What’s New In Impact Investing? October Roundup

Patrick DugganImpact Investing, InSight

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Impact investing is about using markets and money for social good. Impact investing is built on the belief that private capital can play a powerful role in solving the massive global challenges of our day, and that capital markets should work for good as well as profit. This vision is realized through investments made into companies, organizations, and funds with the intention to generate measurable social and environmental impact alongside a financial return.

Every month, PCV will give you a roundup of what’s new in the field, what conversations are taking place, and how you can get involved. Here are some highlights from October:

Billions of New Dollars To Create Jobs and Support Local Communities

If just 2% of the assets in America’s public pension funds and 1% of the assets in private pension funds were dedicated to economically-targeted investments (ETIs), it would mean an additional $300 billion in capital dedicated to social good.  ETIs let pension funds put their capital to work in ways that not only generate financial returns but also create jobs and support local economies and the environment — furthering the long-term interests of their plan participants and beneficiaries.

Following the one-year anniversary of the U.S Department of Labor’s ERISA guidance that reaffirmed private pension funds could pursue ETIs, we’re excited to share a first-of-its kind online catalog of pension fund ETIs and an accompanying research brief that extensively documents these investments and offers insights, trends, and reflections. Check out the ETI catalog >

The goal of this research and the catalog is to better enable information-sharing among the pension fund community and other interested parties by serving as a dedicated online resource for information on ETIs. When pursued prudently, ETIs have the potential to unleash a tremendous amount of new private investment that delivers significant benefits to communities across the U.S.

Why And How Might Investors Respond To Economic Inequality?

A new paper from our friends at PRI and Harvard’s Initiative For Responsible Investing takes a look at growing economic inequality, its impacts on economic growth, and how investors can respond.  Inequality, in some ways, is a parallel to climate change in terms of responsible investment, emerging as the default “S” in ESG, as climate risk is to the E.  Calls for investors to address inequality, perhaps are most prominently featured in the UN Sustainable Development Goals, and are bringing heightened attention to this issue.  Just as our ETI catalog shows how pension funds have historically utilized ETIs to generate financial returns and social good, this paper provides specific insights into how pension funds and other institutional investors can address economic inequality within a fiduciary context. Read the paper >

Another path forward for investors when it comes to addressing inequality is the CDFI movement. For over two decades Community Development Finance Institutions, like PCV have, have demonstrated that we can invest in low-income communities, realize financial returns, and generate social impact. However, it’s time for our industry to do more. Our friends Antony Bugg-Levine of Nonprofit Finance Fund and Ellis Carr of Capital Impact Partners have published a new article on Medium where they talk about how CDFIs are newly called to address the inequality and injustice that continue to hold too many people back. Read the article >

CDFIs are doing great work in our communities, but with more support we could do so much more. In a new research brief our AI3 partners at Enterprise make the case that the amount of investment capital flowing to support disadvantaged individuals, businesses and communities could be greatly increased if impact investments through CDFIs carried a tax benefit.  The brief examines two existing tax credits, the California Organized Investment Network CDFI Tax Credit Program and the South Carolina Community Development Tax Credit Program, which have proven effective in increasing the amount of private capital invested in underserved communities. Read more >

Our friends at Enterprise aren’t the only ones saying that. At the Opportunity Finance Network conference this month, Atlanta Fed President and CEO Dennis Lockhart says a set of circumstances is coalescing in the nation’s economy that will put CDFIs on the front lines of efforts to address troubling, perhaps even dangerous, distributional imbalances. Lockhart says despite economic progress achieved, the circumstances of many urban and rural low-income communities remain very difficult. He believes CDFIs are well positioned to play a pivotal role. Read more >

We’ve just talked about the “S” in ESG, but what’s happening the “E”?

Food waste is a huge global problem, particularly in developed countries. A third of the fruits and vegetables purchased by consumers in North America is wasted. The food and agriculture industry could create $2.3 trillion a year for companies with an annual investment of $320 billion in sustainable business models by 2030. That represents a seven-fold return on investment and could create over 80 million jobs, a new report from the Business and Sustainable Development Commission (BSDC) reveals. Read the report >

We have an example of one way to go about that right here in the Bay Area. About four years ago, our friends at RSF Social Finance launched two integrated capital blended funds that focused on farmers. The most recent of those, Soil Health Capital Collaborative is a $1 million blended fund for sustainable farming ventures, and the other, Local Food Capital Collaborative, is a $6.45 million fund for farming infrastructure like moving and processing meat raised by farmers using sustainable methods. Read more about how they’re doing it >

Impact Investing For The Rest Of Us

Are you part of the global one-percent? You might be – but we’re not. Ample research shows that everyday investors increasingly care about the impact of the investments they make. But impact investing products – funds, direct deals, social impact bonds and the like – have mostly been geared to high net worth individuals and institutional investors. That is starting to change as several firms have overcome significant hurdles to reach the retail market through traditional channels such as brokerages and financial advisors. Read more on ImpactAlpha >

Traditional Investors Moving Into Impact Investing

Eaton Vance, a large Boston-based asset manager, has agreed to acquire the assets of the impact-investing firm Calvert Investment Management, a move that would give it a large presence in the growing field of socially and environmentally responsible investing. Founded in 1976, Maryland-based Calvert was one of the first firms to focus on investing with social-good goals in mind. Many of Calvert’s funds, though, haven’t brought in much return yet. Eaton Vance and Calvert believe they can reverse those flows by combining forces. Read more >

Partnerships like the one between Eaton Vance and Calvert are import for the impact investing sector – and one of the promising ways for the field to really scale. In a recent article, our friends at Duke’s Center for the Advancement of Social Entrepreneurship, or CASE, discuss how, through their work, they often see social entrepreneurs struggling to get partnerships right. Through this lens, they share three tips to consider as you investigate potential partnerships. Read more >