San Francisco for SOCAP 2015- a crash course on the state of impact investing and a tremendous opportunity to meet and hear from a diverse group of investors, social enterprises, nonprofits and intermediaries. What was clear is that the trajectory of market access, evolution, and growth is accelerating. Increasing institutional investor and intermediary participation, use of consistent performance and impact metrics, and a growing demand for investment options is expanding the liquidity and infrastructure needed to bring increased and (suitable) capital to the sector.
The big guys are in, and that is good. If the healthy numbers of financial advisors attending the conference wasn’t enough of a clue, the presence of and commentary from Deval Patrick (Managing Director, Bain Capital and former Massachusetts Governor) and Deborah Winshel (Managing Director, BlackRock) affirmed the increasing demand from retail and institutional investors.
Millenials’ force strikes again, pensions and endowments join in. Shifting demographics and efforts to align personal and organizational values with investment objectives are affecting asset ownership and investment trends. And in response, increased investment options that offer market rate returns that are aligned with investment values, and sustainable investing options across all asset classes.
Impact investing is a market AND a movement, not a market VERSUS a movement. Not everyone agrees. As a long time institutional investor and securities analyst, I instinctively support the benefits to capital flows of institutional market participation, standardization of performance and evaluation metrics, and a well developed market infrastructure. It was a bit of an eye- opener to see there are those who believe the greater size, standardization and (big) institutional participation will come at the expense of true impact focused investing in smaller, private social enterprises and nonprofits. Both can and should exist. The need is there, as is the demand for impact investing options across asset classes and with different impact and financial return expectations. There are also practical limitations on the adoption and application of consistent impact and financial metrics and return frameworks to such a diverse range of organizations that are the impact investing universe.
Scaling is tough but there are many players doing good things. The range of creative and practical strategies to accommodate the needs of both investors and social enterprises bodes well for scaling investment opportunities and capital flows to smaller, private social enterprises. The Ford and MacArthur Foundations highlighted the use of program related investments and grants to create appropriate blended capital structures to support mission and meet capital structuring challenges such as needed credit support and timely investor exit strategies. Deval Patrick captured another positive factor when he referenced the positioning of impact investing as “the articulation of a return to long term investing”. For Bain this is reflected in a private equity fund focused on investments with significant social impact. For university endowments this longer -term investment horizon helps support alignment of investment strategies with university values, while meeting fiduciary requirements.
Investment readiness brings in capital. I’m a big proponent of organizations being investment ready- ready to employ capital, able to raise capital, and knowledgeable that it’s the right capital. Performance of the UK’s Investment and Contract Readiness Fund has affirmed this in a big way. Grants used to help social enterprises prepare for and solicit funding have been leveraged very successfully, bringing in millions of pounds of investment to participating social enterprises (http://www.sibgroup.org.uk/beinvestmentready/review/).
Friends and family. I had the chance to see two organizations I’ve worked with in action. Julie Colombino, Founder of REBUILD globally was a SOCAP Scholarship Entrepreneur and showcased the direct impact REBUILD’s Deux Mains Haitian sandal making workshop is having on the lives of employees and their families. Check out their fabulous sandals and how REBUILD uses social enterprise to put people to work, support families and alleviate poverty (http://rebuildglobally.org ). The Washington Regional Association of Grantmakers has done tremendous work educating and bringing resources to bear on the challenge of affordable housing in the DC area. WRAG’s Gretchen Greiner-Lott’s SOCAP TV segment put a human face (faces really) on the crisis that is affordable housing - and how collaboration and impact investing can address the problem (https://www.washingtongrantmakers.org).
The kids within. And to tie it all up, SOCAP and Fleet Week overlapped, giving all a reason to step outside and watch the Blue Angels dive, roll and soar over the inspiring magnificence that is San Francisco Bay.