Impact investing is about using markets and money for social good. Impact investing is built on the belief that financial tools and 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 December:
[custom_headline type=”left” level=”h3″ looks_like=”h4″]New Regulations Are Unleashing Capital And Boosting Impact Investing[/custom_headline]
Insight at Pacific Community Ventures and Enterprise Community Partners have released a new issue brief on impact investments by U.S. pension funds. The brief highlights public and private pension funds that have pursued “economically targeted investments” (ETIs), a type of impact investment that seeks certain social goals alongside a market-rate financial return. Read the full issue brief >
It comes just weeks after the U.S. Department of Labor issued new regulatory guidance that is expected to enable more ETIs in the years to come. Impressive as this momentum appears, impact investments still represent less than one-half of 1 percent of all the assets managed globally. While some predict the emergence of impact investing is equivalent to the introduction of venture capital in the 1970s, impact investing has a long way to go. And government can help by creating a more favorable regulatory environment.
That’s where the recent regulatory changes come into play. They remove barriers that have discouraged foundations and pension funds from seeking out impact investments. Read more on SSIR >
The fewer barriers to pension funds making ETIs and incorporating environmental, social, and governance factors in their financial analysis, the closer we come to sustainability as a truly compelling investment thesis. In a new podcast interview Dave Chen, CEO of Equilibrium Capital, discusses how the sustainability thesis is driving interest from European, Canadian and leading U.S. pension funds in green real estate, agriculture, timber and, increasingly, water. Read more on ImpactAlpha >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Speaking Of Policy’s Role: HUD Pay for Success Passes Congress[/custom_headline]
In early December, President Obama signed a bill into law that included a small but important provision that authorizes a new Pay for Success (PFS) pilot within the Department of Housing and Urban Development (HUD). This pilot has the potential to be a true “win-win-win,” resulting in long-term cost savings for the federal government, improved health outcomes for residents, and benefits to the environment.
Under the new law, HUD can now enter into contracts with outside entities, which then raise private capital from investors to fund energy and water upgrades in HUD-assisted properties. Investors are paid back only when certain cost savings are realized, as verified by a third party. In addition to improving energy usage in old buildings, energy efficiency upgrades have proven to improve the quality of life for residents by meaningfully reducing instances of asthma and other health problems. Read more at Enterprise Community Partners >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Impact Investing Is At A Tipping Point[/custom_headline]
Paula Goldman from the Omidyar Network recently sat down with Devin Thorpe of Forbes and noted that “interest in impact investing is at an all-time high with champions including the Pope and Bill Gates. However, to date, the amount of capital being deployed to impact investing is still relatively small. In 2016, we will see interest in impact investing convert into exponentially more action — taking a significant leap forward from an “unorthodox” idea to more mainstream.”
Goldman makes three key observations about impact investing for 2016: 1, that we’re at a tipping point for impact investing; 2, that the next generation is more socially-minded and will push for change; and 3, that capital and technology will drive innovation in emerging markets. Read more at Forbes >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]Is The Chan Zuckerberg Initiative Good For Impact Investing?[/custom_headline]
With the birth of their daughter Max, Mark Zuckerberg and Dr. Priscilla Chan plan to direct 99% of their wealth into the Chan Zuckerberg Initiative (CZI), dedicating approximately $45 billion in wealth to charitable purposes. However, this news has been met with controversy and debate given the CZI is structured as an LLC instead of a traditional charitable foundation. As part of the debate, some believe the LLC provides greater flexibility and will allow the couple to make a substantial commitment to impact investing.
According to the CZI team: “An LLC allows Mark and Priscilla to both contribute to nonprofit organizations and to make private investments in innovative companies helping to solve big challenges in areas such as education and health care. It allows them to participate in policy debates that support their goals of promoting personalized learning, curing disease, connecting people and building strong communities.”
We will be eager to see if impact investing becomes one of the tools employed by the CZI team in the future. Read more at Forbes >
[custom_headline type=”left” level=”h3″ looks_like=”h4″]How Three Families Got Their Portfolios To Profit While Reflecting Their Values[/custom_headline]
Liesel Pritzker Simmons is a Hyatt Hotel heiress and a co-founder of the impact-investing family office Blue Haven Initiative, which she runs with her husband, Ian. Not long ago, Pritzker Simmons and her husband were traveling in Rwanda and thinking about how their investments could have a more direct impact on the lives of impoverished Africans. After returning home, she ran their idea by her financial advisor, who sneered, saying, “How much money do you want to lose?”
The advisor was fired. Today, with the help of the Caprock Group’s Matthew Weatherley-White and impact consultant Jed Emerson, Blue Haven’s portfolio is 100% invested for impact, aiming to earn market-rate returns across asset classes. “This isn’t philanthropy,” the 31-year-old Pritzker Simmons insists. “The people I know who are thoughtful about impact investing are not crunchy tree-huggers. This is part of the way investing should be done.” Read more at Barrons >
(photo: Thompson Rivers University – Old Main Facelift)