in our education system pre-dated the pandemic. Students were graduating unprepared for the real world, with high debt, poor job prospects, and an ever-increasing cost of living. Many questioned the value of higher education and the relevance of what they learned in K-12. Covid-19 has highlighted and exacerbated these issues – and shown us some of the possibilities. The pace and acceptance of technological change is only accelerating, as we hurtle towards a future where physical boundaries are less meaningful, and the dissemination of knowledge is easier than at any point in human history. Education as a sector needs to reckon with these changes, and many stakeholders will be forced to do so if the choice is not made quickly and voluntarily. There is hope. K-12 can be made more relevant, equitable and holistic. Higher education and other emergent postsecondary players have many avenues to help us navigate the future of work. For those seeking to drive impact, there are few higher points of leverage to invest in right now than influencing the evolution of how we educate our citizens.

Those Who Are in the Business of Catalytic Capital Need to Be Bold – Andrea Mainelli

If there ever was a year that proved the need for philanthropic and catalytic capital, it was last year. When government was mired in politics and slow to respond, and private capital lacked imagination and appetite for risk, philanthropic and catalytic investors stepped in to fill the gap. Simply put, they were crucial capital providers who proved to be nimble when the times required it. In our work at the intersection of education and employment, the pandemic smashed forever old paradigms – which were already crumbling – of how we educate and how we work. The system is broken for many. Catalytic capital – patient and tailored to investors using breakthrough ideas to solve problems – is poised for an even bigger role this year. While conventional companies might attract conventional funding with increased valuations in a hot market, the changemakers often do not. With new pools of capital emerging, such as funder collaboratives and DAFs, catalytic investors are essential to jumpstart change, solve intractable problems, take unidentified risks.

Investors and LPs Will Ask More About How Their Money Is Making a Difference – Nick Kind

I’d like to think 2022 will be more demanding. Honestly. I am the first to admit that 2021 was difficult enough in too many ways, but in the world of education impact investment, there is room for creative challenges to the status quo. I’m particularly thinking about how LPs in education funds hold their investment managers accountable for the non-financial aspects of their portfolio performance. There are plenty of “impact reports” out there, but they aren’t all great. Some feel retrofitted to history, rather than guided by a clear vision of change and meaningful, practical measures of success. Others focus on outputs (such as hours in the classroom) rather than outcomes (finding a better job). Creating accessible, high-quality reports isn’t easy for a plethora of reasons, but some of the work we did last year gives me both a sense of step-change in the expectations of LPs and a confidence that it’s possible.