Filters: ESG

Impact Investing: Not Just For Billionaires

Posted on by MBC Strategic

Judith Rodin, president of the Rockefeller Foundation, has coauthored a new e-book, “The Power of Impact Investing,” that highlights impact investing is not just for the 1%, it is for anyone interested in learning how to make financial returns while having an impact. In a survey done by Hope Consulting last year, 48% of Americans living in households of $80,000 and up showed interested in impact investing products – Rodin’s book aims to aid them in their endeavors. Her foundation has also been a huge supporter of the Social Impact Bonds infrastructure, funding Social Finance US which has facilitated social impact bonds in the US, given a grant to the Harvard Kennedy School’s social impact bond technical assistance lab, and worked with the Obama Administration on pay-for-success models.

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Massive Wealth Transfer Could Be a Windfall for Charities

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Kelley Holland reports on the $59 trillion wealth transfer to be passed down to heirs, charities, taxes and estate closing costs, according to a study by researchers at Boston College’s Center on Wealth and Philanthropy. This is $7 trillion higher, in 2007 dollars, than a 1999 study by the center. According to Alan Cantor, a nonprofit consultant, those who are inheriting, “may have a different mindset about charitable giving than their parents’ generation.” He “see[s] them doing a few things: looking more into mission investing and impact investing, trying to invest their money in more creative, progressive ways, so it’s not all sitting in their parents’ traditional corporate securities.”

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The Next Generation of Impact Investors

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“The mentality of investors has shifted from dollars and cents to dollars and sense,” said Michael Sidgmoore, founder of NextGenEngage, in his interview with Lindsay Norcott of ImpactAssets. Sidgmoore later in the interview explains the role of investing in addressing some of the toughest global challenges. “Some of the world’s biggest problems need market-based solutions and investment to solve problems at scale. But investment alone will not solve these issues. Investment, working in tandem with philanthropic capital, is important to seed a market.” Lastly, Sidgemoore believes the future of impact investing will need to take a collaborative, multigenerational effort. “Experienced investors have capital in the form of experience and expertise. They have lived through multiple market cycles. Younger investors have capital in the form of connections, networks and an understanding of technology.”

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Schwab, Merrill and Wells find unity on impact investing

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Two men in the C-Suites at Charles Schwab (Bernard Clark, Executive Vice President or Advisor Services) and Merrill Lynch (Andrew Sieg, Managing Director and Head of Global Wealth and Retirement Solutions) agree on at least one thing: impact investing is here to stay. “I would look at your organization at the percentage of time you’re thinking about impact-oriented investments — environmental, social justice strategies — and I would double or triple it,” said Mr. Sieg.

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A Small Drop in a Large Bucket

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Abigail Noble, head of the Impact Investing Initiative at the World Economic Forum, talks about why impact investing needs to go mainstream. With their Mainstreaming Impact Investing Initiative, the World Economic Forum is looking at the challenges and constraints that mainstream investors, such as pension funds, venture capital and private equity, are facing in getting engaged with impact investing. Noble says “one thing to keep in mind is that there’s a range of returns. Some investors only make a 0-1 percent return. But if you look at impact private equity funds like Leapfrog, they’re making in the 20 and up percentile in returns. One of the things that I find most encouraging is that we looked at the GIIN ImpactBase survey data, and found that over 70 percent of impact investment funds surveyed target an 11 percent rate of return or higher.”

She mentioned the effects on financial markets of environmental shocks like climate change, or destabilizing events like social unrest related to youth unemployment. “When you have more stable political and social situations, it’s a better business climate, and you have more stable financial returns. Impact investing is a very real way to create a more stable and inclusive market economy, and once we start to adapt that mindset, we can see how you can target both social and financial returns and, over the long run, create the world that we want to see.”

