Impact Investing Policy

Public policy significantly influences the markets in which impact investors participate and can incentivize or discourage investment.

As part of our field-building efforts for over a decade, we have explored the role that policy can play in fostering the growth and effectiveness of impact investing markets both domestically and globally. Our work has informed the efforts of the U.S. National Advisory Board (NAB) on Impact Investing and its successor the U.S. Impact Investing Alliance (Alliance) as well as the G8 Social Impact Investment Taskforce in mapping the impact investing policy ecosystem.

With support from the Rockefeller Foundation, Pacific Community Ventures and the Initiative for Responsible Investment (IRI) at Harvard University conducted some of the first research on impact investing policy. In 2010 we published a first-of-its-kind framework for impact investing policy design and analysis. This framework has been utilized by policymakers globally to develop and implement impact investing policies within their respective countries.

A Just Recovery From COVID-19

With support from the Tipping Point Fund on Impact Investing our team is working to identify 3-5 impact investing policy ideas for the president and Congress to prioritize as they work to promote COVID-19 economic recovery and combat inequality. As part of this effort, in 2020 PCV conducted a detailed scan of existing and proposed impact investing policies at the state, local, and federal levels in the U.S., as well as internationally. The goal of this research was to identify policy ideas with the potential to drive greater and more targeted investment toward the sectors and communities most adversely affected by the COVID-19 pandemic and that have experienced the centuries-long effects of inequality in the U.S.

Our discussion paper Meeting the Moment: U.S. Impact Investing Policy, Inequality and COVID-19 Recovery outlines dozens of Federal policy ideas that can support a just recovery. We also held a series of discussions in 2020 on building a stronger, more equitable economy through smart federal policy, and we’re actively working to see some of these ideas come to life. 

In addition, there are several policy proposals that we support and believe should be emphasized with policymakers across the federal government, from Congress to the White House to regulators and the Fed:

1. Double the CDFI Fund at Treasury consistently going forward, simplify and reduce costs in the process for more, smaller CDFIs to access it going forward, including a set-aside for CDFIs serving majority minority communities.
2. Create a federal Public Investment Authority/Domestic Development Finance Bank to fund large-scale domestic projects like infrastructure development and the just transition 
3. Change donor advised fund regulations so there’s a minimum annual 5% payout requirement, impact investments count towards the payout requirement, and there is an additional tax incentive applied to motivate donors and DAF managers to make impact investments
4. Assess job quality, DEI, and other impact considerations as part of federal procurement to prioritize contracts with companies that provide quality jobs and incorporate other impact considerations into their operations 
5. Make it easier for investors to invest with ESG, diversity, and job quality considerations by 1) rolling back the DOL ESG guidance issued in 2020 regarding ERISA, and 2) adopting ESG and job quality reporting requirements within the SEC to ensure investors in large, publicly traded companies get a view into those companies’ diversity, equity, inclusion, and job quality practices. 
6. Modernize and expand CRA to ensure CRA-motivated investments benefit Black and Brown communities (those that the policy was originally designed to serve), increase transparency, and ensure that fintech companies, insurers, and other non-bank financial institutions are subject to the regulation. 

We also helped release “Big Ideas for Small Business,” a five-step plan outlining a path forward for America’s threatened small business sector. It includes ideas such as encouraging employee ownership as a means to strengthen small businesses and empower workers at the same time. We estimate that over 10 years, the actions laid out in the roadmap would generate a net new 1.5 million small businesses above pre-COVID levels and grow small businesses’ share of U.S. employment by 25% while contributing to a more competitive, dynamic and innovative economy.

U.S. Impact Investing Policy

PCV has been working to improve and expand the market for impact investments in the U.S. through public policy since 2009. Our work has served as a resource for the U.S. Impact Investing Alliance, policymakers, foundations, and other stakeholders who are interested in advancing supportive impact investing policy nationally. Our research includes:

• An overview of the domestic impact investing ecosystem produced for the U.S. National Advisory Board on Impact Investing
• Impact investing policy relevant to institutional investors in the U.S.
• A report examining historic and present ways policy leverages private capital for public good, and a set of criteria for evaluating new impact investing policy proposals
• An online catalog and report on pension fund Economically Targeted Investments (ETIs), following the U.S. Department of Labor’s ERISA ETI guidance
• A policy “map” illustrating various levels of U.S. government involvement in the market
• PCV has examined federal policy as part of our research and work with investors and businesses on job quality, to encourage investments in quality job creation.
• The Tipping Point Fund on Impact Investing has partnered with PCV — alongside the African American Alliance of CDFI CEOs — to develop and promote policy changes that re-center racial and economic justice within the CDFI industry.

Pacific Community Ventures remains committed to exploring the central role that policy plays in the growth and maturation of the impact investing market.