In recent years, impact investing has gained momentum and can be recognised by synonyms such as value based investing, socially responsible investment, sustainable investing, patient capital, mission driven funding, blended value and so on.

This is further validated with studies revealing that 125 impact investors worldwide reported plans to increase impact investing commitments from $10.6bn in 2013 to $12.7bn in 2014 [GIIN 2015], $1.6bn impact investments in 220+ impact enterprises in India [Intellecap 2015] and plans closer to home - India's MUDRA Bank announcing financing for “unfunded entrepreneurs” with loans of $800-$16,000 (INR 50,000 to 10 lakhs). All these and many more point to the growing importance of investing today in nurturing environmental, social and economically sustainable solutions.At the heart of it is the rise of social enterprises in which profit is a means not an end, who are further distinguished by their under-served target customer segment and related solutions they offer.as a mainstream business model not ancillary to their operations. The social enterprise nascent industry is often viewed as the missing piece of the puzzle among the traditional worlds of government, nonprofit and business. They are deemed to be more efficient than governments, more sustainable than the nonprofit sector and more socially oriented than traditional business.Markets alone cannot solve the complex problems of energy access, poverty, climate change etc, nor are charity and aid enough to tackle the challenges faced by over two-thirds of the world's population living in poverty. There is a huge need for a 'patient investment' as a third way that seeks to bridge the gap between the efficiency and scale of market- based approaches and the social impact of pure philanthropy.Despite varied sectoral differences, these social enterprises work against the predominant commercial tide in a nascent arena balancing socio- commercial objectives and therefore experience obstacles such as high operating costs, scarcity of trained human resources, constrained access to capital, dearth of processes that transition grassroots R&D to practical adoption, access to end user financing, ill-defined standards of impact assessment, conflicting expectations of scale, stifling domestic policies and a host of other issues related to an underdeveloped ecosystem.Social enterprises develop and implement new delivery models many of which are untested, unfamiliar, and not highly profitable even in the long term and therefore getting access to investors whose goal is social impact and thus willing to take lower returns remains a huge challenge.One of the key ways to overcome this challenge is identifying the right investors, designing the right kind of financial mechanisms and investment instruments. Notwithstanding the importance of investment instruments, the focus should also be on building a more integrated philosophy on both ends of the spectrum towards pursuing sustainable solutions to the end user. Most important is to change the terms of engagement in which the predominant language is to fit sustainable investing with current investment speak i.e. in how profitable the business can be in the future and this is dictated by profit margins. The truth is that no balance sheet can accurately capture the impact made by social enterprises.This language of negotiation and reporting of impact needs to be suited towards social missions and realities otherwise it ends up being old wine, new bottle. Bringing together a hybrid of investors ranging from high-risk funds, intermediaries and long- term patient capital into an aligned thinking is vital in ensuring the right mix of funds at different stages across different needs of the enterprise.Tempered expectations on return and exit periods in line with realities of challenging conditions is also necessary. Focus on results rather than processes as a means to scale and scale fast can be detrimental to building sustainable enterprises that need to hone in on strategies to pursue social missions in the long term. Viewing investors as partners, making them more aware and more sensitive to the complexities of the social enterprise ecosystem is crucial. Investors need to be made aware of their role in supporting the ecosystem i.e. jobs being created, new markets being developed, technological innovation being spurred that are improving social and environmental well-being.A new type of enterprise is emerging and it needs to be supported with the right tools to grow. Trying to fit current investment practices and tools to build this type of enterprise will be a mistake. There are already efforts underway advocating and successfully pushing for new legal status of such social enterprises thus a complementary shift in thinking needs to happen for impact investments.Superimposing past investment practices is not the answer; instead we have to frame new rules so that the very foundation of sustainability - as a means to the end goal and the end goal itself - is not compromised.Sarah Alexander has worked at SELCO Foundation for over six years, on program conceptualisation, project management, communications and fundraising. She currently looks at sustaining enabling conditions for social energy enterprises through a policy lens. Sahar Mansoor works at SELCO Foundation Policy Team. She is passionate about environmental policy and decentralised energy access issues.