United States playing catch-up to UK in impact investing

Alison Moodie writes in the Guardian on December 20 that the United States is playing catch-up to the UK in the realm of impact investing.

She may be right that the UK has been proactively creating an ecosystem for impact investing over the past two decades that includes changes to the tax law and the creation of innovative organizations such as Big Society Capital.

However, there have been at least three important advancements in the US impact investing space that Moodie does not mention.

1. The federal government revised rules regarding program related investing last year. This revision added new examples for PRI investments that may receive tax exemption as such from the IRS. A goal of this revision is to expand the number of investments that are made by foundations through program related investment mechanisms.

2. Very many databases of impact investors and impact investments have been created recently. Impact Assets has created Impact50, a showcase of impact investment fund managers. Impact Space is a database of investors, deals, and companies. These are two examples of a growing trend. One goal of these databases is to increase the number of impact investment deal by increasing transparency and thereby reducing transaction costs.

3. Moodie mentions that the US has started looking at social impact bonds, but doesn’t describe how many organizations have started to work in this space. Social Finance and Third Sector Capital Partners are two main organizations, but also the government is creating a $300 million fund for social impact bonds, and 28 state governments applied for technical assistance to the HKS SIB Lab to create social impact bonds.