This afternoon I sat through a discussion/brainstorming session on best practices in Impact Investing hosted by the Case center at the Fuqua School of Business at Duke University. The style of the session was interactive, with over 80 industry insiders joining in the discussion prompted and moderated by Ben Thornley, Jed Emerson & Cathy Clark as part of their recently launched research project: The Need for Evidence and Engagement (pdf). Contributors included Jennifer Pryce (Calvert Foundation), Dipender Saluja (Capricorn Investment Group), Eva Helene Yazhari (Beyond Capital) and Philip Newborough (Bridges Ventures) to name a few. Additionally, Laura Callanan (McKinsey & Co) distilled the discussion down to its salient points at several times throughout the afternoon.
Borrowing from Laura’s points, a few of the key take-aways are below.
-In some ways, we still preoccupied by big barriers to investment and unable to see past them to get to the small distinctions between funds
-We need to educate financials advisors, but also need champions, respected investors who can command respect
-We focus too much on risk shifting. Someone needs to take the risk. Risk doesn’t go away.
-There is a value to getting specific and segmented in conversation sooner, if we are ready to move to next level have nuanced discussions. We need to be able to really differentiate between products and funds.
-Need to solve problems at both the deal level and fund level. Then you can talk to a range of investors that are willing to join the party at different levels and tranche within the vehicle.
-Importance of articulating goal, a layer above finance first, impact first. Notion of who is your priority, the constituents, the services that are being financed, achieving goals of limited partners. Just using the term impact investing doesn’t give us clarity about what the right capital is or who the right partners are.
-Diligence for impact investing might be an area where we are more like philanthropy. Sharing certainly helps keep the costs down. Something we should maintain going forward.
-Mismatch of capital needed and capital available, both a quantity and a quality mismatch. Looking at what investors are willing to take vs what enterprises need investors to be able to take.
-What are we measuring and how can we measure it. If we want to behave like investors, we need tools and standards to make the progress we need to make.
-Investors need to recognize that there are industry wide costs that need to be shouldered by being frontier investors.
Being passionate about impact investing and particularly around the need for creating best practices for equity investment valuations that include social impact (coincidentally the topic of my thesis at Oxford), being apart of this discussion was invigorating and engaging. I loved seeing the discussion become more nuanced and specific, particularly around the need for standardization and best practices. It will be intriguing to watch the research that comes out of The Need for Evidence and Engagement over the next year and a half.
A final comment from Jed Emerson: We are at an inflection point… and are looking forward to continuing to build a field that for a long time has been more of a yard.