Impact Investing History
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Transcript of Impact Investing History
Solidago Foundation & Veris Wealth Partners
Impact Investing History
Michael Lent, Partner - Veris Wealth Partners
Jeff Rosen, Finance Director - Solidago
2
Firm Overview
Sustainable Investment Focus Recognition that Clients Need a Customized
Approach to Impact:
– Consulting in policy and asset allocation development
– Investments in all asset classes: public equities, fixed income, alternatives, impact investments
– Shareholder Engagement
Overview of Veris
3
IPS should reflect mission
Discussion at the finance committee level and then brought to the board.
Identify a consultant who understands what options are available and is able to educate and guide the foundation through its process.
Asset allocation – Integrate Impact
Identify a starting point with institution
Importance of IPS Process in a Mission Driven Culture
4
Foundation Opened Doors in 1996
Commitment from the beginning:
– Developed social guidelines both avoidance and positive approaches in investments
– Screened traditional managers (overlay screens)
– Customized approach: globalization, etc.
– Green Investing
– Community Investments: up to 10% in community loan funds
Relationship to Solidago
5
Changes at the end of 2008:
– Best in Class
– Strict Screens
Corresponded to the specific mission of the foundation: what issues/concerns based on mission and grantees.
ESG Screening
6
Community Loan Funds bought by manager
Additional due diligence
Fund of Funds: Calvert Foundation Notes
Private Equity Fund: Clean Technology
Direct Investments
7
Partnership Between Financial Advisor and Foundation – But need Process to Determine Impact Accountability:
– On the spectrum of impact investing, what is financial advisor’s accountability for financial performance
– If a market discount is tolerated for program returns, how is program impact assessed
The Gray Area
8
Worked Closely with Veris on Traditional Portfolio Management
– Cash Flow
– Asset Allocation
– IPS
Worked Closely with Veris on Refining Screens
– Avoidance Screens
– Manager Searches
How Did Solidago and Veris Work Together Across Spectrum?
9
Continue to Work with Veris in Search of Sustainably Integrated Managers
– Portion of Endowment Currently Allocated via Manager
– Ways to Transition with relatively conservative risk tolerance (From IPS)
– Are new, well understood options coming to the mainstream
– Conducted research on sustainability oriented or green real estate funds
Screened traditional alternative investments (Hedge Funds etc) for green and sustainable characteristics
Continuing Efforts to Enhance Financial First Investments:
10
High Mission Engagement with Financial Manager
– Veris conducted due diligence on intermediary loan funds in early days.
– Transitioned us to Calvert, which worked well for all
– Worked with us on a few specific deals which they were bringing to multiple clients (equal exchange)
Veris led some investments that were borderline PRI/MRI or designed for financial return: Clean Tech
Collaboration on Blended Impact and Financial Investments
11
PRI Targeting – From IPS Set Aside (Implementation Open)
PRI Program changed over the years
– Initially crafting a diversified portfolio
• Scale makes this hard• Couldn’t ask Veris to conduct due diligence on one off
deals that appealed to us
– Seek more connection to our program areas
– We learn by doing (mistakes as much as planning)
Impact Investing Strategy
– Program driven model, integrating grantmaking and program related investments – Grantmaking Enhanced by supporting investments:
• E.G. PVGrows – Lynchpin Activist Role• E.G. Green Jobs/Green Justice – Early Adopters Needed
12
Financial Requirement: Return of Principal– Below market rate deals cannot cover losses– Apply conservative financial review to assess
programmatic returns– To date, few write-offs
Now Apply Program lens to PRI work
Small funders have to assume alignment between strategic thinking and outcomes
We’re a small funder, focused on system change. We are not looking at particular impact measures such as jobs, displaced carbon or food miles.
– Program Partners Focus on Measurables
– We do measure impact in financial leverage• Financial Partnerships Critical at Scale• Program Partnerships Drive Models
Measuring Impact - Program Side First
13
Process informs itself and discipline to mission generates positive, though unpredictable outcomes
Process Evolves
No one “correct strategy”. Needs to be customized for each institution
Clients are interested in collaborating where there are similar investment focuses.
Chance to leverage both experience, simplify follow-up.
‘Conclusions’