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 The mission of the "Your Mark on the World Center" is to solve the world's biggest problems before 2045 by identifying and championing the work of experts who have created credible plans and programs to end them once and for all.
Crowdfunding for Social Good
Devin D. Thorpe
Devin Thorpe

Impact Investing

This category includes articles about people, firms and foundations that invest in social good by investing in social entrepreneurs, social impact or pay-for-success bonds, etc.

The Model for Place-Based Impact Investing: What, Who, Why, How and Where

By Lauryn Agnew, CEO of Seal Cove Financial

Place-based impact investing adds another dimension to the exciting and growing field of impact investing: the investment strategy designed to combine financial returns with positive economic and/or environmental impacts. In its early phase, impact investing was predominantly associated with private equity investments into social enterprises to improve the lives of those at the global ‘bottom of the pyramid’ – the poorest of the poor. Broadening the concept of impact investing to include place can open opportunities for place-based mission-oriented organizations to participate in investing in as well as giving to one’s mission and place.

For those fiduciaries whose mission is to serve their beneficiaries in a particular geographic region, limited place-based investment strategies exist. The financial services industry is based on global geographic diversification strategies and regional/local markets haven’t justified the development of very many local investable opportunities.

We believe that the San Francisco /Silicon Valley Bay Area has the right combination of institutional wealth pools, talent, innovative spirit, and generous philanthropists to demonstrate that Place-Based Impact Investing can bring private capital, public resources, and philanthropic assets together to build a better and stronger, more sustainable economic region. With the right model, the wealth pools that have grown so large in our Bay Area could prudently and intentionally invest a small portion of their assets in our own region, enhancing our economic resilience, prosperity and sustainability.

Collaboration and centralization, combined with transparency and stringent due diligence, can provide the tools to invest – just a small portion of – our asset pools (retirement plans, community and family foundations, corporate and private charitable assets, and endowments) – into our local economy. By offering a family of funds, that is well due-diligenced by an expert team, we can manage the collective asset base in specialized multi-manager funds based on broad asset classes: public equity, fixed income (bonds), real estate, infrastructure, private equity and a community investing/savings fund. Using these funds as building blocks for a relatively small portfolio allocation to place-based impact investing (for example, 1-5%), investors can target their unique risk/return/impact goals and have an intentional impact on the Bay Area. Risk and return are set to achieve the asset class’s individual benchmark risk and return profile (for example, the public equities portfolio’s benchmark is the Russell 3000). Additionally, these funds will have a goal to seek, invest, report, and disclose their local or regional/ Bay Area impact. Each asset class has a specific targeted impact potential.

A well diversified portfolio can therefore offer a variety of potential impact opportunities. Using our public equity holdings, we can engage corporate managements, particularly those companies headquartered in the Bay Area, on a variety of topics like Board of Directors diversity, for example, and encouraging more diversity in the Board and senior management. We can encourage stronger environmental protections around the Bay and the world. We can encourage fair and non-discriminatory policies for the employees of these companies, many of who will be living in the Bay Area. We can encourage and invest in sustainable, long term local and regional real estate projects and programs that will provide strong returns to investors while helping to meet our pressing real estate and housing needs and goals. Infrastructure is a long term investment across many fields, like energy, information, health and education, housing and transit, jobs and community development. Private capital, invested in non-public social and job-creating companies, in start-ups and incubators, can flow more abundantly into disruptive and cutting edge technologies. By using one or more of our portfolios for intentional local impact, we can invest for a long term sustainable, prosperous and resilient community.

Who is a place-based impact investor?

There’s an easy way to know if you are a place-based impact investor: check your mission statement – or even your organization/foundation’s name. If a certain geographic area is mentioned there, it means that you have an opportunity for geographic alignment of investments with your mission, using assets to augment or enhance your gifting (or benefit) dollars in support of your mission.

Some examples of place-based investors include the following:

The large endowment funds at the academic institutions in the Bay Area (Stanford, Cal, USF, Santa Clara, etc.) can invest in the Bay Area to help serve the students who live all around the Bay Area – by investing in our local economy: diversity and jobs, company formation and engagement, housing and transit, etc. We can invest locally to keep our region welcoming, healthy and safe for students.

Public retirement funds, like the City and County of San Francisco Employees Retirement System, (59,000 active and retired employees and $20 billion in assets, https://mysfers.org/resources/publications/sfers-actuarial-valuations ) and whose employees quite likely travel from other counties where they live to work in San Francisco, have an opportunity allocate a small portion of their global portfolios to local economic development. They and the several other public retirement funds in the Bay Area invest billions of dollars of assets globally. Within these portfolios, they could intentionally support local investments, earn market rates of return through institutionally recognized investment managers, and participate in the funding for infrastructure, housing, transit, etc. for their employees and retirees and the overall benefit of the regional community.

Large corporate and personal wealth pools, whose owners are the beneficiaries of the innovation and economic strength of the Bay Area and whose employees live and work all over the Bay Area, can make local and regional investments to help build a more prosperous, resilient and sustainable future for their current and future employees and their families. Our generous philanthropists (Hewlett, Packard, Benioff, and Zuckerberg, to name a few) have an opportunity to use part of the 95% of their assets that is not given away as grants for local investing, without sacrificing return or increasing risk. Investments like these can add to the power of mission oriented grants, using more parts of the portfolio’s capital stack for local impact.

We can make it easier for place-based fiduciaries, wealth managers and asset owners to invest locally for impact by offering a centralized place for investments to be researched, managed by proven outside managers, and monitored for risks, returns and local impact.

Why we want to make place-based impact investments:

Our research indicates that we can overcome the various beliefs that investors have held that keep them unable or unwilling to consider place-based impact investing:

  1. Can’t make market returns if you focus on or align with place or mission
  2. Not enough deal flow or proven strategies to diversify or meet size requirements
  3. Not enough resources/staff time to spend on due diligence for this small portion of portfolio
  4. Not enough evidence that impact will happen and returns will be made
  5. Can’t risk taking it to the Board for approval – for the above reasons

For the San Francisco/Silicon Valley Bay Area Impact Investing Initiative, place-based impact investing is about building a platform through which fiduciaries can collaborate on investments all around the San Francisco/Silicon Valley economic region that can provide a combination of market/benchmark returns in each asset class AND a positive local impact on our community. That broad goal opens the door to our robust economic economy that ranks in the top 20 in the world, is headquarters to the second largest concentration of S&P 500 companies, and is home to a uniquely innovative and diverse urban/rural community and world class destination. The Bay Area however still has its challenges, struggles and failings. Intentionally directing a small portion of our large global portfolios (maybe 1%) to the long term solutions for our own backyard can have a significant influence on the speed at which we find those solutions. Private capital can guide resources to the gaps in our economy and build a more prosperous, sustainable and resilient region.