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Investors Pouring More Into Impact Investments

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In this ThinkAdvisor article, Michael Fischer presents highlights from the J.P. Morgan and Global Impact Investing Network (GIIN) 2014 Impact Investor Survey.  Survey participants — 125 fund managers, banks, foundations development finance institutions and pension funds around the world — expected to allocate $12.7 billion this year, and anticipated a 31% increase in the number of deals. The survey found that respondents collectively managed $46 billion in impact investments, 70% of which was invested in emerging markets and 30% in developed markets. Ninety-one percent of investors surveyed reported financial returns above or in line with their expectations, and 99% said the same about social and/or environmental impact. More than half of investors acknowledged they were seeking competitive financial returns from their impact investment commitments.

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Millennials Will Bring Impact Investing Mainstream

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In this Stanford Social Innovation Review, Jed Emerson and Lindsay Norcott talk about the most recent ImpactAssets issue brief on “The Millennial Perspective: Understanding Preferences of the New Asset Owners.”  According to the blog and the report, “Next Gen”—the approximately 80 million individuals born in the United States between 1980-2000—values, experiences, and preferences are poised to accelerate impact investing, directing billions of dollars towards social benefits. Accenture has estimated that over the next several decades, baby boomers will pass $30 trillion in financial and non-financial assets to their heirs—that’s in North America alone. In another study, Spectrem Group found that 45 percent of wealthy millennials want to use their wealth to help others and consider social responsibility a factor when making investment decisions. The transfer of wealth to this generation presents a compelling opportunity to take impact investing mainstream. 

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More Companies Bow to Investors With a Social Cause

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Shareholders are driving changes in corporate policies and disclosures unthinkable a decade ago, on issues ranging from protecting rain forests to human rights. So far this year, environmental and social issues have accounted for 56% of shareholder proposals, representing a majority for the first time, according to accounting firm Ernst & Young LLP. That is up from about 40% in the previous two years, and means shareholders are increasingly voting on things like greenhouse-gas emissions, political spending and labor rights. 53% of companies in the S&P 500 index now publish sustainability reports, according to the Governance and Accountability Institute, addressing such matters as their energy efficiency and labor standards.

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TriLinc Global Supports High Water Women’s Initiative to Empower Women through Impact Investing

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On April 7th, Joan Trant, TriLinc Global Director of Marketing & Impact, joined a group of senior women from the hedge fund and impact investing industries to assess the impact investing landscape and determine how High Water Women, a New York-based nonprofit dedicated to promoting the social and economic empowerment of women and youth, can increase women’s awareness and participation in impact investing. Women hold a significant amount of wealth globally, and according to Kristan Wojner and Chuck Meek in Women’s Views of Wealth and the Planning Process: It’s Values That Matter, Not Just Value, women are estimated to inherit 70% of the $41 trillion in intergenerational wealth transfer expected over the next 40 years.

Following on its highly acclaimed Investing for Impact Symposium held October 3, 2013, High Water Women is building a strategic process and tools to support women seeking to invest in the impact space. “In addition to speaking at the Symposium, TriLinc Global is delighted to be part of this visionary and dynamic group convened by High Water Women,” said Ms. Trant. “TriLinc Global helps investors recognize the power they have through their investment decisions. Collaborating with High Water Women is an exciting opportunity to support women investors aiming to prove that investments with socioeconomic and environmental benefits also have the potential to achieve competitive returns for their portfolios.”

TriLinc Global CEO Judges for Morgan Stanley Sustainable Investment Challenge

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On April 4th, TriLinc Global CEO Gloria Nelund had the honor of judging the business plans of five exceptional MBA student-teams from various universities around the world at the Morgan Stanley Sustainable Investment Challenge in the firm’s global headquarters in Manhattan. A total of 75 business school teams entered the competition, which filtered down to 10 teams pitching their sustainable finance proposals on Friday morning. The presentations were split between two groups of judges, who after first-round selections together selected the top four teams to present in the finals.

Proposals ranged from financing for solar irrigation projects in India to a fund for LED street-lighting in the United States. The grand prize of $10,000 was awarded to the four-student team from the Kellogg School of Management at Northwestern University, who proposed an investment vehicle to remediate brownfields using popular trees.