Impact Conversations #3

Special issue: Conversation between Wim van der Beek and Jacopo Buttafarro on the future of impact investing.

Who is Wim van der Beek?

Wim is a pioneer in the impact investing industry. He is the founder and managing partner of Goodwell Investments, a pioneering impact investment firm, with over €200 million AUM, focused on inclusive growth in sectors providing essential goods, services and income generation opportunities to underserved communities in Africa and India. With a track record of over twenty years, Goodwell demonstrates the ability to simultaneously deliver significant social impact and strong financial returns. Wim’s experience and knowledge provide unique insights into the current mechanism and future of impact investing.

An In-depth Look at Impact Investing and Measurement: A Conversation with Wim van der Beek

Defining Impact Investing

Impact investing is often misunderstood, with many initiatives being labeled as such despite lacking real investment structures. Wim emphasized that impact investing should be strictly defined as investment activities structured to generate both financial and non-financial returns. He believes that the industry needs clearer definitions to distinguish true impact investments from well-intentioned but ultimately philanthropic efforts. Without this distinction, impact investing risks being perceived as concessionary or ineffective, creating a barrier to mainstream acceptance.

Challenges in the Industry: Headwinds and Misconceptions

While impact investing has gained momentum, it is not immune to setbacks. According to Wim, the industry will continue to experience ups and downs, largely driven by scepticism from mainstream markets.
One significant challenge is the growing negative sentiment around ESG investing, which has influenced perceptions of impact investing. Some critics argue that prioritizing social and environmental outcomes may come at the expense of financial returns. This scepticism, exacerbated by political and market forces, makes it difficult for impact investing to gain full acceptance in mainstream financial circles.

The "Semi-Philanthropic" Problem

One of the biggest hurdles in scaling impact investing is the misclassification of semi-philanthropic activities as investments. Many initiatives that claim to be impact investments are, in reality, grant-based or concessionary capital models that do not generate market-rate returns.

Wim warns that as long as such activities fall under the same umbrella as impact investing, the industry will struggle to be taken seriously by mainstream investors. He stresses that impact investing should focus on market-driven financial instruments that create measurable social or environmental benefits without compromising financial sustainability.

The Importance of Additionality

A crucial yet often overlooked aspect of impact investing is additionally: the idea that an investment must create an impact that wouldn’t have occurred otherwise.

Simply having the intention to create impact is not enough. Investors must prove that their capital brings about a unique and differentiated impact, rather than simply funding projects that would have proceeded regardless. Wim highlights that too many "me-too" investments exist—initiatives that claim to drive impact but ultimately do not add anything new or necessary to the market.

Challenges in Impact Measurement and Reporting

Unlike financial returns, which are exclusive to specific investors, impact is difficult to allocate and measure. If multiple investors support a company, how do you determine who is responsible for the impact?

Wim points out that the industry still lacks standardized methodologies for impact reporting, making it difficult to track outcomes effectively. Just as international financial reporting standards exist, Wim believes that impact investing must move towards harmonized non-financial reporting standards to ensure accountability and comparability.

Advice for the Next Generation

For those looking to enter the impact investing space, Wim offers a crucial piece of advice: trust your vision and don’t be discouraged by naysayers.

"If you see something as possible and achievable, go for it—ignore the advice of those who have tried and failed," he says. He acknowledges that impact investing is still evolving, and those pioneering new approaches may face skepticism. However, innovation in this space requires persistence, courage, and a willingness to challenge existing norms.

Final Thoughts: The Road Ahead for Impact Investing

The impact investing industry is still in its early stages, facing significant challenges in definition, perception, measurement, and mainstream acceptance. However, as leaders like Wim emphasize, these barriers can be overcome through clearer distinctions, stronger measurement frameworks, and a steadfast commitment to proving financial viability.

For impact investing to truly scale, it must remain rooted in its dual promise: delivering financial returns while generating meaningful, measurable impact. Only then can it move from a niche sector to a mainstream investment strategy that reshapes the global financial landscape.

A huge thank you to Wim for his thought-provoking perspectives and commitment to driving meaningful change in the impact investing space.