Investments designed specifically to promote development are not new, but their application across a broad range of sectors—from moderate-income housing, to health care, water and sanitation, and rural development—is recent. And they raise several critical questions for development policy. Are they an effective new tool for long-term development? Are they likely to reach the scale necessary to be part of an overall development strategy?
This report offers an important survey and analysis of the field. Impact investing has the potential to spur development in regions and sectors that traditional foreign direct investment does not target, but it faces many challenges, notably market fragmentation and a lack of infrastructure. The authors, former executive vice president of the Overseas Private Investment Corporation and former CGD visiting fellow, John Simon, and Julia Barmeier suggest concrete steps that will help the market mature and grow, with separate and specific recommendations for practitioners, development finance institutions, and regulators.