Like all investment strategies, impact investing, for our purposes, provides a return and can be recycled over and over, unlike a grant which is a one-time impact gift. Place-based impact investing can tap into more of the capital resources of an organization to complement and enhance the grant-making activities of its regional mission.

Small allocations from large portfolios, when placed in commonly used financial instruments managed by professional investment firms, and even with a mission alignment in geographic terms, would not add to the overall riskiness of a global portfolio. Nor would that portion put the global rate of return expectations of the portfolio in jeopardy if it were constructed under the same strict fiduciary standards for all institutional funds under UPMIFA and ERISA. A large pool of assets dedicated to local investing would draw capital seekers and investment strategies for consideration as potential investments through the investment managers, growing the opportunity set and deal flow. Tracking the local impact would be concurrent with regular monitoring of the portfolios. A team of dedicated financial professionals, employing the best practices and resources of our field, can give investors the building blocks to make prudent portfolios with market returns and a local impact, customized to each investor’s own unique risk, return and impact goals.

The impact generated by these investment portfolios will depend on how that asset class provides impact, and how much we can focus that impact on the Bay Area. Having appropriate expectations about the sort of impact that each asset class offers is key to understanding how an overall portfolio can combine impact with returns. In the early days of these funds, the impact from these Bay Area portfolios would be small. With the potential for growing the assets base over time, more impact can be focused on the Bay Area’s unique needs and challenges.

Public Equity

In the public equity sector, the impact an investor has comes from the right of shareholders to engage with the management of companies to build long-term value. Shareholders can vote proxies as well as work with other groups of investors, sometimes in direct communication with management, for setting and reaching certain environmental, social or governance goals. As shareholders of Bay Area – headquartered companies, we can monitor and engage with corporate management for our commonly held goals of environmental safety of the San Francisco Bay and watershed, diversity in senior management and at the Board level, and for policies that include employees and community as stakeholders. The model portfolio developed in 2011 shows that a portfolio like this would have provided higher returns with no increase in risk (since inception through 2016). Tools like corporate engagement, ESG monitoring, a focus on companies headquartered in the Bay Area with a positive social, environmental and governance profile, build a portfolio that is better than average and could have a long term positive local impact. Indeed, some of these Bay Area companies could partner with us and put some investable assets to work in our own backyard. Publicly traded equities (stocks) are a part of everyone’s portfolio, and are a worthy tool for the impact they offer to shareholders.

Fixed Income

Fixed income portfolios can track the impact they have through the bonds they own. Providing liquidity to investable projects is a proven strategy for impact and there are many ways to participate: small business loans, corporate bonds, municipal and government bonds, green bonds, infrastructure bonds, etc. These categories are then sliced and diced by industry, nationality, currency, etc. Building a fixed income portfolio that focuses on the financing opportunities in the Bay Area, like direct lending, deposits/investments at community banks and loan funds, local bond issuances, middle market corporate loans, through vetted investment professional firms, can provide both an overall market rate of return (Barclays Aggregate) and evidence of the impact, output and outcomes from that financing.

Real Estate

Likewise, Real Estate as an asset class has its own footprint for risk, return and impact. A diversified fund would include some liquid options, like sustainable REITS, and property investments across the spectrum, including residential and homeownership, multi-family and rentals, commercial, industrial, retail, and affordable categories. While the real estate portfolio will not be 100% Bay Area focused in the early days, we could expect to see more concentration in the Bay Area as the funds mature. The Bay Area has unique challenges to developing our limited and scenic real estate while balancing it with the enormous growth our region has seen. Longer term investors in the Bay Area Impact Investing real estate portfolio would invest in sustainable, regional solutions to some of the problems we face in housing disparity, affordability and shortage across the region. The portfolio would also include local and regional properties like medical, industrial, commercial, educational, etc.

Infrastructure

Infrastructure opportunities would include broad categories of sustainable, prosperous and resilient community/regional investments, like cleaner energy for our homes, businesses, and cars, better transit options, affordable housing near transit, education and job training tied to job creation and job development in the region. Adjusting to the risks of climate change and sea level rise will take a regional effort to mitigate the risk that our San Francisco Bay can flood billions in real estate assets along its shores. In some cases, investments in infrastructure may have extended positive impact beyond the Bay Area. For example, water infrastructure investments may include the entire San Francisco Bay watershed north to Oregon and west to Nevada.

Private Equity/Venture Capital

Private equity was virtually born and raised in Silicon Valley. Experts at innovation and finding the next disruptor, private equity/venture capitalists have created millions of jobs around the world, as well as here in the Bay Area. To continue the Bay Area’s leadership, we can build that impact investing eco-system of innovation and support to solve not only the world’s problems but some of our own here at home. The investment spectrum in the private equity space in the Bay Area can also include the innovative Hubs, Incubators, crowd-funding and other alliances for investors. More funding opportunities for social entrepreneurs, building a social stock exchange, networking for more angel funding and more access to each other will help build the bridge between capital providers and capital seekers, through centralized virtual and physical resources.

Community Investment/Savings accounts

A diversified pool of notes with Bay Area based Community Development Financial Institutions (CDFIs) will have a risk and return profile like that of a “really good savings account” while providing an asset base for these community banks and loan funds to grow their impact. They create a lot of community impact through lending to small businesses and non-profit organizations in our community and they have been doing this work successfully for decades. This can now be an accessible investment/savings choice for place-based impact investors. Under development is the first ever “Bay Area Super CD-Note” where we tie together transparency, liquidity, impact and strong returns through highly rated CDFIs in the San Francisco/Silicon Valley Bay Area.

It seems that intentionally focusing a small portion of our investment portfolios on investing in the Bay Area would be a good thing, especially if we can expect to get market returns and a positive local impact, but without all the time and effort of doing it alone.

How to use the Bay Area Impact portfolios as building blocks for aligning your investment strategy with your mission and impact goals in your own backyard.

The six Bay Area Impact Investing portfolios (public equity, fixed income, real estate, infrastructure, private equity, and community investing/savings) are like building blocks to mix and match to meet your own personal, family or institutional target investment goals and mission. Each portfolio is asset class specific, and is designed to deliver the market/benchmark return for that asset class as well as a positive impact on the San Francisco Bay Area’s long term sustainability, prosperity and resilience.

Let’s describe the characteristics of each of the portfolios:

Public Equities: This model stock portfolio is over-weighted in Bay Area headquartered companies which gives its investors an oversized voice for indirect impact through corporate engagement and proxy voting. It encourages strong attention to ESG criteria, long term wealth creation for shareholders, and a positive impact on the Bay Area through shareholder activism.

