GOOD

Social Impact Investing: It's Not Wall Street as Usual

Antony Bugg-Levine and Jed Emerson explain how everyone—even you!—can make the future of finance more ethical through impact investing.

As grumbles over economic inequality and Occupy Wall Street-inspired protests spread across the country, GOOD has been sharing alternatives to business as usual for our financial system, from peer-to-peer lending for savings and loans to crowdfunding for startups. Today, two experts in the budding field of impact investing—putting your money to work for your bottom line and your values—explain the tremendous potential that comes with melding of philanthropy with investment banking.


Jed Emerson and Antony Bugg-Levine’s book Impact Investing: Transforming How We Make Money While Making A Difference, was published in August. They e-mailed with GOOD about their investment philosophy.

GOOD: You argue our current investment and philanthropy system is antiquated. Explain what you mean when you describe it as “bifurcated.”

ANTONY BUGG-LEVINE and JED EMERSON: The “bifurcated” world is built on two fundamental beliefs: that the only purpose of investing is to make money and that the only way to solve social and environmental challenges is to donate money to charities or wait for government to act.

This is a lost opportunity since, at its core, value is not divided, but rather is whole; it is a blend of economic, social, and financial components which, when taken together, give us the total returns we seek in our investing, in our philanthropy and in our lives.

Many people and institutions are rejecting this bifurcated world view. They are investors interested in the pursuit of both financial and social/environmental returns together and philanthropists who use market-based techniques to pursue a charitable goal. Our laws and regulations, methods for measuring value, investment structures, and even language do not meet the needs of this growing group of investors. Instead they are left to force-fit their new aspirations into old systems to generate integrated returns.

GOOD: What are some examples of impact investments? Why can’t government or foundations make those?

EMERSON/BUGG-LEVINE: Impact investors are helping to close the education gap in the slums of India with loans to affordable private schools, enabling coffee farmers in Central America to increase their incomes sustainably by financing their participation in more lucrative export markets, and enabling families in New Jersey to stay in their homes by financing community-based nonprofits to buy up and restructure distressed mortgages.

Impact investing’s sweet spot is exactly where the limits of traditional philanthropy and governmental programs begin. Especially now, government and traditional philanthropy lack the resources to solve social challenges alone. Impact investing is not a replacement for government action or philanthropy, which will always be necessary to provide true public goods and push the frontiers of social justice. But impact investing can be a powerful complement to government and philanthropy.

GOOD: Who is doing this? What kinds of profit are they making?

EMERSON/BUGG-LEVINE: Very rich individuals and families have been best positioned because they have greater control and choice about what to do with their money. Most of us cannot make impact investments ourselves but instead rely on institutional investors who manage our deposits or our retirement funds and they are typically slower to embrace innovation like this.

For now, we cannot say “impact investing generates X level of financial performance.” Research last year by the Rockefeller Foundation and JP Morgan that examined financial return expectations among more than 1,000 impact investments showed clearly that some impact investors are willing to accept a lower financial return.

[But] as an example, in 2008-2009 many impact investors saw their traditional, market rate commercial investments lose 20 to 30 percent or more of their financial value. At the same time, throughout the downturn, many impact investors in microfinance bonds received a consistent 6 percent return…not a bad financial return at all given where traditional market rate investments had headed—into the deep south!

GOOD: What sectors, companies and countries are most likely to feel the affects of impact investing?

EMERSON/BUGG-LEVINE: Impact investing can take off anywhere traditional approaches by government or mainstream markets will not suffice and where an enterprise addressing the issue can monetize enough of the value it creates to pay back investors.

In developing countries, millions of poor families suffer under both market and government failure, leaving them paying more for basic goods and services than their middle- and upper-class compatriots. Enterprises that can figure out how to provide these services at more affordable prices can substantially improve the lives of these families and generate profit—a perfect environment for impact investors to support these enterprises. For example, in Mexico, the impact investing pioneer IGNIA Fund has invested in businesses that help poor customers to build better homes, pay for medical care and access more affordable telecommunications services.

Impact investing is also poised to grow in developed countries, especially where governments are retreating from their traditional roles as the funder and provider of extensive basic services. In the United States, impact investors are providing early-stage financing in a wide range of sectors from education companies to grocery stores moving into urban “food deserts.”

