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Impact across the capital chain: The ‘Who’ in impact investing

The following is an excerpt from Rockefeller Philanthropy Advisor’s forthcoming Impact Investing Handbook: An Implementation Guide for Practitioners. Discuss the handbook with the authors and special guests on Agents of Impact Call No. 20, Thursday, June 25 at 1pm ET. RSVP here

The “Who” in impact investing starts with you. Whether you’re new to impact investing or further along in the journey, it important to understand your position in the ecosystem of players and to consider what resources and influence you can engage to create impact across the capital chain.

From individuals to large institutions, there is a broad range of asset owners, each with distinct capabilities and resources, which will guide their practices. Your Who will guide your engagement with other market participants and stakeholders, drive your Why through a theory of change, and determine How you will ultimately deploy capital.


In order to successfully create impact, you will need to navigate a network of stakeholder relationships that are part of the flow of capital (Exhibit 2-1). As a supplier of capital, you will need to assess and understand the ultimate users of your capital as well as the intermediaries. Decisions about how much time, energy, and resources you want to spend will drive how you approach the intermediaries, such as the asset managers, who sit between you and the entities that create impact. While intermediaries are the bridge between your assets and impact creation, they can also create barriers. The expertise and willingness of an advisor to work with you on the creation and evolution of your impact strategy can be critical for its success.

Asset Owners: As an asset owner, you hold the capital and should make the ultimate allocation decisions along the impact capital chain, establishing the impact orientation of the capital. Asset owners can range from retail investors to endowments of institutions (such as private foundations) to sovereign wealth funds.

Intermediaries: An intermediary is an entity that acts as a bridge between two parties in a financial transaction, such as commercial banks, investment banks, and investment funds. One emerging trend is the advancement of technology (like robo-advisors) that may replace certain financial intermediaries. Your choices about working through intermediaries should align with your own capacity and resources, which may also affect your cost of doing impact investing. Two distinct types of intermediaries are advisors and asset managers.

Advisors: Advisors provide services to asset owners on how to deploy their assets in exchange for fees, and may or may not offer their own investment products.

Asset Managers: Asset managers construct products on behalf of others to meet specific investment goals.

Enterprises: Capital is ultimately put to use by the entities that generate the impact and financial return. This point in the capital chain is critical to achieving an asset owner’s social and financial goals. These enterprises can take on a range of corporate forms, including nonprofits, for-profits, and hybrid structures (such as benefit corporations).

Customers/Beneficiaries: Finally, the enterprise creates a positive or negative change for the customers and beneficiaries. Some categories of beneficiaries are intuitive, such as the residents of a city where electric vehicles are reducing air pollution. Other beneficiaries are just as important but perhaps less easily identified, such as employees or communities along a company’s supply chain. The asset owner does well to pay close attention to the impact of an investment on these diverse stakeholder groups. Ideally, representatives of this group are invited into the asset owner’s strategic decisions and impact evaluation.

As all of these actors work in concert, the impact market system creates impact as well as a financial return. The Impact Market System (Exhibit 2-3) is a feedback loop of impact investments generating financial return along with impact. This feedback loop distinguishes impact investing from philanthropy and traditional investing.

Enabling Environment: In addition to the direct links in the impact capital chain, other stakeholders are integral to impact creation, such as regulators and policy makers. Many impact investments may directly affect communities in ways that are similar to philanthropy and public policy. The lack of a direct transaction or contract between impact investors and the beneficiaries of their investments creates the need to complete stakeholder analysis as part of the due diligence process. This distinction can also raise the question of what legitimacy market participants have in addressing impact issues. In addition to regulators and policy makers, accelerators and incubators can also help the field by mitigating risk and expanding the pipeline of investable opportunities.

Partnering, Cross-Sector Engagement, and Collective Action: Given that impact investors are seeking to drive social and environmental change, and the complexity of the systems impact investors are trying to shift, the role of partnering and collaboration is critical. For example, impact investors focused on education technology need to make sure that the companies they invest in engage with public officials and understand classroom dynamics to successfully scale their investments.

Considerations of diversity, equity, and inclusion are central elements of the Who. These criteria can be applied to the impact beneficiaries as well as to all of the players and stakeholders across the capital chain. Mission Investors Exchange and Stanford Social Innovation Review explored racial equity and impact investing through a series Racial Equity and Impact Investing: Foundations Leading the Way, which framed the following questions that impact investors can use to drive this work:

• Who allocates capital?
• Who receives investments?
• Who is the beneficiary or end user?

Given impact investing’s potential role in addressing racial and gender equity, some investors and advisors have begun to apply a racial and gender equity lens to their entire strategy. Confluence Philanthropy has launched a racial equity initiative calling for action to address the lack of diversity in the field of impact investing.

In order to successfully create impact, investors will need to navigate a network of relationships that are part of the investment process. Understand where you sit in the impact capital chain and how you can drive change through it. Pick your advisors and managers with consideration of who they are and how they can help you achieve your intended impact goals.

Remember, participation and power matters, not just financial capital.

Sign up here to receive the full open-sourced guide on June 25th. Steven Godeke is founder of Godeke Consulting. Patrick Briaud is Senior Advisor, Impact Investing, at Rockefeller Philanthropy Advisors.

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