Bridging the Gap Between Traditional Investors and Impact Investors

Posted by on October 9th, 2015

By: Clark Brimhall

 

Changing the Framework: Three Overarching Conversations at SOCAP15

Governor Deval Patrick of Bain Capital brilliantly articulated the impetus of SOCAP during Thursday morning’s plenary panel when he said, “We need to proselytize. If the planet is to be saved, and if communities are to be uplifted, and frankly, if capital is to survive, we need the world to move into thinking about social and environmental return as part of the overall return for investing.”

So how do we change the framework of traditional investing? After listening to several panels and having one-on-one discussions with people from foundations, private equity groups, and impact investors, I have come up with 3 overarching themes:

Prove it

Extraordinary claims require extraordinary evidence as Carl Sagan said. All eyes are on us here at SOCAP15.  Whether you are an entrepreneur, small impact investor, foundation or private equity group – traditional investors seem to be constantly scrutinized with a magnifying glass tediously waiting for a mistake. Proving them wrong or right is completely on our shoulders. You might say we have a “chip on the shoulder” attitude, or our toes are being held near the fire to create returns.

So how do we withstand the scrutiny? Simply by proving our claim. Offering quality work, sound financial models, and evidenced based work speaks for itself, and it’s only a matter of time before the traditional investors take a look, as long as our work is viable.

Top Down and Bottom Up

Who is the tip of the spear at SOCAP15?  Foundations or impact investors? Entrepreneurs or analysts? Or is a breakthrough in impact investing completely in the hands of the investor? So far, the answer seems to be: all of the above.

Gil Crawford in a panel discussion on segmentation of impact investing suggests that it’s time for all SOCAP15 attendees to get  “confident and confrontational” when speaking to investors, he also suggests that it’s up to smaller firms in the space to set the bar and make noise and not just the leave it to the “big names.” Clara Miller, president of the F.B Heron Foundation puts it this way: “there really is no shortcut to market acceptance” and that it’s going to take everyone to change the framework of investors to include social and environmental risk within their portfolio.

Millennials

I was hesitant to add this last theme, but it’s practically impossible to avoid the word millennial when attending all panels. For example, Deborah Winshel from BlackRock Inc explained to the audience that the reason they have an impact investing unit is because a group of millennials in the firm wrote up the business model for Impact Investing independently, and presented it to management.

There is no doubt that there is a rising interest in making a positive change in the world across all demographics. Social Capital is riding this wave and should continue to ride the wave and capitalize on the young generation and their enthusiasm for impact.

 

Clark BrimhallClark Brimhall is a Senior Associate at Sorenson Global Impact Investing Center, and previously a Finance Associate with Village Capital. Clark has worked on a variety of due diligence efforts covering: Peer to Peer market research, Ed-Tech in Brazil, Romania and Moldova impact assessment, clothing factories in Africa, Agriculture in east Africa, Voice of the Customer market research, Cookstoves in Africa, and healthcare in India.