  • Very liquid, can be very volatile but over the long term is an important part of an overall portfolio.
  • Should be investable for retirement accounts in a mutual fund format.
  • Would include active, passive and ‘enhanced index’ strategies to achieve market levels of risk and return

Publicly Traded Fixed Income: This Bay Area bond fund will hold a broad selection of investable bonds generally offered by Bay Area issuers: municipalities, local governments and agencies, regional corporate bonds as well as strategies for direct lending to small and medium sized businesses and non-profits, and project bonds for the area.

  • Very liquid, can be a solid foundation to a portfolio with current income to the investor, tied with professional strategies for seeking strong total returns like its benchmark, the Barclays Aggregate.
  • Should be investable for retirement accounts in a mutual fund format.
  • Would include a mix of active, passive, community, government and corporate securities

The Real Estate portfolio will include both liquid REITs and investable projects across the spectrum of residential (homeownership and rentals, affordable and planned spaces, rental and multi-family), industrial and commercial broadly across the Bay Area. It will include sustainability, resilience and prosperity goals and will adopt fiduciary standards to invest in the complex environment that is the San Francisco Bay Area real estate market. Impact here can be counted in terms of properties built/bought, families housed, jobs created, GHG reduced, etc.

  • Less liquid than stocks and bonds, offers long term protection against inflation and a good diversifier in portfolios that can afford less liquidity or have a longer holding period
  • Would include REITS, portfolios with active specialty real estate managers in various sectors of the market, with some level of impact in the Bay Area

Infrastructure investments may be in the form of infrastructure bonds tied to specific projects, or public private partnerships for longer term regional transit, housing, and community development solutions. Clean and green energy efficiency, internet access, congestion on the highways, carbon footprints are some of the infrastructure investment needs we see in the Bay Area. With our approach to pooling long term assets, we can find the right partners and shovel-ready opportunities, through networking and centralized collaboration.

  • Highly illiquid, can result in high local impact in job creation, funding community and economic development plans for the long term
  • Brings the discipline of private markets to the public resources for more efficient project management.
  • Can provide cash flow and inflation hedge to investors and portfolios and move the regional economy forward in big ways.

Private equity portfolios, with exposure to the newest entrepreneurial talent found in hubs, incubators and our leading business schools, can be fueled with local talent and resources so the Bay Area can continue to lead the world in creative solutions through innovation and technology. This is a long term portfolio, usually inaccessible to many investors, that can provide early funding for new disruptive ideas, mentorship, and building job-creating machines that focus on the resources and needs of the Bay Area. Success stories already abound about start-ups in the Bay Area’s Low-Moderate Income neighborhoods that have realized significant local impact and provided strong returns to private equity investors, like Pandora, Tesla, Revolution Foods, to name a few.

  • This fund is a long term investment with the potential for high returns over 10-15 years.
  • Takes patience but can offer direct impact by funding unique solutions visible right here.

Combining asset classes in our portfolios is smart diversification. We can apply this concept to our local investment portfolio allocations as well. For example, the old investing rule of thumb was to have a 60% stocks/40% bonds portfolio. Today a well diversified portfolio might look like this below:

Asset ClassAllocationExpected annual returns
Stocks30-40%7-9%
Bonds20-30%3-5%
Real Estate10%8-15%
Infrastructure10%`8-15%
Private Equity10%`15-25%
Community Investment/Savings1-5%1-2%

Typical portfolios will mix these asset classes for an overall average rate of return, relying on the ups and downs of each asset class in its market cycle to moderate the overall risk (volatility) in the portfolio, resulting in a long term average expectation for the portfolio to return about 6.5-7.5% annually over time.

If you are a moderate-risk/moderate-return investor, as are many long term asset pools that expect to survive many generations, then this diversified allocation approach could be a guideline for your place-based impact investing allocation. Split your 1% place-based impact investing allocation into its component asset classes and look forward to it earning it’s assigned market benchmark returns and providing a positive impact on the Bay Area overall.

If you are a more aggressive investor you can shift your percentage allocation in favor of the higher earning asset classes like public and private equities, targeting more there and less to the other asset class portfolios.

If you are a more conservative investor and want more comfort in a less volatile portfolio, you can choose to invest more in the Community Investment/Savings, Bond and Infrastructure funds.

Likewise, because these are already geographically aligned, local mission oriented investors can tilt their place-based impact investments to focus more on a particular alignment with mission than on the risk and return metrics. For example a fund that seeks to impact jobs and job creation can use the public equity, private equity, and real estate portfolios to impact the job goals for job creation and job development. Housing advocates can align their investments to the Real Estate, Bond and Infrastructure portfolios.

Tracking the Impact in the Bay Area

Building sustainability will be a long term investment goal for the BAIII portfolios. In the beginning, we want at least some portion of our private capital portfolios to be participating on an intentional basis in the investable opportunities in the Bay Area. In the long term, we want to create more impactful opportunities and an investment platform for channeling local resources and capital to local investments and community resilience for our region. We can grow into a clearinghouse for other parts of the impact investing capital stack as well.

From the model portfolios designed in 2013-14, we can extract the sorts of investments that provide examples of the kinds of impact we seek in the various asset classes.

  • Fixed Income/Community Investment/Savings: Community Capital Management Inc.
    • CRA Qualified Investment Fund Institutional fund
    • Symbol: CRANX: $2.0 billion fixed income mutual fund
    • Intermediate term, investment grade fixed income
    • Benchmark: Barclays Aggregate
    • Earmarked bonds for CRA credit and local impact
      • Geographically focused on SF Bay Area
      • Taxable Municipal Bonds, Redevelopment Agency
      • Bay Area Small Business Administration bonds
      • Bay Area GNMA and FNMA Affordable Housing bonds
      • Salvation Army (corporate)
      • CDFI deposits in Bay Area (Community Development Financial Institutions)
        • CRA = Community Reinvestment Act
  • Affordable Housing and Job Creation: AFL-CIO Housing Income Trust

HIT Invests $16.8 Million in Gabilan Plaza Apartments in Salinas, CA Rehab of Affordable Housing Development Will Generate Over 110 Union Construction Jobs

5/29/2014

The AFL-CIO Housing Investment Trust (HIT) provided $16.8 million in financing for the $43.3 million rehabilitation of Gabilan Plaza Apartments, a multifamily development that has provided affordable housing to residents of Salinas, CA, for over 40 years. The all-union rehabilitation work is expected to generate more than 110 union jobs.

The HIT investment of union and public employee pension funds will help finance exterior and interior rehabilitation at the aging housing complex, which consists of 26 garden-style apartment buildings offering 200 rental units. All of the units are income restricted, with 10% designated for households earning up to 50% of the area median income and the rest reserved for families earning up to 60% of the area median income.

