Glen Jeffries is senior director of Impact Investments at NatureVest, The Nature Conservancy’s (TNC) in-house impact investing and sustainable finance team. Glen leads the team in creating innovative investments that aim to deliver both conservation and social outcomes as well as returns to investors. Below, he answers some questions from TNC’s Cat Burns to share insights into NatureVest’s process of integrating impact when developing a new investment.
How does NatureVest originate impact investments?
Our north star is that all of our impact investments—usually an investment vehicle, like a fund, though we regularly explore new structures and financial solutions—must contribute meaningfully towards TNC’s 2030 Goals.
We identify opportunities in two main ways. Often, our conservation colleagues at TNC present us with early-stage ideas for evaluation. These typically aim to address conservation challenges by leveraging financial markets, rather than philanthropy or traditional conservation funding.
We also source opportunities externally through active engagement with the private and public sectors. Sometimes we approach an investment manager directly, and other times they—along with other impact finance stakeholders—might contact us. Recently, we have begun issuing public RFPs, or requests for proposals, to identify investment management partners for specific opportunities that we consider organizational priorities. We have found this to be an effective way to expedite finding a well-aligned partner.
NatureVest often collaborates with partners to execute its impact investments. How does NatureVest’s role in deal development differ from its partners’?
It’s essential for those of us in the impact finance sector to define our roles and responsibilities clearly. By better articulating what we do in a transaction, we enhance our effectiveness and credibility.
In broad terms, NatureVest typically has three core roles:
- Developing the overall impact strategy for the investment: We outline the target impacts, design features to reach those targets, identify what impact success looks like, and how that success will be measured and reported. The details are then memorialized in a formal ‘Impact Strategy’ that is incorporated into the impact investment’s decision-making processes and legal documents.
- Collaborating with our partner on structuring the investment product and designing the decision-making protocols to maximize the likelihood of impact delivery and investment execution.
- Supporting our partner in investor market testing and fundraising.
How do you ensure that impact considerations are built into the investment decision-making process?
‘Built into’ is a great way to phrase it. In our collaborations, we require impact considerations in the investment process with a legal obligation to follow through. This step distinguishes our role from some other organizations that provide traditional conservation advisory services in the impact investments arena.
We typically add an Impact Committee into the governance architecture of an investment vehicle—just like an Investment Committee, the Impact Committee must review and approve decisions and actions from the impact perspective. The two committees work together so that no investment vehicle can proceed with an investment that does not meet the impact requirements established from the outset. We also incorporate financial incentives into our impact investment vehicles, building on what the market already knows and understands as a route to mainstream our work and make it replicable.
Lastly, as a non-profit we promote accountability through robust reporting and knowledge-sharing, highlighting both successes and areas for improvement.
How do you balance financial returns with impact objectives when structuring an investment?
Generally, I see three types of correlation between financial returns and impact returns: strong positive correlation (“impact is free”), negative correlation (“impact is a cost”), and moderate positive correlation (for example, additional upfront costs with a positive correlation over a longer time horizon). Unfortunately, I don’t think the market talks enough about the reality: most impact investments are in the second or third category!
We typically like to focus on that third category (moderate positive correlation) as that’s where the scale and replicability can exist and I believe telling that story compellingly and transparently for each opportunity set is the best way to balance impact and financial expectations from the outset.
For certain investments, when appropriate, we may implement a blended finance strategy to achieve structural balance, ensuring a better alignment of risk and reward. We also consider including other structural solutions in the investment design, such as financial incentives for investment managers based on ‘stretch’ impact performance, or dedicated funding pots for high-impact, relatively low-cost activities adjacent to the investment’s day-to-day work (e.g., research studies or pilots). Monitoring and reporting is key, because arguing the case in those ‘moderate positive correlation’ scenarios is much easier when an investment has a track record demonstrating this in practice.
What factors do you think contribute to structuring a successful impact investment?
It’s what I call the 3P’s (and 1A):
- An aligned and motivated partner.
- A strong, investable, and scalable product.
- And underpinning all that is a clear purpose—an ambitious but achievable impact that is unambiguously explained and then quantified.
The other element I’d add is a keen eye on the audience, because it helps with fundamental structuring and storytelling. As we seek to mainstream impact investing, those who may not consider themselves impact investors must be confident the approach ‘makes sense’.
What is an example of a deal where impact considerations significantly influenced the structure or terms?
We recently celebrated the closing of The Blue Revolution Fund, or BRF, a collaboration between TNC and Hatch Blue. BRF is investing in sustainable aquaculture systems and technologies with the goal of accelerating the industry to provide a low-carbon food source while actively supporting ocean health. At its core, BRF is structured around impact. For example, the fund has committed to a set of environmental and climate targets that it must achieve, and, as a result, measurable outcomes are built into every investment it makes.
Additionally, we structured the fund manager carry pool to include impact-linked compensation, which means that a portion of the carry can only be earned if the fund achieves all its impact targets. We also included a fund-level requirement to promote learning and knowledge building to advance the aquaculture impact investment sector.
This year, TNC and Hatch Blue will publicly release guidance resources for pre-investment conservation diligence and impact measurement and reporting. These resources will support others in the sector to replicate and build on what we are doing.
How do you monitor and measure the impact of an investment post-close?
At TNC, we have an exceptional Impact Management team that manages and reports on NatureVest’s portfolio of investments post-close, with defined conservation targets and agreed-upon practices for working with our partners. The team’s actions include establishing metrics to measure and promote environmental impact, identifying opportunities to deliver impact, advising our partners on the best practices for land and water management, and measuring and reporting on each investment’s climate and biodiversity outcomes.
In short, this dedicated team drives our mission forward by taking us from transaction to action. This helps facilitate the implementation and management process and makes the “how” as straightforward as possible. Getting this right is what motivates me: creating the right environment for impactful change—which is why we do what we do.
Glen Jeffries is a Senior Director in NatureVest’s Impact Investing Team and Dr. Catherine (Cat) Burns is the Interim Managing Director of NatureVest at The Nature Conservancy.
To learn more, read the recently released NatureVest Impact Report: Investing in Nature.
