Although it has only recently been growing in recognition, impact investing has been in existence in various forms for a long time. A history of individual investors using socially responsible investing to express their values exists, and such investing behavior is usually defined by the avoidance of investments in specific companies or activities with negative effects. Since the 1960s, government-funded financial institutions like the International Finance Corporation (IFC)—the World Bank’s private investment arm—and the U.S. Overseas Private Investment Corporation (OPIC), have been engaging in impact investing through private equity and debt investing in developing economies. The IFC, which coined the term “emerging markets” in the early 1980s, has proven that generating impact investing (investing with impact) does not necessarily require sacrificing return, achieving an annual internal rate of return of 18.3% on its investment funds portfolio between 2000 and 2011.
In the 1990s, Jed Emerson advocated the blended value approach. This approach focuses on aligning the investments of the foundation’s endowments with the overarching mission of the foundation, rather than simply trying to maximize financial return. Simultaneously, approaches such as pollution prevention, corporate social responsibility, and triple bottom line began as measurements of non-financial effects, both inside and outside of corporations. In 2000, Baruch Lev, of the NYU Stern School of Business, collated thinking about intangible assets in a book of the same name, which furthered thinking about the non-financial effects of corporate production.
Finally, around 2007, the term "impact investment" emerged — an approach that deliberately builds intangible assets alongside tangible, financial ones. According to the Global Impact Investing Network, “Impact investments are investments made into companies, organizations, and funds with the intention to generate social and environmental impact alongside a financial return. Impact investments can be made in both emerging and developed markets, and target a range of returns from below market to market rate, depending upon the circumstances. The growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as sustainable agriculture, clean technology, microfinance, and affordable and accessible basic services including housing, healthcare, and education.”