  • Community Investing/Savings: Northern California Community Loan Fund
    • Since 1987, NCCLF has invested $150,904,816 in Northern California, financing over 300 projects that have created or preserved 14,459 jobs, 5,742 low-income housing units, and served over 700,000 clients.
    • Recent project examples:
      • Provided a $216,000 loan to a Contra Costa homeless services provider to build a catering kitchen that now distributes 60 tons of groceries annually from eight locations
      • Provided $2.8 million in loans and collaborated with other public and private partners to build and maintain a transit-oriented multi-tenant center in Berkeley.
  • Institutional Real Estate – Sustainable Industrial, Commercial, Job Creation: American Realty Advisors
    • Construction of Cherry Logistics Center, a 574,000 square foot warehouse distribution facility in the San Francisco Bay Area is proceeding with a 2Q14 delivery date. The property is the first of its kind and size to be built in the Bay Area in 20 years, employed 250 people in construction and is expected to serve as a logistics and distribution center.
      • A 29 acre LEED distribution facility developed with 100% union labor, built at the crossroads of the Silicon Valley and the Port of Oakland
  • Sustainable Real Estate: Gerding Edlen is an SEC-registered investment advisor that manages separate accounts and funds that are focused on the redevelopment and development of mixed-use, multi-family and office properties in high growth urban markets in the US.
    • Property in San Francisco, CA: “ Etta”, Van Ness & Sutter
    • 13 story, 107-unit LEED (Gold) Mixed Use apartment, 9,750 square feet of ground floor retail
    • Located adjacent to Pacific Heights/ Nob Hill, energy savings, one-, two-, three bedroom units
  • Private Equity: Bay Area Council’s Real Estate and Growth Funds (approximately 2002-2012)
    • The Bay Area Family of Funds is considered a national model for regional Double Bottom Line investment initiatives, highlighted by the Office of the Comptroller of the Currency (the OCC)
    • Over 230 new jobs have been generated, 1,096 jobs have been retained, and over 2,300 new jobs are projected from investments by the Family of Funds
    • 870 for-sale homes being built or renovated, with at least 230 units affordable to purchasers at 80% of area median income or lower
    • Nearly 700 acres of land have been remediated for brownfield development
  • Community Investing: Bay Area Transit Oriented Affordable Housing Fund: www.bayareatod.org

Eddy & Taylor Family Housing
Location: San Francisco, CA
TOAH Fund Financing: $7.2 million
Housing Units: 153
Retail Space: 12,000 square feet

The Tenderloin Neighborhood Development Corp. is developing an old parking lot into a 14-story building with affordable housing and retail space planned to attract a grocery store to this underserved community. The site is located just two blocks from the Powell Street BART station, a major transit hub in San Francisco.

  • Green Infrastructure Bonds

Municipal Industrial Revenue Bonds:

San Francisco PUC – Wastewater infrastructure bonds

• $240 million Wastewater Revenue Bond will fund eligible projects in sustainable storm water management and wastewater projects

Green infrastructure is a stormwater management tool that takes advantage of the natural processes of soils and plants in order to slow down and clean stormwater and keep it from overwhelming the City's sewer system
• The first certified green water bond to finance sustainable water infrastructure

• Working to maintain the 100+ year old, 900 mile long combined sewer system and 17 pump stations that collect sewage and storm water
Long term municipal revenue bond for water infrastructure

http://www.ceres.org/press/press-releases/san-francisco-public-utilities-commission-issues-world2019s-first-certified-green-bond-for-water-infrastructure

Proposal to open The Bay Area Center for Place-based Impact Investing: Let’s make it easier to invest locally

The Center becomes the PLACE where collaboration and collective impact begin. By centralizing the core activities like due diligence, resource management, and monitoring of the portfolios, a collaborative team and their investor/partners would have a virtual and physical place to work and network. Members/investors will get to align their mission and financial goals and capital seekers will have a platform for networking and mentoring. Acting as a clearinghouse, the Center can be the home to all sorts of impact investing opportunities, across the capital markets continuum, including:

  • Community -based investment funds: institutional quality asset class specific, multi-manager funds for local impact
  • Social Impact Bonds, Pay for Success contracts, Development Impact Bonds, Environmental Impact Bonds, Health Impact Bonds
  • Mission Related Investing and Program Related Investing by Foundations (MRIs and PRIs)
  • Investment in human capital/development, corporate engagement, bootcamps, and Co-ops
  • Private Equity Funds with Social Impact
  • Social Stock Exchange for B-Corps, etc.
  • Green and Sustainable Infrastructure Bonds
  • Community Development Financial Institutions – local investing, savings, and lending
  • Investment in Cleantech, BioTech, Education, Healthcare, and Fintech
  • Crowdfunding, DPOs, Incubators/Hubs for very early stage investing
  • Long term public private partnerships in education and job training, infrastructure, transit, housing, water, etc.

Next Steps: How do we open the Bay Area Center for Place-based Impact Investing?

  • Get the right people in the room to pledge assets, staff time and funding
  • Develop partners/investors/members
  • Create the professional team and business model for asset management
  • Build real portfolios so the track records can develop to grow assets and scale
  • Develop the virtual clearinghouse platform with database technology
  • Encourage Deal Flow and Gatherings

The Bay Area Center for Impact Investing

The Bay Area is the natural place to build a model for a more efficient channeling of private capital into the regional economy. Let’s do it.

References:

[1] The research paper describing the BAIII was published in the Routledge Handbook of Sustainable and Social Finance with Oxford University: “Regional Impact Investing for Institutional Investors: The Bay Area Impact Investing Initiative,” July 2016

[2] The Federal Reserve Bank of San Francisco encouraged and published the research working paper: “Impact Investing for Small Place-Based Fiduciaries: The Case Study of the United Way of the Bay Area”. http://www.frbsf.org/community-development/files/wp2012-05.pdf

[3] Financing Sustainable Cities Scan and Toolkit, October 2016, in partnership with HIP Investor: to download the paper: http://usdn.org/public/page/32/Government-Operations

[4] Cornerstone Journal of Sustainable Finance and Banking, “Proximity” (full edition) December 2016 issue: http://cornerstonecapinc.com/2016/11/place-based-impact-investing-how-to-invest-in-your-own-backyard

Impact Measurement: Finding Your Way Through The Maze

This post was originally produced for Forbes.

This is the second in a series of articles about impact measurement for social entrepreneurs.

Social entrepreneurs who are serious about having impact or about attracting capital from sophisticated impact investors face an intimidating array of measurement tools, standards and abbreviations. To help social entrepreneurs find their way through this maze I connected with practitioners and experts.

