Impact investing is not worth its name if it doesn’t step up now 

by Saskia Bruysten, Co-founder and CEO | Yunus Social Business
Thursday, 15 October 2020 15:50 GMT

Migrant workers and their families sit inside a bus to take them to a railway station to board a train to their home state of Uttar Pradesh, after a limited reopening of India's giant rail network following a nearly seven-week lockdown to slow the spreading of the coronavirus disease (COVID-19), in Ghaziabad in the outskirts of New Delhi, India, May 18, 2020. REUTERS/Adnan Abidi

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* Any views expressed in this opinion piece are those of the author and not of Thomson Reuters Foundation.

Why are we celebrating a growing impact investing sector with money to spend, if the social businesses worth saving are being left to dry?

Saskia Bruysten is Co-founder & CEO at Yunus Social Business, a social business fund and co-initiated the COVID Response Alliance for Social Entrepreneurs alongside the World Economic Forum.  

As the global economy plummets into the deepest recession seen for decades there is one positive trend: investments in impact funds have sky-rocketed. In fact, they look to reach over $1 trillion dollars by the end of year. On the surface, this seems like a milestone worth celebrating. But the money is not reaching the businesses that need it.

A recent Gates foundation report shows that 25 years of development have been wiped out in the 25 weeks of the pandemic, as 37 million people have already plunged back into extreme poverty. 

Social businesses are the typical target investees for impact investors and have been playing a crucial role as ‘first responders’ for the poor. These businesses focus primarily on solving social problems. (Despite dropping revenues, they continue payrolls to support their employees.)

Waste Ventures in India, for example, continued to pay its waste pickers and provided them with meals despite a partial shutdown of operations. This support meant their waste pickers did not have to join the thousands of migrant workers on the long walk back to their villages. Because Social Businesses are already serving the poor, they are the social safety net in many developing economies.


However, to continue to help others, these companies need help themselves. And that means quick access to funding. 


The typical SME in Europe or the US has access to significant governmental bailout packages, allowing them breathing room through the most difficult months. Social businesses in developing countries, however, face a complete funding void. Local governments either do not have adequate resources or have simply failed to act. Commercial investment is expected to drop (in Africa, by at least 40%). We expect this from standard investors, but now not even impact investors are stepping forward to protect the most vital social businesses.


A recent Global Impacting Investing Network study has shown that 27% of impact investors are either decreasing their investment activities or are uncertain about them. At Sir Ronald Cohen’s GSG impact summit last month, even supposed impact investors were cautious of investing now, citing heightened risks and remote due diligence becoming too “inconvenient”. 


Why are we celebrating a growing impact investing sector with money to spend, if the social businesses worth saving are being left to dry? In the impact investing space and beyond the growing rhetoric of “build back better” is unavoidable. But if we do not provide the much needed liquidity now, when it is needed the most, the term impact investing is not worth its name. 


Under the umbrella of the World Economic Forum, 60 organisations representing 50,000 social entrepreneurs created the COVID Response Alliance for Social Entrepreneurs.

In our latest report, we are demanding investors not to hesitate but to act now. It’s vital that impact investors actually deploy the 1 trillion they have under management. Rather than sitting around cautiously and watching as these businesses fail, it is in the interest of us all to ensure that funding is used to rebuild the impact economy now. To do that we will need to become creative: building alliances not seen before and blending commercial capital with more concessionary funding from governments, corporations, development agencies and philanthropists.

In one of the most tumultuous years we have ever witnessed, it's time for the sector to show its true colours and put the impact back into their investing.