The Why of Impact Investing, Millennials and the Last Word at #SOCAP16



Jed Emerson has been studying his history, as evidenced by the arc he traced from Dutch East Indies Company in 1604 and the 1848 Oneida commune in upstate New York, through the German dissident Dietrich Bonhoeffer, the Marshall Plan, to our present moment and “out into the future for more centuries to come.”

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And Jed, as he’s universally known among the impact investing veterans, had something to say. If you missed the opening plenary, or just want a dose of that ol’ time impact religion, the video is up.

Emerson is concerned, he said, because “I hear some people who present themselves as impact investors who clearly don’t get what this is about.” He called out an investment banker, who at SOCAP last year said the first task for an impact investor is to decide “how much financial return you want to surrender in exchange for impact.”

“You don’t get what this is about,” Emerson said to his unnamed interlocutor. “It is not a conversation about tradeoffs and compromise and marginalizing profitability in order to create some fuzzy concept of ‘charitable good.’”

“I know you’re not supposed to actually tell somebody that they’re wrong,” he said. “That is wrong if you’re thinking that way.” (David Bank)

Global Goals
“Global Goals” is better branding than “the Sustainable Development Goals,” and reinforces that world leaders did, indeed commit to them. The commitment include not only audacious goals such as Eliminate Extreme Poverty, but huge investment opportunities such as adapt agriculture to climate change (SDG №2); Tip toward low-carbon energy (№7); Build sustainable cities (№11), 21st century infrastructure (№9), and effective health and welfare systems (№3); and create jobs and opportunities for the next generation (№8).

Yet there is still a mismatch between SDGs and capital needed to achieve them. The demonstrated customer demand for goods and services such as finance, education, health care and energy should send a signal to investors that the oft-discussed “financing gap” should actually be considered an investment opportunity (see “Call to Action: Align Global Assets with Global Goals”).

“As we look at these goals, we need to leverage capital from bottom up as well as top down,” said Gary White, Chief Executive Officer and Co-founder of Water.org, a nonprofit dedicated to promoting innovations in how water and sanitation projects are delivered and financed. Poor populations have the means to buy solutions if you design them right. “Don’t underestimate the power of people as customers to pay for solutions.”

In a paper and LinkedIn post this week, Philippe Zaouati, CEO of asset manager Mirova, outlined three steps to bring mainstream finance to bear on the global goals. First, he said, “we need a precise understanding of what concrete investments are needed to support each SDG.” Second: we have to structure “tailored quality financial products that aim for high social and environmental impact.” Third, “we need to better align the interests of issuers and investors.”

How will millennials invest?
Technological and regulatory shifts are unleashing the power of millennials to make value-aligned investments. “Millennials are sitting on over $400 billion in cash,”said Catherine Berman, Co-Founder of CNote, which aims to offer retail investors a government-backed annual return of 2.5% on their savings through investing in CDFIs. “There is a market opportunity there.”

Research suggests millennials want to align their investments with their values. including the recent Jobs Act III legislation, the advent of low-cost brokerage platforms and the greater availability of impact data. OpenInvest’s low-cost online tools that allow users to customize their investment portfolios based on their values are aimed at empowering millennials to enter the market.

“Finance is complicated, expensive and boring,” noted Josh Levin, CoFounder & Chief Strategy Officer of OpenInvest. “We need to make finance look like kale. Right now it’s spinach.“ (Marina Leytes)

The Last Word
By tradition, the organizers of SOCAP don’t plan the last segment of the closing plenary at SOCAP until the last minute, and that was clear when Lindsay Smalling asked me to join the panel about an hour before showtime.

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Millennials, I think, will clean up the mess of the 20th century and turn us in the right direction. Then we can truly pass the torch to a new generation — to paraphrase JFK, those “born in this century, tempered by war…” — and build the new civilization. I’m keen on those post-Millennials and am campaigning to christen them the ReGeneration. On stage, I referenced our 10-year-old son, partly to signal to the Millennials that by, say, 2030, he’ll be 24 and they will be heading into their 50s.

For the last word, I trotted out that old saying, apparently misattributed to Gandhi (and, alarmingly, tweeted by Donald Trump earlier this year): first they ignore you, then they laugh at you, then they fight you and then you win. Impact investing, and the whole movement to build that sustainable, inclusive world, is, it was easy to think after a week at SOCAP, somewhere between the fighting and the winning. And so my question: What does winning look like? If we can imagine it, we (all) can build it. (David Bank)

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