Impact Investing: $4.1 Trillion to Save the World

By Joshua Wiese The world now faces dramatic cuts in government spending and no shortage of pressing social and environmental challenges. On Monday, asset owners and managers of an impressive 4.1 trillion dollars gathered in San Francisco to "Take Action!" - discussing how they can best use their investment portfolios to address big issues. The Take Action! Impact Investing Conference marks conference founder Georgette Wong's fifth year working with asset owners and managers to use their investment dollars for good while seeking premium or market-rate returns. The gathering brings asset owners from families, foundations, major pension plans and corporations together to exchange stories of success and failure, debate ideas and investments, and make the connections they need to move to their impact investing efforts to the next level. One of the conference's major thrusts is understanding how investors can move beyond “socially responsible investment” (SRI), which primarily focuses on steering clear of "harmful" companies. The next step is to encourage an improved corporate environment, social performance, or governance practices. While SRI is undoubtedly important, many of Monday's speakers focused on impact investing's premium return potential as a catalyst that could affect the entire capital market structure. Attendees discussed challenging old paradigms about wealth and philanthropy, investment policies, addressing fiduciary constraints and standards of conduct, and deal flow in different markets. The day started with discussion about different types of impact investing. Even amidst the relatively small group of conference attendees, there was no consensus definition. Attendees listened to different perspectives on bringing key decision-makers on board. Bonny Landers talked about the River Star Foundation, a family foundation based in Hong Kong that's taking a pioneering approach to doing good with their portfolio, while navigating three generations of key decision maker perspectives. Tom Ries from the W K Kellogg Foundation talked about the challenges and successes of his organization's efforts to move into the impact investing space. In the last four years, Kellogg's impact investing fund has done over 20 deals and made 2 exits. Attendees got perspectives from around the world, learning about challenges and opportunities that make up the investment landscape in Latin America, the Middle East, Africa, and Asia. Government also had a strong showing. The US Department of State's Kris Balderston talked about 'smart power' and State's new Global Partnership Initiative, which is forging new private-public partnerships to address big global problems. Jerome Tagger, COO for the UN Principles for Responsible Investment (PRI), talked about some of his organizations efforts to engage PRI's over 870 signatories representing more than 25$ trillion in assets under management around the world. Both organizations are working with Wong in a survey of asset owners on impact investing, hoping to create a global view of best practices, identify opportunities, challenges and the solutions to overcome them. Jacqueline Strasser from the Overseas Private Investment Corporation (OPIC), the US Government's international development bank, talked about some of the tools OPIC uses like political risk insurance to overcome barriers to private investment in the developing world. Monday ended with attendees chewing on the myriad of stories and perspectives they were exposed to throughout the day. It's clear that the impact investing has the potential to move large amounts of capital into key areas, that there are lots of ideas being tested to address market barriers and externalities, and that there's a lot of exciting thinking about how to create products that make investors money because of their social and environmental benefits.  But it's also clear that the space is new and that even the best leaders in the field are learning as they go - all the more reason why this opportunity for asset owners and managers to gather, share stories about their successes and failures, and debate the best way forward is so important.  

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Joshua Wiese is a strategy consultant focused on social and environmental issues. He occasional moonlights as a blogger, reporting on solutions to social and environmental problems, and he stumbled across the Take Action! Impact Investing Conference through work with the organization's founder.