Laura Callanan, founding partner at Upstart Co-Lab, makes the case for using existing standards rather than inventing your own. “I am a fan of building off what already existing in the field — especially B Lab, GIIRS and IRIS. In the work we are doing at Upstart Co-Lab — connecting impact investors to the creative economy — these existing tools work really well. And using familiar tools makes it easier for us to launch a creativity lens for impact investing.”

Laura Callanan

B Lab is the non-profit that certifies Benefit Corporations. GIIRS is the “Global Impact Investing Rating System” and the acronym is pronounced “gears.” GIIRS ratings are used by impact investors to evaluate social impact; the measurements can be applied at both the company and the fund level. B Analytics, the B Lab entity that does measurement and certifies Benefit Corporations, uses GIIRS standards.

Note that I and others often use the terms Benefit Corporation and B Corp interchangeably, B Corp refers most properly to the certification by B Lab where a Benefit Corporation is a legal entity formed under the rules of a state that allows that form of incorporation.

IRIS is a free product of the Global Impact Investor Network, the GIIN (pronounced like the spirit). IRIS provides standards for measurement that are broadly used within the impact investing community.

Laurie Lane-Zucker

Laurie Lane-Zucker, the CEO and founder of the Impact Entrepreneur Center for Social and Environmental Innovation, adds that using the SDGs, the UN’s Sustainable Development Goals also makes sense. He adds, “I am a big fan of the new taxonomy framework that Fourth Sector Networks is in the process of developing for the “for-benefit” or “Fourth” sector.”

Impact investment fund manager, Joel Solomon is Chair of the Renewal Funds; he encourages portfolio companies to seek B Corp certification.

Matthew Weatherley-White

Matthew Weatherley-White, a recognizes expert on impact measurement and co-founder and managing director for the Caprock Group, which manages money for impact investors, agrees. He encourages social entrepreneurs not only to measure their impact with B Lab standards but also to become a certified B Corp (or Benefit Corporation), for three reasons:

  • as a statement of commitment
  • as a stamp of transparency and credibility
  • as a way of supporting the emerging community of social enterprises

“They should then establish a tight group of IRIS-compliant metrics that are quantifiable and material, that will be gathered during the day-to-day operations of the business, and that will provide evidence around the mission of the enterprise,” he continues. He also encourages entrepreneurs to report using the taxonomy provided by his firm’s “iPAR” system.

Lisa Curtis

Social entrepreneurs Lisa Curtis, founder and CEO of Kuli Kuli, says, “One of the first things Kuli Kuli did as a company was to get our B Corp certification. It was tremendously helpful in pushing us to further define how we wanted to operate as a business. We’re now a full-fledged Benefit Corporation and we regularly report on those metrics.”

Daniel Jean-Louis, CEO of Bridge Capital, an impact investing firm focused on investments in his native Haiti, notes that while the GIIRS standards are “pretty good,” entrepreneurs “should establish some of their own standards in addition to those rules.” He points out that sometimes it is hard to fit your impact into an existing model.

Nell Derick Debevoise, founder and CEO of Inspiring Capital, says that which standard you use may depend on your stage of development or your industry. “B Lab is good for very early stage companies because it’s focused on setting up the operations of your company and is relatively simple and user friendly. It’s also more of a consumer-facing certification. GIIRS and IRIS are more investor-facing, so startups looking to raise institutional capital should think about mapping their impact to those standards sooner than later.”

Cecile Blilious

Cecile Blilious, an impact investor based in Tel Aviv, is the founder and managing director for Impact First Investments. She also encourages people to use the B Lab standards. She also notes that using a Social Return on Investment or SROI method is important. She uses Sinzer to help her firm with that. The SROI is a means of measuring value created that doesn’t have an easy financial metric, such as environmental and social benefits.

Matthew Davis, an impact investor focused on Ethiopia, is the CEO of Renew. He says his firm uses the IRIS standards.

Similarly, Gary White, the CEO and co-founder—with Matt Damon—of the non-profit Water.org uses the “IRIS framework to ensure that we are delivering social returns as well as financial returns to investors” for its WaterEquity program that allows investors to fund water projects with an economic return.

Lisa Hagerman, director of programs at impact investment fund DBL Partners, says the firm also uses IRIS metrics, but notes that what is appropriate for each social enterprise will vary depending on the asset class and sector.

Amit Bouri

Amit Bouri, CEO of the Global Impact Investing Network, says more entrepreneurs are using the IRIS standards. “While IRIS was developed to be used by investors for the purpose of measuring the social and environmental performance of their investees, we are increasingly seeing enterprises adopting IRIS for their own impact measurement and management practice.”

He notes that using IRIS measures could make social ventures more attractive to impact investors because it could accelerate the impact due diligence phase of an investment.

More importantly, perhaps, Bouri says that impact measurement can actually improve business performance. “Impact measurement is a defining characteristic of impact investing and has been shown to have significant benefits to organizations that utilize it to inform business decisions.”

Cathy Clark, author and professor, is the director of CASE i3 at Duke. She cautions, “Not every social entrepreneur needs to use a standard or produce an impact report. It’s a choice, dictated by the stakeholders of your enterprise and what level of evidence they are demanding.”

She explains, “We define 5 levels of evidence and 3 paths for impact reporting in our CASE Smart Impact Capital online tools. Using standards is just one of the paths.”

Cathy Clark

She sees a range of demands from investors; using standards helps with comparisons. “The advantage of using standards is giving people some level of comparability at the organizational level, and there are stakeholders who care a great deal about this, including some private investors and some federal and state agencies. All of the other paths allow you to customize more, but you lose some comparability with other ventures. Some stakeholders, like some agencies in the US government, have often decided that they will only invest significantly where higher levels of impact evidence can be shared.

Bobby Turner, CEO of Turner Impact Capital, which invests primarily in affordable housing and charter schools, is also cautious about using standards. “We focus less on impact standards and more on actual impact and the correlation between positive (and possibly negative) [social impact] and financial returns. Similar to LEED certification, while the intent of the standards is well meaning, they are often irrelevant to a particular investment.”

It isn’t necessarily which standards you choose but how you use them, says Stephanie Gripne, founder and director of Impact Finance Center & CO Impact Days and Initiative. “Probably any of [the standards work for now for the larger part of the market. There are many out there. Once these standards are selected by a social entrepreneur, I would ask why these indicators and how exactly they will capture and use the data.”

Breaking from the pack, Topher Wilkins, CEO of Opportunity Collaboration and founder of Conveners.org, says Poverty Spotlight is worth considering as a standard because of its focus on feedback from beneficiaries and on their economic well-being.

