Realities of Impact Investing: Recap

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Hi Net Impacters!

We hope you’ve been well and enjoyed the holiday last week!  It seems like a great time to say how thankful we are to the partners who help us put on such great events and the wonderful members who attend them! In early November we hosted an Impact Investing event in partnership with BASIC and WISE – for those who weren’t able to make it or who want to learn more about impact investing, we’ve put together a recap along with additional resources and ways to support the organizations and companies featured.

Our Realities of Impact Investing event brought together five speakers to share their challenges and successes within the sector. Impact investing covers a broad range of products: our diverse set of speakers included Catherine Gill from Root Capital, which invests in small-holder farmers in developing countries, Navjeet K. Bal at Social Finance and Tim Pennell at Third Sector Capital Partners, both of which deal with social impact bonds, Nancy Rosenzweig from Big Path Capital, which specializes in direct investments, and Ken Lehman from Kendall Investments, which works in sustainable infrastructure.

Impact Investing is a broad field and there’s a lot to learn, but some key themes stood out after hearing each of these speakers talk about their challenges. First of all, there will be challenges. Impact investing is still largely uncharted territory, and companies face daunting tasks that range from creating legal contracts from scratch (I’m no expert, but according to Navjeet, a blank page is something lawyers never want to see!), to clearing up misperceptions about the cleantech industry for Kendall, to raising capital for deals which Catherine Gill jokes are in Root Capital’s “sweet spot” – high risk, and low return. Companies don’t only have to raise capital, but also must ensure that investors share common values, since goals go beyond simply achieving high returns. Social impact bonds, or Pay For Success programs, face challenges including collecting data that may or may not exist and deciding on measurable outcomes to consider  “success.”

As financial returns are not the be-all end-all goal, priorities vary depending on each investor’s mission. Governments, for example, often deal with this conundrum by placing a dollar value on social benefits, which allows them to pay organizations for the social outcomes of programs that might be too new or risky to implement directly through government agencies. Root Capital is a registered nonprofit, with advisory services, R&D, and assessment totaling around $12 million raised philanthropically, and a $10 million loan business. Catherine Gill views philanthropy as “unlocking the ability of perpetual capital to do its job.” On the other end of the spectrum, Kendall Investments and Big Path Capital aim for market-based returns. Even though it would be great to be living in a world with exclusively green wind and solar power, as Ken Lehman points out – in order to start a business – “At the end of the day, it’s got to make money, or no one’s going to do it.”

Despite the challenges, the work these organizations are accomplishing and new paths they are forging are incredibly important for generations to come. It was inspiring to hear from these speakers who show such tenacity in the face of risk, uncertainty, and skepticism. A final comment to leave you with is that impact investing is not exclusively a project for financial institutions, as Tim Pennell points out. Progress also depends on government leaders being open to new projects and ideas, engineers creating improved and profitable technology, and conscious consumers choosing products and services that are sustainable and ethical.

Are you excited about impact investing?  Check out these websites, resources, articles and books to learn more:

http://www.thegiin.org/

https://www.bcorporation.net/

The Impact Investor: Lessons in Leadership and Strategy for Collaborative Capitalism

http://www.chicagotribune.com/news/opinion/editorials/ct-social-impact-bond-illinois-chicago-edit-20151106-story.html

 
A big thank you also goes to Graham Sinclair, who did a fantastic job moderating!  We were thrilled to see so many faces at our event, and can’t wait to see you at one of NIB’s next events. Next on the docket? Our Annual Career Summit, taking place February 26th – save the date!

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