Impact investing, or investing for social and/or environmental impact as well as financial return, has become more and more popular, and will hopefully become the norm rather than the exception. At the Investors’ Circle conference, a panel of experts discussed impact investing.
Amit Bouri, of the Monitor Institute, explained the findings of a recent report, “Investing for Social and Environmental Impact“.
- Market fragmentation is a challenge.
- The field needs better metrics and measurement standards, such that impact investments are transparent and comparable.
- Investors need to assess, understand and communicate the impact of their investments.
Binda Ganguly, Associate Director at the Rockefeller Foundation, manages Rockefeller’s $20M program related investment portfolio. She explained how Rockefeller is working on building the impact investing space.
- Networks: Rockefeller’s Global Impact Investing Network (GIIN) is a network of investors seeking social and environmental return. The aim is to create a transparent forum for the field.
- Infrastructure: Rockefeller strives to create the infrastructure for impact investing to thrive. As such, they are creating a social investment bank, a social stock exchange and a standardized reporting and rating system for assessing the social impact of investment.
- Intermediaries: Rockefeller is working to develop the investment intermediaries so that they can drive capital towards underserved sectors.
Ganguly indicated that lack of syndication and liquidity are two central issues that need to be addressed in this field in order for impact investing to scale.
Don Shaffer, President and CEO of RSF Social Finance, explained that impact investing at RSF involves supporting organizations, like IceStone (the case study of the panel), that want to do business in a fundamentally different way. Shaffer reported that RSF Social Finance assets are up 15% from last year because people are gaining interest, and okay with a lower return. He explained, “We need to move from financial transactions that are complex, opaque and anonymous to ones that are more direct, transparent and personal, based on long term relationships.” Reiterating the local focus discussed in the water panel earlier in the day, he stressed the need for diversified regional economies for food, energy, building materials, and other basic needs.
IceStone was used as a case study example. Peter Strugatz, co-founder and co-CEO of the recycled glass and concrete countertop manufacturer which has reached ~$7.5M in sales, spoke on the panel. IceStone has raised ~$16M in funding over the years, $10M from angels, and $0 from venture capital firms. Strugatz referred to it as “commune capitalism” wherein there is one class of stock and nearly 100 partners, all of whom are impact investors. But even though he has done well for himself and his business, Strugatz indicated the lack of social capital available to businesses like his own.
Measuring impact was a popular topic of conversation. Andrew Kassoy of B Lab, Shaffer and Strugatz discussed the B Corporation rating system. Kassoy stressed the importance of balance and transparency – not managing to just one metric. Shaffer, who has been on the B Lab standards council, conveyed that while it’s important to have standards to rely on, the B rating system will be an endlessly iterative process. Sturgatz brought the manager’s perspective and said that while B Lab is not the be-all and end-all for accounting for impact, it is one holistic way of being judged and resonates with investors. All in all, measurement is just in its early stages – we’ll need to develop more sophisticated impact management systems in the years to come.