What’s New In Impact Investing? February Roundup

Good February summary of impact investing news from various influencers via Pacific Community Ventures. Among the areas covered are the strides impact-driven foundations continue to make, and the momentum being reported, despite continued debate, of for-profit enterprises’ adoption of SDG and of investors adoption of ESG, practices.

The tone is notably optimistic, but realistically there is much more work to do.  For example, this week as new consumer products and technologies like AI are being touted at the Mobile World Congress event in Spain, mindfully, some of these products, Samsung in particular, “utilize 1.5 million underpaid and unprotected labor in developing countries,” according to at least one advocacy site.

At the Economist Impact Investing event in New York in February, Nancy Pfund, a managing partner at DBL, criticized larger institutions and said their “lack of aggressiveness in impact investing was holding back the asset class.”

San Francisco-based OpenInvest, also in February, launched a feature to expose which banking institutions are investing in the Dakota Pipeline, a controversial project that protesters say will harm local water supplies, the environment and cause oil spills, and which in turn caused the city of Seattle to cut ties with Wells Fargo.

And as reported in January, with the US administration expected to divert its federal government budget to its national security and defense sectors, funding for purpose-driven projects will shift – private (foundations and family offices) and local sector (city/state driven like CDFIs) impacting investment funds are expected to pick up the slack, based on recent analysis by Forest Trends.  Elsewhere, governments in other developed countries, like Australia and New Zealand are experimenting with utilizing social impact bonds to help get homeless communities in their cities into jobs.

Foundations put their assets to work and are expanding

Foundations have an important role to play in impact investing—in building platforms and products that efficiently mobilize capital, mitigate risk, and improve liquidity. Julia Stasch of the John D. and Catherine T. MacArthur Foundation writes that foundations need to being market making for their missions. In addition to their traditional grantmaking of about $250 million each year, they’ve expanded their impact investing strategy, working in new ways and tapping a dedicated pool of $500 million to help make the global impact investment marketplace more inclusive, efficient, and effective. Read more in Stanford Social Innovation Review >

Kate Wolford of the McKnight Foundation echoes this. Most foundations have endowments with invested assets—but many don’t see themselves as institutional investors. As a result, they are leaving behind some of their influence. The philanthropic community, she writes, should change the lenses through which they choose to see themselves to include institutional investor, and it could very well open the door to powerful new networks, new conversations, and new market-driven strategies. Read ore on Stanford Social Innovation Review >

One example comes from the Annie E Casey Foundation. To bring more resources to bear on the challenges facing children and families, funders can step outside their traditional grantmaking role to invest in innovative and mission-focused efforts. Our friend Patrick McCarthy from the foundation talks about how they began exploring social investing in the late 1990s as a way to put even more assets to work in advancing their mission, without jeopardizing the foundation’s long-term viability. Casey saw this kind of investment, using a percentage of their endowment to finance projects beyond the limits of their grant budget, as another tool to advance their mission. Read more in Stanford Social Innovation Review >

Banks and Funds are increasingly leveraging UN Sustainability Development Goals (SDGs)

An estimated $5-7 trillion a year until 2030 are needed to realize the SDGs worldwide, including investments into infrastructure, clean energy, water and sanitation and agriculture. Blended finance, venture capital, impact investing, crowd funding and environmentally or socially oriented market instruments such as green bonds are among a range of mechanisms designed to bridge the gap, but none of the current approaches seem sufficient to reach the necessary scale. Now, 19 banks and investors launch financing principles aimed at funding the UN sustainable development goals with $7 trillion. Read more on the UN >

Corporate-driven programs are rising

The report cites over 25 case studies of giants such as Nissan, Unilever, Mahindra, Ericsson and Merck, as well as ‘disruptive innovators’ like Safaricom’s M-Pesa, TransferWise, Peek Vision, and Bla Bla Car — which have successfully tapped into opportunities by addressing some of the world’s most pressing challenges such as climate change, economic inequality, and the gender gap. Read more on Triple Pundit >

From sustainable “blue economy” projects to restoration projects for wetlands, streams, and animal habitats, conservation-related projects have been drawing a significant amount of investor money in recent years. Investments that produce a financial return and a “measurable environmental result” climbed 62% from 2013-2015, according to a new report from Forest Trends, indicating that traditional divisions between conservation, philanthropy and for-profit finance may be withering. Read more at Fast Company >

More opportunities in 2017

Impact investing is expanding, and that is creating new opportunities for social enterprises, including Benefit Corporations, women-led firms and community-based ventures. For the first time since the study was started in 1995, gender lens investing was tracked separately. The advancement of women is a factor for $397 billion in institutional investor assets and nearly $132 billion in money manager assets. Another growing trend has been a focus on place-based investing, especially in underserved communities. Community investing institution assets grew by almost 90%, from $64 billion to nearly $122 billion. Read more on Locavesting >