Segmenting the impact economy

A framework for directing finance effectively

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About this report

The impact economy brings together individuals, organisations and capital, intending to prioritise public benefit over private gain. But within that shared ecosystem, organisations have different financing needs. This framework offers a practical way to understand those differences and make more informed decisions about what different parts of the impact economy need to grow well.

The impact economy is growing in visibility and ambition. Yet it is still often talked about as though it were one broad field, with one set of financing needs. That can make policy, funding and investment decisions too blunt to support the organisations working within it.

This report is designed to help policymakers, funders, investors, infrastructure bodies and sector leaders distinguish between the different business models, capital needs and routes to scale across the impact economy.

The framework is not a hierarchy or a pipeline. It is a tool to help move the conversation from who is ‘in’ the impact economy to what different organisations need: grant, revenue subsidy, blended finance, impact investment, catalytic capital, member-benefit finance, commercial investment, market-shaping policy, specialist infrastructure or the foundational conditions that enable people and communities to participate in economic life.

The accompanying diagram sets out the segmentation framework visually, showing the different parts of the impact economy and the forms of finance, subsidy and support they are most likely to need.

A map of the impact economy’s financing landscape

Categories:

The diagram shows the different organisations, capital providers and intermediaries that make up the impact economy – and the different ways they interact with finance. It helps illustrate why different organisations need different types of capital, and why there is no single route from grant funding to investment.

Better decisions start with a better map

What can policymakers, funders, investors and sector leaders do?

This framework is intended to be examined, tested and improved, and the ideas about gaps in the financing architecture are hypotheses for the sector to test rather than conclusions to adopt. Stakeholders within the sector can:

Use the framework to better match capital to organisations, rather than assuming that one type of finance or support will work across the impact economy.
Test and refine the segmentation framework and use it to identify where capital, infrastructure or appropriate support is missing.
Ask better questions about existing approaches, particularly where categories are muddled or organisations are being offered finance that doesn’t fit their actual circumstances.
Develop a clearer shared understanding of the role of public capital, including how its cost and added value are assessed across different programmes.