Amara's Law and the Long Game of Impact Investing

Impact investing was supposed to change everything by now. It hasn't yet, not at the scale we want. Roy Amara was a futurist, not a financier, but the law he articulated in the 1970s so accurately captures the path of impact investing:

"We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run."

I've been living in the impact hype bubble for over a decade. The one where we believed that if we just built the right products and showed enough proof of concept, the big institutional money would follow.

Around 2015, something electric was happening in our corner of finance. Impact investing felt like it was about to break through. The conferences were full. The Sustainable Development Goals got buzzy. Industry surveys showed assets under management doubling, then doubling again. Institutional capital was starting to ask questions. There was a real sense that we were going to redirect trillions toward communities that had been shut out of the financial system for generations.

That didn't happen. Not at the scale we expected. Not yet.

What actually happened was more complicated, and more instructive.

The gatekeepers are real

The impact investing community is tight-knit, passionate, and prone to talking primarily to each other. Inside the bubble, the momentum at times feels unstoppable. Outside it, we keep running into the same walls: investment committees that have never seen these structures before, legal counsel who can’t get comfortable with unfamiliar deal terms, bank partners who need a 10-year track record on products that are three years old. Every institution has processes built to evaluate what they've always evaluated. Impact investing asked them to evaluate something new. They mostly say no or “not yet”, or they say yes very, very slowly.

That friction is real, but there’s a deeper structural problem we didn't talk about enough.

We built strategies the big money can’t buy

Impact investing hasn’t failed to scale because big capital doesn’t care. It has been muted because of a structural mismatch between niche strategies and the larger financial system.

The large allocators with $20M, $50M, $100M to deploy into an investment operate under constraints that have nothing to do with values or client demand. They won't be more than 10-20% of any single strategy. They need to see fund size and a deep operational bench before they can move. So a first-time impact fund manager, running a $30M fund with a genuine thesis and real deal flow, is disqualified before the conversation starts. Not because the strategy is wrong, but because the math doesn't work for the allocator. And the gatekeepers advising those allocators can't spend the time to diligence a small strategy when the economics of rolling it out to their clients don't pencil. The catch-22 is structural: you need size to get the allocators, and you need the allocators to get the size.

Layered on top of that is the fragmentation problem. Every impact investor has a specific thesis — a community, an issue, a geography — and that's not a flaw, it's the point. But in practice, a $1 billion opportunity in the impact market often becomes 100 separate $10 million strategies, each customized to a different investor's priorities. Custom and artisanal is the enemy of scalable.

Then add the measurement problem. Many impact fund theses ask investors to accept both a novel structure and unverified outcomes. That's a lot to ask of a fiduciary. When the ESG and DEI backlash hit, and when ESG and impact got conflated in ways that served neither, the whole category absorbed the reputational damage. The greenwashing accusations didn't come from mission-driven actors, but we were close enough to get the splatter.

It’s been hard. Some have left. Some have rebranded. Some have quietly stopped using the word impact altogether. I don't begrudge the rebranders. Keeping the work alive matters more than keeping the label, and the work is the same whether you call it impact or not. But the retreat from the word “impact” has ceded ground at the moment when we need to hold it.

Why we're still here

Here's where Amara's Law keeps the hope alive: the long-run effect is underestimated.

The internet didn't fail in 2001. It was early, and the infrastructure such as broadband, smartphones, and cloud computing hadn't been built or figured out yet (the iPhone didn’t show up until 2007). The thesis was right. The buzzy late-90s timeline was wrong.

Impact investing is in a similar place. The underlying problem hasn't changed. Communities across this country still lack access to sufficient, affordable capital. Inequality is still rampant and growing. That market failure is structural and persistent, and no political cycle eliminates it. What's changing is the infrastructure that makes it possible to address at scale — and a growing set of people with money who want it to change.

Two things in particular show the potential is still in front of us:

First, the demand side is shifting in a way that's structural, not cyclical. The wealth transfer from baby boomers to Gen Z and millennials is only beginning, with an estimated $84+ trillion moving over the next two decades. And that was before AI and crypto created a new generation of younger wealth holders ahead of schedule. That generation didn't learn finance from a two-bucket model: portfolio here, philanthropy there, never the twain shall meet. They grew up with values-aligned everything, across their purchases, their employers, their platforms. When they become the principals setting investment mandates, the committees will look different. The compliance culture will look different.

We already see it in the early anecdotes. I just heard from a wealth advisor whose clients with under $100k in net worth are asking how to align their investments with their values. That's not the $50M allocator we need to move the needle at scale, but it's the same values-driven mandate, earlier in the wealth curve. The pipeline is being built from both ends. In 20 years, it will be visible in the data.

Likewise, the amount of impact capital being managed by large institutions is only growing (see: Impact(ed), Tideline). Which is a good thing overall, even if today it’s tilting more toward larger and more proven vehicles.

Second, what's actually changing on the supply side is observable, not aspirational: some of us are breaking through.

You can see it in the fund managers reaching Fund III. That's not a small thing. It means track record exists, institutional-quality operations exist, and the conversation with investment committees is different than it was at Fund I. You can see it in CDFIs rolling out large-scale note products that finally meet the minimum check size requirements of institutional platforms. You can see it in the gradual shift from impact managers getting PRIs — program-related investments, the province of foundations — to MRIs, market-rate impact investments that sit comfortably inside a traditional portfolio allocation. And you can see it in the expansion beyond venture capital, which had its heyday in the early 2020s but crowded out other asset classes that were always better suited to the communities impact investing is meant to serve: credit, real assets, community development finance.

The gatekeepers haven't disappeared. But the strategies that have survived long enough to reach scale are starting to get on the platforms. That's the slope of enlightenment. Not a revolution, but a ramp.

What staying the course actually means

When we started Mission Driven Finance 10 years ago, we overestimated how much impact investing could change things. The SDGs were just one example of these lofty goals, with an admirable approach to setting a 2030 deadline, but we are a long way from realizing those results.

However, we continue to be stubbornly optimistic, albeit with a dash of realism. Over the next decade or two or three, I believe the financial system can shift into one that reduces inequality instead of increasing extraction. That accelerates climate resilience, better education, and health outcomes. That helps all communities thrive.

I ate it up 10 years ago, and I'd do it again. I hope I’m underestimating the potential.

David Lynn is CEO of Mission Driven Finance, an impact asset management firm dedicated to building a financial system that ensures good businesses and bold visions have access to sufficient, affordable capital. Mission Driven Finance was launched in 2016 in San Diego, CA, and is a Certified B Corporation.

Further reading

• Impact Investors vs. Impact Economy Investors — Impact Entrepreneur

• Impact Investing: Growing in Name, Shrinking in Conviction — Pioneers Post

• Impact Investing: The State of Market Institutionalization — Tideline / ILPA