The past few months have been good ones for the burgeoning impact investing movement. This summer brought us a study that offers quantitative evidence in support of the central hypothesis that investors can earn market-rate or better financial returns from investments that also advance important social goals.
Since most of you don't have time to troll the interwebs looking for the latest research paper or thoughtful article on the important topics related to impact investing, we bring you this roundup.
1. Perhaps the most important publication of the summer: The first Impact Investing Benchmark study was performed by Cambridge Associates and the Global Impact Investing Network. Read it here.
Excerpt: "Impact investment funds that raised under $100 million returned a net IRR of 9.5% to investors. These funds handily outperformed similar-sized funds in the comparative universe (4.5%), impact investment funds over $100 million (6.2%), and funds over $100 million in the comparative universe (8.3%). Emerging markets impact investment funds have returned 9.1% to investors versus 4.8% for developed markets impact investment funds. Those focused on Africa have performed particularly well, returning 9.7%.
2. Doing Less, Better. This author argues that the real power of social enterprises lies not in their combination of revenue-generation with charitable purpose, but in their ability to focus on doing fewer activities. This is in stark contrast to typical nonprofits where more programming is a sign of more impact.
3. Impact Investing Goes Mainstream? This Forbes article by Devin Thorpe goes point by point through reasons why impact investing is finally being accepted broadly. Thorpe even goes so far as to suggest a financial advisor has an obligation to consider it for his client's portfolios.
4. Impact investing opportunities needed for smaller investors. Nesta, a major U.K. based innovation charity is urging the government to make available 'individual savings accounts' to provide smaller investors with a tax-efficient way of investing in enterprises that combine financial returns with social or environmental benefits. Read about it here.
5. Growing demand for socially-responsible investment options. "As of 2014, there were 456 mutual funds with $1.9 trillion in assets (and 20 ETFs with $3.5 billion) incorporating ESG criteria, up from 333 mutual funds with $641 billion in assets in 2012, according to the Forum for Sustainable and Responsible Investment." This article explains how asset managers and mutual funds are responding to demand from millennials and women to create socially-responsible investment options.
I was 17 when my dad died. It was sudden and deeply disorienting. Those days and weeks immediately afterward were a dense fog of grief and cleanup. He died without a will or estate plan (mainly because he had nothing to plan).
As the youngest of 5 kids and the only one still living at home without an adult job, I received the largest "inheritance".
Part 2 in our "Defining and Measuring Series"
"I own a company and I'm a Christian. Does that mean you can invest in my company?" - We get a version of this question at least once a week at Impact Foundation. Consequently, we've spent a lot of time thinking about what it means to say deploy capital for social and spiritual impact alongside financial gain. Is it enough to have "christian" management? Must the organization sell "spiritual" goods or services?
Part 1 in our "Defining and Measuring Series"
To reach broader adoption, kingdom impact investing needs a unified definition and a basic set of metrics to help determine if it works. Over the next few blogs, we'll explore these issues but first can't we find a better phrase?
"Kingdom" in our usage refers to the kingdom of God, as Jesus described it in His teachings. Not every follower of Jesus is comfortable with this phrase. For us at Impact Foundation, the hope of this Kingdom drives everything we do. Thus, it seems a suitable adjective to differentiate our version of "impact investing" and the least bad option.
part 3 of 3 in our "Defining and Measuring Series"
Tracking performance of investments to determine if we're meeting our goals for spiritual transformation feels like the holy grail of Kingdom Impact Investing. It’s time to put forth a working version that can be implemented now and improved over time because we have seen the power of Kingdom Impact Investing and want to unleash it for more good.
Sitting between Thailand and Vietnam, the country of Laos is marked by rugged mountains and one of the lowest per capita incomes in the world. This poverty fuels the two largest industries in the Golden Triangle (Laos, Burma, Thailand, and Myanmar): opium trade and human trafficking.
Jobs and the hope of the Gospel - they're needed here perhaps more than anywhere else. Fortunately, the Lao government has been implementing reforms meriting attention from US investors. For those interested in alleviating poverty through sustainable business, it's an attractive place. That it why Laos Agriventure got its start.
In their own words, Craig and April Chapman describe their experiences investing for impact.
Historically, we have set aside some amount of our personal financial resources to go to non-profits; i.e. organizations that improve the lives of others, with the goal of impacting not only their physical, emotional or educational needs, but also pointing them to God. FThe problem is that once we give the money away, it’s gone – and we have to continue making money in order to give more away. Clearly, that is not a sustainable strategy unless we have an unlimited capacity to make money. That’s where impact investing comes in.
Winding along dirt roads South of San Pedro Sula for two hours gave us plenty of time to talk. As we drove, Pete pointed out the truck window at the rows of young coffee, yucca, and pineapple. "All those fields are new. The first time I came out here [on a five hour donkey ride] there was nothing in these hills. Can you guess why that changed?"
Drought ended? Drug cartels stopped fighting in the region? Some nonprofit moved in with an agriculture program?
No, no, and no.
Over five days, we took 24 people to see eight projects in two countries. It was a bit of a whirlwind, so I recruited some help to describe what we saw: Jackson Johns, age 10 and Andy Minnich, age 9. I figured if two young boys can explain these social businesses, nearly anyone can understand. Certainly, these businesses are robust enough that we could write MBA case studies on each of them, but hopefully the simple explanation can help paint a quick picture of impact investing and spark your imagination.
Pete, David and Bob my friends of over 20 years model not only a personal work ethic that empowers their employees, but have also elevated the conversation of how to best help the poor by providing productive work environments that facilitate replicable and sustainable business models that radically increase a person’s potential to care for their families. Rita and I heard from two joyful recipients of this holistic approach to charity: a mom beamed of her ability to daily have a physically clean child and a farmer proudly told us of his capacity to pay for the education of his entire family. Indeed, responsible ways to help people help them grow more responsible.
I had a series of bad interactions with a Charity Enterprise that I love. It's caused me to reflect on my own work and the social enterprise industry at large. I don't want to identify this company, but they're one of the dozens that sells consumer products that have been made by at risk populations - people for whom a job means they can avoid jail, trafficking, putting their children in orphanages, etc.
To be fair, we all make mistakes. Every day. I'm not stellar at returning email and I can't remember names sometimes even my own kids. So the lessons I'm sharing in this blog are ones that I'm trying to take to heart for Impact Foundation. Maybe they'll help you as well.
Why does this matter? The long-term viability of investing for impact is at stake.