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 January:
Foundations Are Driving The Future Of Impact Investing
Foundations of all sizes have been true leaders in the impact investing field, aligning their capital with their missions, ensuring a laser focus on impact and providing catalytic capital to attract other types of investors. Seeing the potential of impact investing for achieving transformative change, many foundations are looking to invest even greater resources in this new approach. To drive that, our partners Mission Investors Exchange are sponsoring an 11-week series exploring what’s next in impact investing and what we can learn from some of the most innovative foundations. Read more in Stanford Social Innovation Review >
Impact Measurement Is Crucial To Your Success
As PCV’s been saying for years, impact measurement and management are a critical component of impact investing. Having a strong assessment framework in place means better financial returns and an easier time assessing social impact to make adjustments over the life of an investment. Now, our partners at the Global Impact Investing Network (GIIN) have put out three case studies in support of their recent report The Business Value of Impact Measurement. Each Impact Measurement and Management Case details the investor’s investment strategy, impact measurement and management practices, and use of data. Read more on The GIIN >
Supply and Demand: Market Forces Impact Impact Investing
As the field of impact investing has grown and matured in recent years, one criticism has been that the amounts of capital and available investments haven’t always lined up. But that may be changing. Our friends at Impact Alpha report on the experiences of members of Toniic, an impact investing network, suggesting impact investors are moving beyond private equity and creating portfolios diversified by asset class similar to traditional asset allocation. The report covers 51 investors worth $1.65 billion who have deployed nearly 70 percent of this amount across asset classes, geographies and sectors. Read more on ImpactAlpha >
In the past two years BlackRock, the world’s biggest asset manager, launched a new division called “Impact”; Goldman Sachs acquired an impact-investment firm, Imprint Capital; and two American private-equity firms, Bain Capital and TPG, launched impact funds. The main driver of all this activity is investor demand. Deborah Winshel of BlackRock Impact points to the transfer of wealth to women and the young, whose investment goals, she says, transcend mere financial returns. Among institutions, sources of demand have moved beyond charitable foundations to hard-bitten pension funds and insurers. Read more in The Economist >
Another create example of the radical uptick in impact investing comes from our friends Calvert Foundation. In 1995, Calvert began offering a Community Investment Note (CI Note), a type of bond used to finance a broad portfolio of nonprofits, microfinance firms and social enterprises in the United States and around the world. Investors earn a fixed financial return between 1 percent on a one-year Note up to 4 percent a year on a 15-year Note. More than 15,000 investors have collectively invested more than $1 billion in CI Notes. Today, Calvert has more than $180 million invested in roughly 200 different nonprofits or social ventures located in about 100 countries. Read more on B The Change >
Can Big Business Have A Soul?
Henry Ford — who passed up profits to provide society with good jobs and cheap cars – thought so. In these days of activist hedge funds pressing companies for ever more share buybacks, The Atlantic asks “is there room for a company that cares about its workers, the environment, or the communities in which it does business? In other words, can a company have a soul?” Yes – but it’s an uphill fight against rich investors and well-lobbied regulations that keep companies from being better citizens. Read more on The Atlantic >
Ben & Jerry’s is also a leading evangelist for the movement to give capitalism a conscience. The company adopted a triple mission in 1988 to produce the best natural ice cream, earn a decent financial return and make a difference in society, fostering a “linked prosperity” for the business and those connected to it. The company also serves as a great case study in B-Corporations working. They became a certified B-Corp after being purchased by mega-multinational Unilever – and as a B-Corp made Unilever a ton of money while doing a ton of social good. Having found success with its first B Corporation acquisition, Unilever doubled down with its purchase of B Corp Seventh Generation in September 2016. Read more on B The Change >
And it’s not just being good to your employees and community that drives a new soul for business. The Guardian looked at 180 US companies and found conclusively that those who adopted environmental, social and governance policies in the 1990s have outperformed those that didn’t. Critics of sustainability argue that it destroys shareholder value. We found exactly the opposite. Companies that manage their environmental and social performance have superior financial performance and actually create more value for their shareholders. Read more in The Guardian >
Can Green Bonds And Private Capital Save The Environment?
Under the new Trump administration, it’s widely understood that our government’s efforts to fight runaway climate change will be stopped and rolled back. But that doesn’t mean institutional entities across the country aren’t still working for renewable energy and clean air and water.
For example, conservation investing is on the rise and experienced dramatic growth these past three years as total committed private capital climbed from $5 billion to just over $8 billion, according to Ecosystem Marketplace’s latest report, State of Private Investment in Conservation 2016. It’s recognition of forests, wetlands and reefs as smart investments, authors say, and signals growing interest among even mainstream investors. Read more on Ecosystem Marketplace >
After Paris hosted the 2015 Climate Change Accord, it’s fitting that France is pioneering one way in which it might be paid for: green bonds. France has set aside 13 billion euros for green spending in 2017, which can be matched against the money raised – so that’s the cap for this year. Anthony Requin, head of the French debt agency, says it’s looking for at least 2.5 billion euros from this first syndicated deal. Read more on Bloomberg >
So what’s happening with green bonds stateside? Last fall, DC Water and Sewer Authority, Calvert Foundation, and Goldman Sachs announced the nation’s first Environmental Impact Bond to fund green infrastructure to manage stormwater runoff in Washington DC. Our partners at Duke School of Business sat down with Beth Bafford of Calvert to learn how the Bond process went, and what to expect in the future. Read more on Duke >