What is Impact Investing and why it works

By Elena Pons, Investment Manager, Oryx Impact

Oryx Impact
4 min readJan 28, 2021


Association of women shea nut collectors in Northern Ghana. Photo Credit: MCE Social Capital

The term “impact investing”, first coined in 2007 by The Rockefeller Foundation, put a name to investments made with the intention of generating both financial return and social and/or environmental impact.

Impact investing includes a wide spectrum of possibilities. Some experts call impact investing the practice of applying an ESG lens to publicly traded securities, or applying a negative screen to certain type of stocks known as “sin stock” (alcohol, tobacco, etc.) or simply excluding from the portfolio certain stocks such as fossil fuels. Impact investing in the broader sense of the term also includes shareholder activism, that is the desire to influence how a company is run by obtaining seats on its board of directors or by exercising proxy voting. However, for most people impact investing denotes investments into private companies, either through equity or debt with the desire to generate a positive social and/or environmental return in addition to financial benefit.

I have been involved in impact investing since 2009, mostly acting in line with the latter version of the definition (private investments); but I have also worked with or have been familiar with ESG investing and shareholder activism. In all the different versions of impact investing, I can say I have seen examples that work.

My most recent and lengthiest experience has been working in private investments in the sectors of microfinance and agriculture value chain in Latin America, Africa, and South Asia; and I can attest impact investing works. On the financial side, I have seen how private debt investments in these rather “risky” parts of the world yield between 7% and 8% gross per annum (in USD)[as comparison, JP Morgan EM Corporate Bond index reports 5-year trailing returns of 6.71%]; while the default rate stands at 1.5% of all of the capital deployed since inception (2006). This, in my mind, is very impressive; as they are completely unsecured loans to microfinance institutions or direct loans to small and growing businesses in the agriculture value chain. In absence of collateral to collect if borrowers default, the main components of the portfolio’s strong performance are a rigorous risk analysis and a good partner selection.

On the impact side, I can also confirm that impact investing yields strong impact results. After spending the last seven years on the field, I have seen the effects of impact investing first hand. Measuring and reporting impact is not an easy task, impact reports are getting more robust as investors have access to more data. The data collected by Impact Managers (e.g., number of clients with access to a savings account for the first time, number of female micro-borrowers, number of farmers supplying goods to a specific company, etc.) is widely known as the “outcomes”, that is what we can measure. Well-designed outcomes are exceptionally useful; they help us ensure we are on track with our original impact goals for a particular investment. Impact outcomes are as important as financial returns in impact investments.

Nonetheless, what is really meaningful and difficult to measure is the impact on the beneficiaries’ lives, which can only be observed when one spends enough time with them. The real impact of impact investments is still rather anecdotal, but powerful: Are children able to continue going to school rather than being pulled out of school at an early age to help at the family business? Are children able to graduate from high-school or college when their parents did not have the chance? Are daughters of female micro-entrepreneurs able to avoid getting pregnant at an early age; therefore, breaking the chain of what happened to their mothers? Is the increased income generated thanks to a thriving business backed by microloans able to create some positive effects on the family life? Are the beneficiaries less stressed about putting food on the table? Are children of hard-working micro-entrepreneurs less likely to join a gang or a terrorist group? Are women recipients of private health insurance through their micro-lender able to take better care of their health? Is the certainty of a stable price per kg agreed upon in advance of the season between the buyer and the farmers able to give the farmers peace of mind? Is a recipient of a micro-loan for his/her micro-business less likely to emigrate looking for a better life elsewhere? This is the real impact of impact investments, which can only be perceived when one is in daily contact with the communities it invests in.

From my experience, I can confirm that impact investing has the potential to create immense social and environmental benefit while generating financial return; as long as we are able to apply rigorous investment selection process, employ relevant outcomes measuring tools, and back financially sustainable businesses with a clear mission to generate social and environmental impact for the beneficiaries and their communities.

Elena Pons is an Investment Manager at Oryx Impact and a seasoned impact investment professional with over 10 years of experience managing impact portfolios in Africa, Latin America and South Asia. She also teaches Impact Investing in the MBA program at a top tier business school. Elena is based in Barcelona.



Oryx Impact

Oryx Impact is an impact investment firm dedicated to mitigate forced migration by investing capital into the African continent.