GOOD: On the flip side, how much profit is too much profit for an impact investment to count?

EMERSON/BUGG-LEVINE: Profit is actually a relative term. Muhammad Yunus, founder of the Grameen Bank, argues that there should be a cap on profits returned to investors and on salaries paid to venture managers. It’s important he draw that line in the sand. At the same time, he does not own the beach: the impact investing capital market needs to offer a full range of potential returns to all investors.

GOOD: How, or when, can everyday people get involved in this? Can I put my retirement money in impact investments?

BUGG-LEVINE: We’ve seen a growing trend toward the “democratization” of impact investing.

Today the “best” deals are still often only open to those investors with more assets to deploy—with staff to vet the right opportunities [and] meet the minimums, which can be quite high/ But most people with a bank account can now participate. In the United States, retail investors with as little as $1,000 can invest in a diversified impact investing fund through the Community Investment Note offered by Calvert Foundation, or a similar offering from RSF Finance.

If you are setting aside money for donations, you can open a donor-advised fund through the Giving Fund at ImpactAssets.org and immediately have your assets invested for impact as you decide where you will eventually donate them. Soon, impact investing products will increasingly be offered by “mainstream” advisors and wealth managers at much lower investment minimums than is possible today.

EMERSON: We should not be limited by the label “impact” in assessing our options for investing for impact. For example, personally, my bank accounts are all at a small, rural bank where I live in the Rocky Mountains. Simply by keeping my funds there—and not at some faceless, massive national banking institution—and taking my loans from that same local bank, I’m supporting community banking and economic development in my area. I am investing for impact!

By joining a credit union bank or similar institution, anyone can do the same thing. By exploring how to source agriculture produced locally and participate in one of the various Slow Money initiatives that are increasingly active around the world, I am engaging in impact investing. By managing my 401K through a social fund listed at Social Funds, I’m engaging in impact investing—and in fact, all my personal retirement assets are invested on a sustainable/impact basis and I’ve been quite happy with their performance.

Articles
via Collection of the New-York Historical Society / Wikimedia Commons

Fredrick Douglass was born into slavery in 1818. At the age of 10 he was given to the Auld family.

As a child, he worked as a house slave and was able to learn to read and write, and he attempted to teach his fellow slaves the same skills.

At the age of 15, he was given to Thomas Auld, a cruel man who beat and starved his slaves and thwarted any opportunity for them to practice their faith or to learn to read or write.

Keep Reading Show less
Culture
via Thomas Ledia / Wikimedia Commons

On April 20, 1889 at the Braunau am Inn, in Upper Austria Salzburger located at Vorstadt 15, Alois and Klara Hitler brought a son into the world. They named him Adolph.

Little did they know he would grow up to be one of the greatest forces of evil the world has ever known.

The Hitlers moved out of the Braunau am Inn when Adolph was three, but the three-story butter-colored building still stands. It has been the subject of controversy for seven decades.

via Thomas Ledia / Wikimedia Commons

The building was a meeting place for Nazi loyalists in the 1930s and '40s. After World War II, the building has become an informal pilgrimage site for neo-Nazis and veterans to glorify the murderous dictator.

The building was a thorn in the side to local government and residents to say the least.

RELATED: He photographed Nazi atrocities and buried the negatives. The unearthed images are unforgettable.

For years it was owned by Gerlinde Pommer, a descendant of the original owners. The Austrian government made numerous attempts to purchase it from her, but to no avail. The building has served many purposes, a school, a library, and a makeshift museum.

In 1989, a stone from the building was inscribed with:

"For Peace, Freedom

and Democracy.

Never Again Fascism.

Millions of Dead Remind [us]."

via Jo Oh / Wikimedia Commons

For three decades it was home to an organization that offered support and integration assistance for disabled people. But in 2011, the organization vacated the property because Pommer refused to bring it up to code.

RELATED: 'High Castle' producers destroyed every swastika used on the show and the video is oh-so satisfying

In 2017, the fight between the government and Pommer ended with it seizing the property. Authorities said it would get a "thorough architectural remodeling is necessary to permanently prevent the recognition and the symbolism of the building."

Now, the government intends to turn it into a police station which will surely deter any neo-Nazis from hanging around the building.

Austria has strict anti-Nazi laws that aim to prohibit any potential Nazi revival. The laws state that anyone who denies, belittles, condones or tries to justify the Nazi genocide or other Nazi crimes against humanity shall be punished with imprisonment for one year up to ten years.