Morgan Simon

Some worry that impact standards themselves may not go deep enough. Morgan Simon, managing director at Pi Investments, says, “Impact standards are great for addressing short-term outcomes. It’s important to also keep track of what the long-term, systemic impact of an intervention can be–this may require a greater attention to the structural elements of a business. Who owns it? Does it add more value than it extracts from communities?

She adds, “Impact measurement is absolutely useful—what gets measured, gets managed. Impact measurement is often used to count the occurrence of something, e.g., 1,000 jobs created or 200 homes built. Measuring structural change may require a different set of questions.”

Peter Fusaro, Chairman of Global Change Associates, adds the Sustainability Accounting Standards Board or SASB to the list of standards. The SASB is primarily used for socially responsible investing metrics and is working to become to public companies what the FASB accounting rules are for financial metrics. He adds, “I don’t see one as the dominant standard as of yet.”

Lauryn Agnew

Lauryn Agnew, president, Seal Cove Financial and founder, Bay Area Impact Investing Initiative, shares the view that the standard you should use depends on your situation—and on what you are measuring.

“ESG factors can measure the outcomes of CSR. B-labs often are about balancing corporate behavior and shareholder expectations and governance. Measuring GHG reduction from an investment in solar is an example of measurement but the value of that impact in not fully understood. Certain standards like SASB are helping to define what is the ‘material’ impact so that we do not have to track ‘every’ impact, which can be diluting or detracting to the big picture goals.”

This primer on impact measurement should help you understand the key issues in measurement so you can find your way out of the impact measurement maze.

#impmeas

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Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!

CEA Targets $800M of Solar Investment With New Partners

Clean Energy Advisors is a sponsor of the Your Mark on the World Center.


Clean Energy Advisors announced a major new financing that will take the firm from having invested about $140 million in solar energy projects to about $800 million. CEA President Scott Hill also notes that building on this success, the firm will establish a foundation to fund more charitable initiatives. (Watch or listen to my discussion with Scott using the players above.)Scott explains that the unnamed financing partners, two “multinational families,” have committed about $350 million. Combined with additional debt financing, the firm anticipates reaching $800 million in financed projects, “completing the pipeline of projects in North Carolina.” He anticipates that deploying the capital will take 18 to 24 months.

Scott explains that the unnamed financing partners, two “multinational families,” have committed about $350 million. Combined with additional debt financing, the firm anticipates reaching $800 million in financed projects, “completing the pipeline of projects in North Carolina.” He anticipates that deploying the capital will take 18 to 24 months.

He notes that the cost of installation for small utility scale projects is about $1.50 or $1.60 per watt, yielding a cost of about $1.5 million per megawatt. The new financing should allow CEA to install another 400 MW in North Carolina. He also notes that the scale they are achieving should allow the firm to look beyond their traditional structure where Duke Energy is the primary “off-taker” or buyer of the energy from the projects financed.

The new scale also creates an opportunity for CEO to increase its philanthropic efforts. Scott says the firm has started the process of creating a foundation that will fund charitable work. Last year, the firm backed nonprofits Reverb and Headcount to build support for environmental causes at 25 concerts across the country. Scott says they’ll be doing that again. “People who attend concerts have a natural affinity for nonprofits.”

Scott also hopes that the firm can use the foundation to fund solar projects in the developing world like putting solar panels on schools that don’t have access to the grid. He says the firm will donate its time to manage projects that the foundation funds and hopes donors will help them make a big impact.

The acceleration of the solar industry is creating a bright future for the world, both in the developing world and here in the developed world.

Scott Hill, courtesy of Clean Energy Advisors

Scott Hill, courtesy of Clean Energy Advisors

More about Clean Energy Advisors:

Twitter: @cleanenergyadv

Clean Energy Advisors (CEA) creates ownership opportunities for investors in utility scale solar energy projects that generate tax-advantaged predictable income, preserve capital, and have positive social and environmental impact.

Scott’s bio:

Twitter: @williamandhill

Scott Hill has over twenty years of entrepreneurial experience including a significant perspective on business start-ups and building successful small businesses. Mr. Hill has been with CEA since April 2014.

His duties include overseeing the firms family office, endowment, foundation, and UHNW client strategies. He has served as a panelist at US based family office conferences and enjoys speaking on impact investing, renewable energy opportunities, and the future of Solar PV worldwide.

Scott is a 1991 graduate of Columbia University and four year member of the football program. He lives near Nashville, TN with his wife and children. He’s also actively involved in his community and church.

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Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!

How Social Entrepreneurs Begin To Measure Impact

This post was originally produced for Forbes.

This is the first in a series of articles about impact measurement for social entrepreneurs.

There are two keys to becoming a good social entrepreneur. Intentionality, that is intending to have a positive social impact rather than merely delivering one incidentally, is how you become a social entrepreneur. Accountability, measuring the impact, is how you become an effective one.

Measurement, however, is not straightforward for most social entrepreneurs. To help guide startup social entrepreneurs on the measurement of impact, I’ve reached out to some of the leading practitioners and experts in the impact arena to comment.

“It may not be as difficult as it seems, at least for now,” says Stephanie Gripne, Founder and Director, Impact Finance Center & CO Impact Days and Initiative. “The majority of individuals and families [investing in social entrepreneurs] can still be satisfied with basic impact premises and themes, much as they’re satisfied with generalized results from gifts to charities. For now, the democratization of impact investing is being led by values and principles more than measurable outcomes.”

Stephanie Gripne, courtesy of the Impact Finance Center

“Even many institutional investors and advanced investors,” she continues, “are satisfied with ‘outputs – acres conserved, ex-offenders employed, fair-trade products sourced, etc. – as long as the units counted seem reasonable. A smaller percentage (but perhaps a more vocal and well-publicized percentage) are seeking real ‘outcomes’ – the types of harder, longer-term measures that drive Social Impact Bonds for example.”

Cathy Clark, Director, CASE i3 at Duke, highlights the importance of defining a “theory of change.” She says, “This is basically an ‘if-then’ statement that relates their activities to the change they seek. Every social entrepreneur needs to make this argument about their impact. Using that theory, they can they start to recognize assumptions in the theory and track measures that help test how well things are actually occurring.”

Cathy Clark, courtesy of CASE i3

Cecile Blilious, Founder, Managing Partner, Impact First Investments, echoes Clark. “Entrepreneurs should be able to describe their theory of change and work towards creating a social impact plan in parallel with their business plan.”

Cecile Blilious, courtesy of Impact First Investments

Similarly, Uma Sekar, Impact & ESG Manager, Capria Ventures, suggests starting with an impact thesis. “Entrepreneurs should start with an impact thesis or strategy, set goals that are achievable and align their core metrics. Some of the common metrics are lives impacted, job creation and geographic coverage. The more specific they are about the populations they are addressing–base of the pyramid, low income, minorities, women, refugees, etc.–the better. If it is an environment focused company – energy conservation, carbon footprint are common measures.

