Articles / 03.07.2017
I had the honor of spending a few days down in San Diego last week, attending the San Diego Grantmakers annual conference, as well as a separate event focused on Philanthropy and Impact Investing.1 I learned a lot while I was down there, and came away inspired with a renewed vigor for my efforts to drive social and environmental benefit. At the same time, my interactions with foundation trustees, board members, and other asset owners illuminated a glaring blind spot in the way I commonly talk about our work here at Caprock.
Before I commence the self-flagellation, allow me to offer some perspective on the San Diego impact ecosystem. In short, the cohesion and curiosity within this community of impact-oriented individuals are unmatched across the country. Given that San Diego County is the fifth-most populous in the United States, I was surprised by the level of familiarity everybody had with each other’s work. It helps that they have exemplary convening organizations like the San Diego Impact Investors Network and San Diego Grantmakers, both of which recognize not only the importance of collaboration but also the urgency of engagement. Hence, their event, “Taking a Stand,” eschewed the frequently staid programming around donor relations, nonprofit capacity building, and impact measurement. Instead of administration, they focused on inspiration. They aggregated an eclectic mix of experience amongst their speakers, weaving together a rich tapestry of viewpoints, with action as their collective North Star. Everyone with whom I spoke after the event had an air of anticipation – indeed, enthusiasm – about furthering their respective missions.
Typically, this attitude acts as an accelerant to impact investment activity, something we work tirelessly to promote. In the past, I have done this by citing our work, to illustrate the possibilities and their promise. In particular, I point to those families and foundations for whom we have invested 100% of their capital in harmony with their values. I share strategies across every asset class (e.g. venture capital, private equity, real assets) where we’ve deployed significant capital with measurable impact. And I highlight iPAR, the proprietary tool we built to report on the impact generated across an entire portfolio. I am quite proud of our work – but has it been enough to compel more foundations to pursue impact investing?
Or, to the contrary, has it been too much? Has my emphasis on the esoteric and extraordinary inadvertently deterred more widespread adoption of impact investing?
After listening to some of San Diego’s smartest foundation representatives, I recognized on my flight home that I have generally failed to discuss my work in an approachable manner. After all, one person admitted their large corpus didn’t have any exposure to venture capital, due to the desire to avoid risk. Other endowments were exclusively limited to public securities (i.e. stocks and bonds). Finally, no one even raised the topic of impact measurement for fiduciary assets (i.e. the other 95%). And this is a community comprised of eager, sharp, and committed asset owners, each of whom was clearly deploying capital with a conscience.
Thus, upon reflection, I believe my contribution to the impact conversation has hitherto been off the mark. In my quest to demonstrate my depth of expertise, I’ve perhaps done a disservice to the industry by exacerbating the exoticism of impact investing.
My efforts have been analogous to a trainer at your local gym, who tries to convince a curious customer to join by touting the benefits of high-intensity interval training and post-workout supplementation. Never mind the fact that the consumer may not even be sure they want to exercise more! The trainer’s tactic is not only tone deaf; it also discourages the very activity he is attempting to advocate.
Much like physical fitness, the most complicated approaches to investment management will motivate only a limited few. It is simply human nature, as we tend to steer clear of the unfamiliar and uncertain. Add to this fact the full complement of impediments to impact investment implementation, and one can quickly see why so few foundations have embraced the practice.2
Since this runs counter to my goal for our industry, I’ll endeavor to ease the embrace of impact investing. I’ll show how any foundation can begin their journey without adjusting any material aspect of their portfolio – not the asset allocation, not the risk profile, not the liquidity characteristics – and how their fiduciary assets can begin to reflect their values and mission. At this point, there are plenty of pioneers who are celebrated, rightfully, in the Stanford Social Innovation Review and Impact Alpha. But now is the time to focus on more accessible illustrations of impact.
1 Since I was frequently asked why I, an Idaho native, was at an event ostensibly focused on southern California, allow me to answer a question potentially pondered by the reader. Last summer, my trip to the area – for Confluence Philanthropy’s Western Water Briefing – demonstrated that there is a palpable interest in impact investing within San Diego. More to the point, my role at Caprock is to advance the impact conversation wherever there is enthusiasm and to showcase solutions where there is appetite. San Diego has both, so I am happy to commit time and expertise to support this leading community.
2 See the 2016 Council on Foundations – Commonfund Study of Responsible Investing, which surveyed 186 private and public / community foundations. Notably, only 23.7% were considered adopters of the practice. Non-adopters, meanwhile, had predictable (but refutable) concerns around performance and fiduciary duty. But a “lack of understanding among key decision makers” rated highly – as did a “lack of interest.” Might all of these impediments be related?