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Impact Investing Aided By White House

Posted on by MBC Strategic

On June 25, 2014, at the White House roundtable on impact investing, corporations, banks, foundations, and individuals including Prudential, Capricorn Investment Group and the Omidiyar Network committed to invest more than $1.5 billion in new capital into companies and funds that strive to generate positive financial and social returns.

 In addition, US government agencies announced programs to support impact investments and social enterprises. These commitments followed the release of a new report from the U.S. National Advisory Board to the Social Impact Investment Task Force that provides a framework for how federal policies can support impact investing.

As the industry matures and more investors enter the market, policies that remove barriers to growth and provide incentives for more impact investments will grow in importance. Government, philanthropy, and nonprofits cannot solve the world’s numerous problems alone, but with their aid in impact investing, social issues can be improved while creating a profit.

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So You Think You’re An Impact Investor?

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Charly Kleissner is a former tech entrepreneur and early pioneer of impact investing. He and his wife Lisa co-founded the KL Felicitas Foundation to support social entrepreneurs around the world and to bring like-minded investors together to redefine the meaning and purpose of investing in the first place. Kleissner says there is a much higher absorption capacity for impact capital than many realize, and, over the next 2-3 years, he and his wife want to show that there are at least a dozen $500 million impact portfolios making a difference. He strongly believes even the least socially concerned investor knows the benefits of hedging, like towards clean energy, because at some point a collapse in the status quo is inevitable. Unfortunately, in this day and age, social transformation begins with personal transformation. CEOs of multinational companies will need to change their own consciousness and awareness, or else impact investing is not going to get very far.

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Mainstreaming the Movement

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This article focuses on Toniic, a global network of impact investors that aims to “harness the incredible potential of socially minded impact investors to catalyze the broader impact investor movement and support the growth of high-impact entrepreneurs and funds.” Their CEO Stephanie Cohn Rupp discusses the network’s approach, and the evolution of the impact investing sector in general.

Firstly, she talked about the need for more connections among investors, and the tactics Toniic uses to bring investors and entrepreneurs together. And, secondly, she shares her thoughts on current trends, and what they mean for the future of the impact sector.

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5 Myths Socially Conscious Enterpreneurs Need to Ignore

Posted on by MBC Strategic

Impact investing is a new, holistic approach to business that may well be the most significant movement of our time, as well as the most misunderstood. Five main pervasive myths surround stakeholder capitalism today. The first: impact investing is a fancy term for giving money away, while it is really when purpose and profitability coexist, hand-in-hand. Next is the thought that environmental and social welfare is the government’s responsibility; however, businesses taking a comprehensive approach to growth, unlock unrecognized value and create competitive advantages. Thirdly, some believe corporate sustainability is to improve reputation and anything more hurts shareholders, but, in reality, sustainable companies outperform their unsustainable counter parts. Then, it is said that it’s human nature to prioritize profit over sustainability, while consumers are truly more educated than ever about sustainability and corporate values, and they are voting with their money. Lastly, it is thought stakeholder capitalism is a choice. Contrarily, stakeholder capitalism is vital to an industry’s continued survival. The time has arrived to invest capital into opportunities offering both compelling economic and social/environmental returns, while demonstrating a more conscious approach to how we live and do business.

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Impact Investing: Making a Difference and a Profit

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Several not-for-profit organizations have recently been teaming up with money mangers and investment banks to create and market a new line of products that offer investors the opportunity to engage in impact investing, a form of socially conscious investing. The goal is to invest money in companies, organizations, funds or projects across globe that can influence positive social change, while delivering financial return to investors. In recent years, it has gained momentum and product variety leading to more and more retail investors and millennials getting involved in this ex-wealthy investors’ niche. And, with this growing interest, organizations such as the Rockefeller Foundation and Goldman Sachs have created their own funds aimed at deploying capital toward the physical, social and economic revitalization of disadvantaged communities across the U.S. and the world. The groundwork has been laid for the creation of numerous products to meet the demand of a new generation of socially conscious investors, and, as long as such investments produce competitive social and financial returns, their popularity will only grow from here.

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Impact Investing: Not Just For Billionaires

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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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