NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

To do good or to make money? That is always the question that investors seeking a better world grapple with. But what if you could do both – improve society and realize a financial gain in your portfolio?

Three leading investors shared how they are “Seeking Impact and Sustainable Investments” at the inaugural IMN Impact Investing Summit last week in Huntington Beach, CA. While most conference panels are mostly “talk,” this discussion described real investor commitments that seek positive financial, social and environmental gains.

The panel also showcased a new initiative: The Investing Pledge, a society-wide, cross-sector collaborative opportunity for impact investors across all geographies to come together to build a better world across all asset classes in their portfolio. Several of the panelists have already signed on.

The pledge invites all investors – be they individuals, families, foundations, endowments, pensions or corporate treasuries – to declare their specific goals towards a higher level of sustainable investing.

The pledge was originally conceived of several years ago by Paul Herman, the CEO of HIP Investor, Inc., and Patrick Gleeson and Bonny Meyer of Meyer Family Enterprises. The Investing Pledge stands in contrast to Billionaire’s Challenge or “Giving Pledge” initiated by Warren Buffett and Bill Gates. The Giving Pledge has signed 105 billionaires plus their spouses (mainly from the Forbes 400 list of wealthiest Americans) to pledge half or more of their wealth to charity before they die.

But why can’t billionaires and other investors use more than charity, which is such a small percentage of their portfolio, to save the world? The collective positive social and environmental impact of the Investing Pledge could theoretically be much higher because the model is seeking to capture investment, not just charitable, capital.

Institutional Investor’s Katie Gilbert and HIP Investor’s CEO R. Paul Herman co-moderated three investors that are investing for positive impact as well as seeking market returns. These leading investors included Meyer Family Enterprises, a family office based in Napa, California; Tidwell Idaho Foundation, a foundation based in Idaho; and Capricorn Investment Group, LLC, an investment advisor in Palo Alto, California, that manages the family wealth of eBay’s first president Jeff Skoll and his foundation.

Each investing pledge seeks to answer three main questions:

1. What share of your portfolio will seek sustainability – and by what date?

2. Why are you investing in sustainability?

3. How are you accomplishing your investing pledge goal?*

*Currently the pledge accepts self-reported strategies and represents a range of negative screening to positive impact reporting approaches. Over time, the goal is to push for more detailed strategies.

During the discussion, each investor shared their journey with around 100+ attendees and discussed some of the trials that arose along the way to reaching their impact investing goal. Patrick Gleeson, CEO of Meyer Family Enterprises, described the path towards their “100% by 2020” investing pledge.

Gleeson discussed the challenge of simply taking the first step and the importance of establishing a baseline. “We didn’t know where we stood as a portfolio in the beginning; we ended up asking HIP Investor, our investment advisor, to help us establish a baseline with their five-step methodology – then we created a strategy for impact from there.”

Gleeson also encouraged investors to be diligent and strategic and to be mindful of the emotion behind the investments, “you may get excited up front about the potential environmental and/or social impact for a specific investment, but you have to make sure to practice careful due diligence for every opportunity.”

Kiki Tidwell, of the Tidwell Idaho Foundation, urged foundations in particular to consider “Total Portfolio Activation,” which is the concept of moving beyond using only the 5 percent annual grant making towards their mission and activating the 95 percent that sits in the endowment or corpus – across every asset class. Tidwell also reminded the audience that mission investing might already be embedded in the portfolio, so it’s worth taking a good scan of the entire portfolio before embarking.

Herman highlighted examples of concrete ways that investors could begin thinking about investing portions of their endowment portfolios into impact products. His advice is to get started now, as simple as where you park your cash. “Sustainable banks like those listed at GABV.org (The Global Alliance for Banking on Values) can generate impact and positive interest for your cash,” said Herman. Additional options for impact investors are included on the Investing Pledge website.

A Need for More Investible Impact Products

One issue many of the investors shared was the lower number of investible “impact” products that could accept large tranches of capital. Although there are a number of investment opportunities in private equity, it can be especially difficult to find places to land larger investments, “there are a limited number of options, especially in the alternatives and fixed income asset classes,” said John Jonson, Managing Director & Partner of Capricorn Investment Group.

If products don’t exist – these three investors are asking their advisors, brokers and fund managers to create them. For instance, HIP Investor listened to the demand from several of its clients and is currently working on a new customized Impact-Rated Municipal Bond product that has recently become available for investors. “Creating new products to meet demand is one of the most significant ways we’re going to get to 100 percent for impact by 2020,” says Herman.

Everyday investors can pledge – and invest – for more impact. And we don’t have to be institutional investors to think about signing on to the investing pledge – there are ways to get involved as an individual. Leaders in the Investing Pledge look forward to the day that just as much funding, or more, is dedicated for impact as through the Giving Pledge.

For more information, visit www.InvestingPledge.com. The website provides information about potential investments that are considered “impact investments”: http://investingpledge.com/investments/. It also provides a list of research reports on impact: http://investingpledge.com/academic-research-reports/

Logan Yonavjak is a freelance writer, the assistant manager for the Conservation Private Capital Group, and also a consultant with HIP Investor Inc., an investment adviser registered in the states of California, Washington and Illinois. This feature is not an offer of securities nor a solicitation in any investment.

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