March 3, 2018

The US-Europe Divide in the Development of Impact Investing

By Gil Crawford, Chief Executive Officer, MicroVest | March 3, 2018 | Featured in Philanthropy Impact

The United States is the birthplace of many financial innovations, from exchange traded funds (ETFs) to digital payment platforms. Innovation is in the DNA of our financial system. In the case of the growing financial phenomenon that is impact investing, however, the US is generally lagging behind Europe.

Around 15 years ago, the impact investing industry was still in its infancy and consisted of a few firms in the US and fewer across the Atlantic. Soon, more and more European firms began emerging and scaling faster than their US counterparts. Today, there are several successful impact investing firms in the US, but their numbers pale in comparison to the landscape in Europe. For instance, several microfinance investment vehicles (MIV) in Europe have surpassed $1 billion in AUM, a milestone not yet reached by a US MIV.

There are a variety of factors that explain why impact investing has developed and matured more fully in Europe than in the US. The crucial one is cultural and institutional differences in the two regions concerning charitable giving and private investment returns. European investors tend to view impact investing and financial inclusion as important and necessary for the world. This view on financial inclusion is not ubiquitous amongst US investors. They often require convincing.

Read the full Op-Ed

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