At gatherings in Davos and a series of World Economic Forum reports, Abigail Noble has tried to nudge the world’s largest asset managers toward impact investing.
[blockquote author=”Justin Rockefeller” pull=”pullleft”]A group of young people and I thought that there should be some organization to help families make more impact investments, more effectively.[/blockquote]
Her first step? “I want to get the top 100 to 200 wealthiest families in the world to make impact investments,” she says. “If they’re making none, make one. If they are making a few, start to think about it as a strategy for a diversified portfolio.”
Noble says wealthy and influential stakeholders are key to making the inclusion of social and environmental value the norm, not the exception, in investing and business decision-making. The 200,000 families around the world with more than $30 million in assets hold nearly $30 trillion in assets, roughly double the annual output of the United States.
“We’re interested in the [aggregate] change from where they are now to where can be next year, to where they can be in the future,” Noble told ImpactAlpha in a podcast interview.
Indeed, in some wealthy circles, impact investing is beginning to take its place next to philanthropy. The ImPact network of wealthy families is inspired by the Giving Pledge, Bill Gates’ and Warren Buffett’s network of billionaires who have pledged to give away the majority of their wealth. The ImPact asks members to “Make The Pact,” and to go beyond philanthropic giving to use the power of their private investments and the broader capital markets to solve global challenges.
The ImPact’s first movers and co-founders are from families such as the Rockefellers (Justin), Pritzkers (Liesel) and Sorensons (Jim), along with Tom Groos, the principal of his own family office, Tyden Ventures, and Tyden’s CIO, Josh Cohen. Jean and Steve Case, of AOL fame, and Pam and Pierre Omidyar, who founded eBay, are supporting the ImPact through their respective foundations. Noble and her partners are expanding internationally: The ImPact held three events last week in São Paulo to bring together dozens of Brazil’s leading families.
Justin Rockefeller, a great-great grandson of John D. Rockefeller, and Cohen knew Noble through the World Economic Forum and worked closely with her on the report, Impact Investing: A Primer for Family Offices. Rockefeller is a trustee of the Rockefeller Brothers Fund, which in 2014 announced it would divest itself from fossil fuel investments.
“A group of young people and I thought that there should be some organization to help families make more impact investments, more effectively,” says Rockefeller in a new video. A network that created learning opportunities, collected and shared data and connected impact investors with each other could address some of barriers keeping wealthy families from embracing the practice.
“The ImPact, through the network and the technology platform that we use, has the capacity to change the nature of that learning from one that’s anecdotal to one that’s more data-driven,” Rockefeller says.
Rockefeller knows something about that technology platform, in his job as global director of family offices and foundations at Addepar, a Mountain View, Calif., company that sells software for investors, advisors and fund managers. ImPact members will privately share their impact investment transaction and performance data through Addepar’s platform.
High-net worth individuals committed to social and environmental impact have long been seen as the early adopters of impact investing practices, but the expected flood of capital has yet to arrive. Obstacles include the paucity of performance data, a lack of education around investment strategies, and peer support to overcome resistance from other family members and, sometimes, financial advisors. “We’re seeing both a mindset gap and an action gap,” says Noble.
Overcoming those obstacles could catalyze significant capital for impact. Families, unlike many institutions, have control of their own capital. Many families have their own staffs of investment professionals that report to them directly. A decision by a family member to begin impact investing can be turned into action quickly, at least in theory. Family offices can move money through multiple channels, including both the main corpus and their foundations, and into both direct investments and funds.
Already, more than two-thirds of the 93 impact investing fund managers surveyed this year by the Global Impact Investing Network have raised funds from wealthy families. A 2016 Financial Times survey of 70 family offices found that 60 percent are actively making impact investments (up from 53 percent in 2013). A new U.S. Trust survey found that the percentage of high net worth individuals that own impact investments has tripled in the past year, from 9 percent to 27 percent.
Single-family offices like Liesel Pritzker Simmon’s Blue Haven Initiative and another Pritzker family office, Pi Investments, have been early adopters of impact investing and among its most principled. Many multi-family offices also are seeking to distinguish themselves through impact investing, such as The Caprock Group, based in Boise, Idaho, and Threshhold Group, based in Seattle and Philadelphia, which each have helped families move about $1 billion to impact and sustainable investments.
Some families take a complete portfolio approach, committing 100 percent of their assets to investments that create social and environmental value, like Blue Haven and Hong Kong-based RS Group, a family office that manages the assets of its founder Annie Chen. In fact, a group of 74 individuals (with total capital of $4.5 billion) have formed the 100% IMPACT Network, a network of asset owners that have committed 100 percent of their assets to impact.
Making the Pact is a lighter lift — it doesn’t require a 100 percent commitment. The Pact does commit families to at least exploring the impact of all of their current investments while beginning to make, or make more, investments that create measurable social impact.
That wealthy families care deeply about community standing was highlighted in the World Economic Forum’s family office report. Indeed, families ranked “setting the bar as ‘best practice’ for impact investing” as the most important indicator of a successful impact investment in the Financial Times survey.
The ImPact is addressing key gaps in investor education. Since January, the ImPact has released six reports including a set of primers on impact investing frameworks and asset classes [see note below]. “Part of what we do is help with the tools and on ramps,” says Noble. “It’s the low hanging fruit — rounding up the expertise and know how.”
The ImPact also helps families educate their financial advisors, often by making making the business case for impact. “Environmental impact becomes mitigating risk. Being responsible with your supply chain becomes a case for customer loyalty,” she says. “Externalities have an effect on bottom line.”
“Somehow we’ve stopped considering the social and environmental impact of investments,” adds Noble. “We can no longer use financial return as the only success metric. If we want to solve problems on a global scale, we need a more sustainable, long-term capitalism.”
Sustainable capitalism might just be savvy investing. As Ben Goldsmith, chief executive of Menhaden Capital Management and director of Cavamont Holdings, the Goldsmith family investment vehicle, told the Financial Times, “All we’re doing is applying absolutely normal and fundamental investment principles to a newish sector. It just so happens that this sector creates positive environmental impact.”
“The world is undergoing a green industrial revolution and that’s great news for all of us and it’s great news for investors because when new disruptions take place, investors can make a lot of money,” Goldsmith said.
The wealthy already have high confidence in the private sector to solve social and environmental challenges. High on that list of challenges are environmental protection and sustainability. So are healthcare and education access and disease prevention, treatment and cure. Millennials, set to inherit tens of trillions of wealth, are more likely to favor sustainable and impact investing.
They don’t have to wait. Along with their parents and grandparents, families have the assets, the nimble apparatuses and growing inclination to shift billions, and then trillions, to impact, sooner rather than later.
- Impact investing frameworks
- Fixed income impact investing
- Public equity impact investing
- Early-stage impact investing
- Real assets impact investing
Photo by Benji Aird.