ImpactAlpha, Apr. 6 – Investors willing and able to prioritize impact over financial returns were behind some of today’s highest-impact innovations. Catalytic investment strategies, sometimes decades in the making, helped lay the groundwork for the mRNA platform that was used to create COVID vaccines, for community development financial institutions as a pandemic-era lifeline for underserved businesses, and even for the breakout growth of electric vehicles.
Long the stomping ground of private foundations, a growing number of family investment offices are on the quest for outperformance on impact. In “Back to the Frontier: Investing that Puts Impact First,” the consultancy Bridgespan highlights the families and the growing ecosystem of fund managers, advisers and intermediaries that are enabling the shift.
- Freedom to act. Fiduciary obligations to deliver market-rate returns have strangled conventional impact investors from prioritizing impact over financial return. “By contrast, high-net-worth individuals and family investment offices have the discretionary power to declare impact a priority when investing assets,” write the authors, including Matt Bannick, formerly managing partner at Omidyar Network and now a Bridgespan fellow.
- Catalytic investors. Charting the course are Pam and Pierre Omidyar at Omidyar Network, Liesel Pritzker Simmons and Ian Simmons at Blue Haven Initiative, the Berwind family at Spring Point Partners and Diane Isenberg at Ceniarth (see, “Fighting poverty and remaining rich: Ceniarth shifts portfolio to impact-first capital preservation”). Still, impact investors annually deploy less than 10% of capital toward catalytic strategies.
- Impact-first funds. Alongside direct investments in social ventures, impact-first investors invest through a growing number of impact-first funds. Among them: Prime Impact Fund, WaterEquity, Global Partnerships, the Perennial Fund, Candide’s Olamina Fund and dozens of community development financial institutions.
- Operationalizing impact-first. Some family offices are outsourcing their impact-first investing to advisors, including Jordan Park, Tiedemann Advisers, Align Impact and Avivar Capital. Others build the team in house, including Omidyar Network (100+ staff) Ceniarth (13) and Blue Haven (10).