NB Financial Health

Thursday
November 27
2014

James Militzer

Four Insights from Four Investors: Practitioners of impact and angel investing share their views

As our Impact Investing Insights series concludes, we’ve compiled the views of four practitioners on topics like impact assessment, crowdfunding, and the advantages of socially responsible investing. You can read excerpts below, or check out the video for their full perspectives.

You can view the other parts of the series here:

Part 1: A Small Drop in a Large Bucket: The World Economic Forum’s Abigail Noble, on why impact investing needs to go mainstream

Part 2: Pay for Success: Can social impact bonds provide the fabled “win-win-win”?

Part 3: Start Small, Stay Small: Can better finance help Latin America’s microenterprises take the next step?

Part 4: The Best-Kept Secret in Impact Investing

Part 5: The Supply Chains of the Future

Part 6: A Shift in Focus: Impact investing needs to concentrate less on problems, more on solutions, says Burckart

Part 7: Funding to Reach the Tipping Point: Doug Balfour, CEO of Geneva Global, on how to spark collaboration that amplifies social impact

Rob Hanna, Social Wealth Investment Management

How can impact assessment can be simplified?

“The learning is in the doing,” Hanna said. “And a lot of groups either don’t explore and take the time and the discipline to actually get some on-the-ground experience with measuring impact. They kind of take what’s out there – and there’s not a lot out there that’s been proven in operational use – and so they default back to what they know, and what’s easier to communicate and use as an operating conceit.” He used the example of a balance sheet to illustrate how impact can be measured intuitively and easily on an individual basis: either the targeted social benefit is being achieved, or it isn’t. “It’s really that simple, and I think we try to make these externalities so much more complex and systemic before we even have the basic elements operationally working on the ground. And I think that’s where the error has been: people are trying to approach it too much from an abstract, theoretical level, as opposed to just making it work as an operational framework.”

Peter Johnson, partner, Developing World Markets

What do you wish mainstream investors better understood about impact investing?

“When we evaluate the social impact component of a particular investment, I would love it if they would understand what we do,” he said. “We actually look through to see how that enhances the financial return – what I’m referring to is essentially reducing risk, reducing volatility. … When you reduce risks because the client really believes in the loan, and uses it for productive purposes, then you’ve built in both the means and the motive for them to repay, and that becomes a more reliable income stream. And we find, therefore, that the social impact and the financial side are self-reinforcing: the highest quality standards in both lead to the highest quality investments.”

Bethann Kassman, CEO, Go Beyond Network

What are some of the most interesting developments you’ve seen in angel investing in recent years?

Kassman didn’t hesitate to bring up the biggest trend she’s seen lately: crowdfuding: “It’s just starting here in America, where you can invest for equity as opposed to a gift, like Kickstarter. But crowdfunding is changing the landscape for all angel investors. And what we’re seeing is a lot more of the traditional angel bulletin boards and companies are now approaching crowdfunding. There are pluses and minuses that go along with this new development … but it opens up the playing field for the average person worldwide to invest in any company that they choose to invest in.”

Helen Rake, owner, Synergy Asset Strategies

What are some of the misperceptions about impact and socially responsible investing that you’ve noticed among the investors you work with?

“A lot of what I heard when I initially started to bring it up to my clientele was, ’What is that? Isn’t that for environmentalists?’” Rake said. “There was this interesting perception that … you had to be kind of a progressive pioneer in that area to really be able to participate.” Consequently, when she asks her clients if they are interested in socially responsible investing, they often say, “Oh, no … I don’t think so.” But after she asks them if they’d rather invest in a company that allows child labor or sweat shops, or one that treats their employees well (all other things being equal), Rake said that they invariably choose the latter. Her response: “Then guess what? You’re really, in the broadest definition, a socially responsible investor. I want them to know that is an option, and it’s a great option, because not only do you get to invest according to your values and feel good about what you’re doing, but you can actually make more money doing it.”

Categories
Entrepreneurship, Impact Assessment
Tags
crowdfunding, Impact Assessment, impact investing, investment fund, social impact, video