Insights from Mark Berryman, Managing Director of Impact Investments
Impact investing is big business. According to a study by the Global Impact Investing Network (GIIN), more than $1.5 trillion is allocated globally toward investments that tackle some of our greatest social and environmental challenges. These investments have paid off, with GIIN reporting that many impact investors are experiencing not just good impact performance, but good financial returns as well.
Given its meteoric rise over the last decade, impact investing – defined as investments made to generate positive, measurable social and environmental impact alongside a financial return – has become much more than a trend. It has evolved into a global movement and a reliable component of countless portfolios.
Small Steps for Big Impact
So where should a new impact investor begin?
Integrated impact investing is not complicated and can be executed through a full portfolio approach. With the right impact investing firm at the helm, investors looking to make a social impact or environmental change can set themselves up for success.
In supporting our clients, we at Caprock take a holistic finance-first approach. This means not sacrificing financial returns for impact results. Instead, strive for market-rate or above-market returns while also generating positive social and environmental impact. Next, understand that impact investments should be focused on private securities, particularly private companies and funds, to address social and environmental problems that are important to you. This is in contrast to ESG (Environmental, Social, and Governance) investments, which are more public market-oriented. Impact investing funds, which are entities that pool money from multiple investors, are also a smart way to invest for diversification because they can expose you to different sectors, impact themes, and asset classes, helping to reduce risk.
Because impact investing relies heavily on private markets, investors should work with a professional who has a large network, closely follows the impact investing landscape for trends and insights, and has a front-row seat to the myriad impact funds that are available. A great resource is the ImpactAssets 50, a database of the world’s top impact investment fund managers, and Impact Capital Managers, a network of more than 140 leading and innovative impact fund managers.
When vetting impact funds, bringing the same rigor, discipline, and process as for any traditional private- or public-market investment is critical. On top of that, there should be an added layer of diligence that evaluates the fund’s impact measure and management, impact thesis, and intentionality. When investing for impact, it’s critical to have a defensible impact thesis that can be measured and analyzed similarly to financial performance. The impact investing industry continues to evolve with new and improved frameworks, standards, and tools for impact measurement, including GIIN’s Impact Reporting and Investment Standards (IRIS) framework. At Caprock, we build on the IRIS metrics and utilize a proprietary framework and software to analyze and present impact data to clients, and we believe we are the only firm with this capability.
Is Impact Investing for Everyone?
The short answer is that it can be. Every investor has different financial and impact objectives, so we often recommend investing in macro trends that are expected to have positive long-term impacts. Climate investing is just one example. We recommend this because macro trends offer significant growth potential and can often be more predictable and persistent than other types of investments. That said, every investor is going to be different, so it’s our job at Caprock to meet them where they’re at and ensure they are educated and have clear goals and objectives.
While Caprock firmly believes a finance-first approach to impact investing can unlock more capital leading to a positive demonstration effect, we are also equipped to support our clients who wish to invest in catalytic impact opportunities, which have a more impact-first approach. However, this is not for everyone and is more tailored to individuals and foundations who want to move the needle further to solve some of the world’s problems through investments.
Caprock Can Help
Caprock was among the first multi-family offices to offer impact investing as a core service, and we have invested in more than 100 impact investment funds with nearly 50 impact fund managers, totaling upward of $2.4 billion.
With a strong track record and a vast network that frequently provides access to new impact investment opportunities, we’re ready to help you no matter where you are on your impact investing journey.
Request an impact investment portfolio sample.
About the Author
Mark Berryman is Managing Director of Impact Investments at Caprock. He has spent over two decades gaining invaluable experience in finance and asset management at renowned financial institutions. In addition to his role at Caprock, he is an adjunct professor for impact investing at the Columbia University Graduate School of Business, serves as chairman of the Impact Capital Managers LP Council, and is an advisor on several impact-focused organizations.
©Caprock. All rights reserved. The Caprock Group, LLC (“Caprock”) is an SEC Registered Investment Advisor. This communication is not an offer or solicitation with respect to the purchase or sale of any security and is for informational purposes only. Information contained herein has been derived from sources believed to be reliable, but Caprock makes no representations as to its accuracy or completeness. Investment in securities involves the risk of loss. Past performance is no guarantee of future returns. Registration with the SEC does not imply a certain level of skill or training.