Lisa Curtis, founder & CEO, Kuli Kuli, suggests identifying a short list of key measures. “Social entrepreneurs should understand how their high-level vision translates down into 3-5 key metrics that are quantifiable. They should be able to articulate what success in 10 years would look like in terms of those metrics, whether it’s the number of trees planted, livelihoods created or investment made.”

Lisa Curtis, courtesy of Kuli Kuli

Focus on measuring the one thing you’re looking to do, says Nell Derick, Founder and CEO, Inspiring Capital. “A simple, customized, quantitative standard related to their self-proclaimed target impact. For example, we’ve been measuring our professionals’ and clients’ reaction to the question, ‘Do you better understand how to use your or your employees’ business skills (e.g. finance, strategy, marketing and operations) to advance social good?’ since our first programs in 2014. It’s not part of a public index or measure, but it tells US if we’re doing what we set out to do, and the very design (and ongoing choosing) of that question forces us to clarify the one thing we’re looking to do in the world.”

Nell Derick Debevois, courtesy of Inspiring Capital

Laurie Lane-Zucker, Founder & CEO, Impact Entrepreneur Center for Social and Environmental Innovation, suggests putting impact measures into a broader context. He says, “Global sustainability context is also important in this discussion of impact measures. Grounding social entrepreneurship in widely accepted contextual touchstones such as the United Nations’ Sustainable Development Goals helps: a) provide sustainability context for impact investors keen on seeing “the big picture,” b) facilitates comparisons between different investment opportunities addressing the same sector (i.e. water, climate, poverty, food), and c) helps ESG [environmental, social and corporate governance] reports using (hopefully) similar impact measurements be more comparable and transparently answerable to macro social and environmental needs.”

Laurie Lane Zucker, courtesy of Impact Entrepreneur Center for Social and Environmental Innovation

Matthew Weatherley-White, Co-Founder, Managing Director, The CAPROCK Group, cautions that no single set of metrics will work for all social ventures. “We believe that there are no universal impact key performance indicators. Instead, social entrepreneurs should be prepared to measure, on day one, whatever impact metrics are endogenous to the operations or mission of their enterprise. Far too often, social entrepreneurs believe that tracking and reporting on a host of socially-aware metrics will make their business ‘more’ impactful… when, in fact, doing so may be (at best) a distraction to operating the business or (at worst) a distorting force, putting at risk the survival of the enterprise.  Seen through this lens, impact measurement can be interpreted as answering the question of ‘materiality’: what impact measures are critical to the survival of the enterprise. That set of measures should be what the entrepreneur strives to report the day the doors open.

Matthew Weatherley-White, courtesy of Cap Rock.

Gary White, CEO & Co-founder, Water.org, also emphasizes the unique measurement challenges each social venture will face. “For enterprises like Water.org and WaterEquity, we are very much focused on delivering impact in the form of number of people reached with water and sanitation improvements.  For our WaterEquity initiative, we also look at IRIS metrics and commit to reporting within that framework.”

Gary White, couresty of Water.org

Matthew Davis, CEO, RENEW, an impact investing firm focusing on Ethiopia, notes that for some ventures impact measure is relatively simple. “In the part of the world where I invest (Africa), where job creation is desperately needed and starting and growing a business is very challenging, the best impact is a healthy growing business that is managed by ethical leaders. Therefore, growth and good governance must be a priority from day one.”

Matt Davis, courtesy of Renew LLC

Peter Fusaro, Chairman, Global Change Associates, agrees. “Hopefully, they should be focused on the ESG metrics of environmental benefits, job creation and be ethical vis a vis transparency.”

Bobby Turner, CEO, Turner Impact Capital, also recommends ESG metrics. “At Turner Impact Capital, our reports provide financial, social and environmental metrics for our investors to track. By doing so, one can then see the correlation and interdependency between profits and purpose, i.e. a reduction in carbon footprint leading to lower utility costs or a reduction in crime translating into lower insurance costs and thus higher profit margins.”

Bobby Turner, courtesy of Turner Impact Capital

Daniel Jean Louis, CEO, Bridge Capital, operating in Haiti, suggest even more basic measures, starting with “customer and employee satisfaction” because they are “much easier to track.”

Balance qualitative measures with quantitative measures, suggests Topher Wilkins, CEO and founder, Opportunity Collaboration and Conveners.org, respectively. “In general, it’s best to be able to justify both quantitative and qualitative impact, i.e. data-driven metrics (how many more children are now attending school, what percentage of women are now surviving childbirth, what’s the increase in average household income, etc.) alongside stories or testimonials from beneficiaries, e.g. ‘before X organization came to my village, it was very difficult to feed my entire family, but now I can provide at least two meals a day and no one is hungry anymore.’”

Expanding on this idea, Lisa Hagerman, Director of Programs, DBL Partners, says, impact measures should include narratives and quantitative measures about the programs and practices related to the target impact. These should include “narratives across: public policy, environmental stewardship, workforce development, community engagement, and, quantitative metrics across: job creation, quality of jobs & benefits offered (including wealth creating programs such as Employee Stock Ownership Plans), environmental metrics, supply chain accountability, among others.

Some investors do have more specific guidelines. Joel Solomon, Chair, Renewal Funds, says, “We are a B Corp Fund. We strongly encourage, but don’t require, portfolio companies to become B Corp. We use the B Corp questionnaire as part of our due diligence before final investment. We prioritize B Corp companies for our intake process.”

Joel Solomon, courtesy of Renewal Funds

Impact takes time so reporting on impact will improve over time, says, Laura Callanan, Founding Partner, Upstart Co-Lab. “If this is a new enterprise, there will be a trajectory to actually deliver impact just like there will be a trajectory to deliver financial return. Impact investors need to think like investors first and foremost and recognize it takes time to build a business and see results, all kinds of results.”

Lauryn Agnew, President, Seal Cove Financial and Founder, Bay Area Impact Investing Initiative, agrees. “We also need to measure both outputs and outcomes, which can take decades. Biotech investments seek the outcome that lives are saved over decades.”

Ultimately, measurement isn’t a panacea. Morgan Simon, Managing Director, Pi Investments, says, “At Pi Investments, we try to focus on impact management above and beyond measurement–ensuring both fund managers and entrepreneurs have a clear vision of how they will enhance the impact of their work over time.”

Morgan Simon, courtesy of PI Investments

Lane-Zucker, emphasizes the organization of the enterprise to minimize measurement challenges. “The more that entrepreneurs can bake double and triple bottom line values into their DNA (mission, legal structure, reporting, etc.) from the earliest stages of their project, the easier it will be to locate appropriate measures as the business begins to take shape and mature.”