In Austria the anti-Nazi laws are so strict one can go to prison for making the Nazi hand salute or saying "Heil Hitler."

"The future use of the house by the police should send an unmistakable signal that the role of this building as a memorial to the Nazis has been permanently revoked," Austria's IInterior Minister, Wolfgang Peschorn said in a statement.

The house is set to be redesigned following an international architectural competition.

Communities
via Chela Horsdal / Twitter

Amazon's "The Man in the High Castle" debuted the first episode of its final season last week.

The show is loosely based on an alternative history novel by Philip K. Dick that postulates what would happen if Nazi Germany and the Empire of Japan controlled the United States after being victorious in World War II.

Keep Reading Show less
Politics
via Mike Mozart / Flickr

Chick-fil-A is the third-largest fast food chain in America, behind McDonald's and Starbucks, raking in over $10 billion a year.

But for years, the company has faced boycotts for supporting anti-LGBT charities, including the Salvation Army, the Fellowship of Christian Athletes, and the Paul Anderson Youth Home.

The Salvation Army faced criticism after a leader in the organization implied that gay people "deserve to die" and the company also came under fire after refusing to offer same-sex couples health insurance. But the organization swears it's evolving on such issues.

via Thomas Hawk / Flickr

The Fellowship of Christian Athletes explicitly announced it was anti gay marriage in a recent "Statement of Faith."

God instituted marriage between one man and one woman as the foundation of the family and the basic structure of human society. For this reason, we believe that marriage is exclusively the union of one man and one woman.

The Paul Anderson Youth Home teaches boys that homosexuality is wrong and that same-sex marriage is "rage against Jesus Christ and His values."

RELATED: The 1975's singer bravely kissed a man at a Dubai concert to protest anti-LGBT oppression

In 2012, Chick-fil-A's CEO, Dan Cathy, made anti same-sex marriage comments on a radio broadcast:

I think we are inviting God's judgment on our nation when we shake our fist at Him and say, "We know better than you as to what constitutes a marriage". I pray God's mercy on our generation that has such a prideful, arrogant attitude to think that we have the audacity to define what marriage is about.

But the chicken giant has now decided to change it's says its charitable donation strategy because it's bad for business...Not because being homophobic is wrong.

The company recently lost several bids to provide concessions in U.S. airports. A pop-up shop in England was told it would not be renewed after eight days following LGBTQ protests.

Chick-fil-A also has plans to expand to Boston, Massachusetts where its mayor, Thomas Menino, pledged to ban the restaurant from the city.

via Wikimedia Commons

"There's no question we know that, as we go into new markets, we need to be clear about who we are," Chick-fil-A President and Chief Operating Officer Tim Tassopoulos told Bisnow. "There are lots of articles and newscasts about Chick-fil-A, and we thought we needed to be clear about our message."

RELATED: Alan Turing will appear on the 50-pound note nearly 70 years after being persecuted for his sexuality

Instead, the Chick-fil-A Foundation plans to give $9 million to organizations that support education and fight homelessness. Which is commendable regardless of the company's troubled past.

"If Chick-Fil-A is serious about their pledge to stop holding hands with divisive anti-LGBTQ activists, then further transparency is needed regarding their deep ties to organizations like Focus on the Family, which exist purely to harm LGBTQ people and families," Drew Anderson, GLAAD's director of campaigns and rapid response, said in a statement.

Chick-fil-A's decision to back down from contributing to anti-LGBT charities shows the power that people have to fight back against companies by hitting them where it really hurts — the pocket book.

The question remains: If you previously avoided Chick-fil-A because it supported anti-LGBT organizations, is it now OK to eat there? Especially when Popeye's chicken sandwich is so good people will kill for it?

Lifestyle

Oh, irony. You are having quite a day.

The Italian region of Veneto, which includes the city of Venice, is currently experiencing historic flooding. Venice Mayor Luigi Brugnaro has stated that the flooding is a direct result of climate change, with the tide measuring the highest level in 50 years. The city (which is actually a collection of 100 islands in a lagoon—hence its famous canal streets), is no stranger to regular flooding, but is currently on the brink of declaring a state of emergency as waters refuse to recede.

Keep Reading Show less
The Planet