Whether you call it impact, place-based, mission-aligned, values-driven investment, or something similar, the movement toward investing for “more than financial” return has gained significant traction over the past decade. The recent pandemic-induced economic downturn has only increased momentum in this direction, as it heightened awareness of the indispensable role of “Main Street” businesses within local economies. As a result, we’re seeing significant interest among a whole new group of aspiring impact investors looking to contribute patient, thoughtful capital to revitalize their communities. Unfortunately, for many would-be investors in this group, their ability to act on their motivations is extremely limited.
The term impact investing was coined nearly 15 years ago, and its practice has remained largely in the realm of foundations and high net worth individuals. This is due in part to the fact that these institutional and individual investors have not only a mission-driven motivation but also significant financial means to invest according to their personal or organizational values.
What is less well-known, however, is that institutional investors and wealthy individuals also have enjoyed an almost exclusive right to invest for impact due to US securities regulations enacted more than 80 years ago. Many investments are only available to people who are “accredited” investors in securities legalese; to be accredited requires having an annual income of over $200,000 (over $300,000 if a couple) and/or wealth (not including the value of a family home) in excess of $1 million.
The confluence of the desire of people of more modest means to invest for impact—combined with the critical need among local businesses for community investment—offers a watershed opportunity for the federal government to take meaningful steps toward creating more democratic access to capital.
