The State Of Impact Investing: Is It A Houseboat Or Is It Brunch?

Since first getting engaged in the impact investing movement several years ago, I’ve participated in hundreds of dialogues ranging from one-on-one conversations, to college and business school classes, to large, institutional and conference gatherings in the thousands. From these experiences, two moments stand out in my mind with clarity, and both gave me pause. The first, at a conference of high net worth and philanthropically-minded individuals, I heard a humorous but cynical comment from a celebrated venture capitalist—it went something like this: “Impact investing is like a houseboat; it’s not a good house and it’s not a good boat.” Ouch… Do we ever have our work cut out for us if we are going to broaden this tent, I thought.

It was only a few months later while guest lecturing in a class at Yale’s School of Management, when I shared the cynical comment with the class, underscoring that there are those who bring a more negative view of impact investing. It was then that a young man raised his hand and offered his own perspective: “I think impact investing is like brunch, it’s better than breakfast and better than lunch!” For me these “two sides of the same coin” are highly reflective of what we’ve seen in our work with impact investing from the start. And while some days it feels like we still have a chasm between the true believers and the most ardent cynics, in reality, there is no question that we’re already seeing impact investment mature into a movement that is being more widely embraced than ever before.

Both in the U.S. and around the world we’ve seen segments of the market move from informed, to educated, to activated. We’ve seen new private capital unleashed with a focus on impact across sectors, geographies, industries, issue areas and asset classes. I’m excited to be in Chicago this week to speak at the Impact Capitalism Summit where I join hundreds of other people gathered to discuss the state of the impact investing movement and what the future may hold. As part of this gathering, we’ll take some time to reflect on the tremendous progress we’ve seen recent months that represent impressive momentum in the movement.

Everything For Everyone: Impact Investing Is The Present

Impact Investments: Why Short-sightedness Scuttles Opportunity

As Ron Cordes tracked his investments in the months following the 2007-2008 global financial crisis, fully expecting to suffer losses, he noticed something unusual. One of the best-performing parts of his portfolio was the 20% he had hesitantly put into something called “social enterprise investments.”

The 20% consisted of microfinance, agricultural cooperatives and small business loans around the world, most of it in the global south in countries that he joked he “could neither pronounce, spell, nor find on a map.”

Yet somehow, said Cordes, all of these underlying borrowers and entrepreneurs had not ‘gotten the memo.’ “They didn’t know that AIG had fallen, that Lehman Brothers had fallen, that Merrill Lynch had been sold, that the world had kind of cratered financially.” Despite the West’s economic disaster, these borrowers had gone on building their businesses and paying back their loans, he said. For Cordes, this was a key moment in which he realized that impact investing — a term not even coined yet — could really work.

A 30-plus-year veteran of the financial services industry, Cordes and his wife Marty started the Cordes Foundation in 2006. The foundation focuses on alleviating global poverty and empowering women and girls to participate in community development. He is also the co-founder and executive co-chairman of AssetMark, a provider of asset management solutions to independent financial advisors.

Cordes’s leadership in social entrepreneurship and impact investing has been highlighted in prominent news media and he shared some personal and professional reflections at the recent Wharton Social Impact Conference.

Saving Our Own Children

Quoting Mark Twain, Cordes said that “the two most important days of your life are the day you’re born, and the day you find out why.” He said the day he “found out why” was November 4, 2008 when he visited a small village in Uganda that had benefited from one of his microfinance investments.

He described how he and a group of businesspeople found themselves “totally off the beaten track” in a jeep going down a ravine, three hours from the last road they had been on. They came to a small village in Buyobo, Uganda, where about a dozen women were “excited” to see them and showed them the businesses they had created with their microloans.

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Solar energy to the rescue in Zimbabwe

As it increasingly becomes clear that climate change has become a reality in Zimbabwe, many are struggling to come to terms with its effects — especially the blazing heat that now characterises most days. But for people like Tundondeghe Chiraya and her family, the scorching heat spells an uninterrupted 24/7 supply of electricity.

Having recently moved into their new house built on a stand acquired in the new settlement of Budiriro 5B Extension — neighbouring thousands of houses built by banking institution CABS under the Budiriro Housing Scheme — life would have been most unpleasant without any source of power supply, as Zesa-powered electricity is yet to reach the area because getting connected to the utility’s power lines is proving to be a cumbersome process filled with hurdles.

But power problems are slowly becoming a thing of the past as people in the area have been left with no choice but to turn to solar power.

While the investment in a solar panel and battery was initially made sulkily, the Chirayas were soon to realise turning to solar energy was one of the best decisions they could have ever made. While it might have taken sacrifice to fund the initial setting up of the solar connection in their home, the return on investment that immediately followed has left them without any hint of regret.

“I have to admit that before we connected to solar power, I wished Zesa would hasten to connect the area so we would avoid the costs, but I have since changed my mind,” said Chiraya with a beaming smile.

“With our solar panel and battery, we are able to power lighting for the whole house, the entertainment set [television, home theatre system, DStv] and to charge all our cellphones. We use gas to cook and we are planning to invest in another battery so we can also power the fridge and other electrical gadgets.

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Corporate Social Responsibility Matters: Ignore Millennials at Your Peril

It is no secret that companies must be responsive to customer demands and expectations if they want to survive.

Consumers are demanding more from the brands they buy –and increasingly are rewarding companies whose services and products are both good for them and good for society.

In its 2015 Nielsen Global Corporate Sustainability Report, Nielson found that “66% of global consumers say they’re willing to pay more for sustainable brands–up 55% from 2014.” It also found that 73% of global Millennials are willing to pay extra for sustainable offerings–up from 50% in 2014.

Businesses must adapt to the times as consumers are voting with their wallets and Millennials, in particular, are demanding that companies put their money where their mouth is.

Millennials make up the fastest growing force in the marketplace. Numbering more than 80 million strong, Millennials already account for an estimated $1 trillion of U.S. current consumer spending. This sum will continue to grow exponentially as more Millennials reach peak buying power.

Millennials represent the consumer market of the future, and it behooves corporations to read the tea leaves.

In a study by Horizon Media’s Finger on the Pulse, “81 percent of Millennials expect companies to make a public commitment to good corporate citizenship.”

By almost any measure, Millennials place a premium on corporate social responsibility (CSR) efforts.

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