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Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!

13 Social Ventures Woo Investors and Philanthropists in Nairobi

Today, 13 social enterprises from across Africa put their best feet forward in Nairobi, hoping to attract investor and donor money to help them scale their enterprises and their work in improving health outcomes for women and children.

The entrepreneurs presented at the GE healthymagination & Miller Center Mother and Child Program Investor Showcase. The program largely replicates the Miller Center’s Global Social Benefit Institute program, which it has been conducting in Silicon Valley for 15 years. GE provided funding to make the program possible in Kenya. It has been so successful that GE has committed to fund the program again.

The month’s long program features a focused curriculum to help the entrepreneurs generate more self-sustaining revenue sources and includes counsel from accomplished mentors. The program culminates in today’s investor presentations, with each entrepreneur getting six minutes on stage to hook the investors’ interest.

United Nations Coordinator for Kenya, Siddarth Chatterjee, spoke about collaboration between the public and private sectors to create a leapfrogging of maternal and child healthcare. Sid highlighted women’s issues, including female genital mutilation, child marriage and gender-based violence. He noted, “Kenya’s economy will grow when the woman is allowed to achieve her full potential and can plan her own family.” He congratulated the Miller Center and GE for assembling such an impressive cohort of entrepreneurs.

The following is a summary of each of the 14 social enterprises who pitched from the day’s program:

Access Afya, Melissa Menke, Founder and CEO:

Access Afya creates a model for comprehensive primary care in wellness in Nairobi’s informal settlements. Our tiered approach includes fixed community microclinics as anchors that have authentic medication, emergency response capacity point-of-care lab   capabilities, immunization family planning, and qualified clinicians with novel field programs that provide care through field-based programs to community institutions like schools, factories and churches.

Ayzh, Zubaida Bai, Founder and CEO:

Ayzh is transforming access to products through carefully designed kit-styled interventions around reproductive, maternal, pediatric, and adolescent health needs. These products help the care providers and beneficiaries with improved health outcomes.

Health Builders International, Tyler Nelson, Executive Director:

Health Builders (HB) is dedicated to addressing the fundamental challenges that prevent universal access to quality primary health care services in Rwanda: inefficient management systems, inadequate or nonexistent health infrastructure, and outdated technology. Through partnerships with local and national governments, HB mentors health care providers to build strong management systems; constructs comprehensive primary health centers where access is limited; and equips health centers system strengthening technology that supports efficient and sustainable operations. This approach results in health centers with the knowledge, resources, and capacity to thrive as independent enterprises, ensuring more people receive higher quality care in Rwanda.

Health-E-Net Limited, Pratap Kumar, CEO:

Health-E-Net is a social enterprise in Kenya providing innovative solutions to support healthcare delivery in low resource settings. PaperEMR is a unique system to generate electronic medical records directly from paper. It allows clinicians to document cases easily on paper, while interacting with the patient. Data entered on paper can be automatically extracted in digital form, analyzed, and used to improve quality of care. The Gabriel application is an innovative, low-cost tele-consultations platform that allows local healthcare providers to easily create and share digital medical information. Experts from a global volunteer network engage with local healthcare providers, supporting healthcare in the community and improving the efficiency of referral when needed.

Hewa Tele Ltd., Dr. Bernard Olayo, Executive Chairman:

Hewa Tele provides medical oxygen that is needed in medical and surgical situations. Medical oxygen has been listed as an essential drug for the last three decades by the World Health Organization. Unfortunately, many patients still do not receive this vital drug. Oxygen can reduce the chances of a child dying from pneumonia by at least 35 percent when given with antibiotics.

LifeNet International, Stefanie Weiland, Executive Director:

LifeNet International provides a bundle of services for primarily rural and faith-based health centers that improves the quality of clinical care and sustainability as businesses. This includes dedicated mentors to train all staff on-site in updated, life-saving techniques and efficient financial and operational management practices, door-to-door medicine delivery, and access to resources and equipment. In addition, LifeNet provides monitoring of health center performance with regular evaluation and quality assurance. By strengthening local capacity in every link of the healthcare delivery chain, LN is transforming primary care for Africa’s poor.

Lwala Community Alliance, Julius Mbeya, Managing Director:

Lwala Community Alliance is a community-led innovator, tackling the multidimensional drivers of poor health. Founded by Kenyans, Lwala ensures that beneficiaries plan, implement, and evaluate all programs. At the core of our model is a cadre of former traditional midwives whom we train, pay, and supervise to track, support, and refer every pregnant women and child under five. Simultaneously, Lwala works with primary care facilities and the communities they serve to provide quality, patient-centered care. Through bringing communities closer to health providers, Lwala has a driven a 97 percent facility delivery rate and 300 percent increase in contraceptive uptake.

Kids at play at Nurture Africa in Uganda

Kids at play at Nurture Africa in Uganda

Nurture Africa, Brian Iredale, Co-founder and CEO:

After 17 years of operation, our holistic and community-centered model, providing healthcare, vocational education, and sustainable livelihood loans has proven that offering these services under “one roof” successfully empowers vulnerable families to increase their standard of living. Our new enhanced model shifts from the   traditional philanthropic approach to a self-sustainable paradigm.  Accessing multiple community services locally benefits affluent   residents who will support and subsidize the operations to more vulnerable families.

Outreach Medical Services, Nigeria Ltd., Dr. Efunbo Dosekun, CEO:

Outreach Medical Services is a health service acute care provider for babies and children and professional development company, leapfrogging and leveraging on technology in clinical applications, training and health service operation management. Solutions provided are integrated, high impact and scalable, strengthening our acute care system horizontally and having its influence on saving lives of ill babies and children and preventing chronic disability together with increasing the human  capacity of healthcare workers in Nigeria. In our bid to deliver affordable, quality and safe care, there has been need for continuous refinement and modification in our product creation and service deliver responding to the multiple challenges in our internal and external environment in Nigeria.

PurpleSource Healthcare, Femi Sunmonu, Co-founder and CEO:

PurpleSource Healthcare strengthens clinical processes through   evidence-based approaches to care and provide quality certification in partnership with standard setting bodies. The enterprise aggregates its primary healthcare centers into one integrated network, centralize management functions and share scarce resources across the network. PurpleSource Healthcare leverages technology for healthcare analytics, population management and to aid responsive performance management of the network.

The Shanti Uganda Society, Natalie Angell-Besseling, Founder and Executive Director:

Shanti Uganda provides a unique model of care where skilled midwives incorporate traditional knowledge and modern best practices. Shanti Uganda’s Birth House is a collaborative-care maternity center staffed by Ugandan midwives and traditional birth attendants that provide mother-centered care throughout pregnancy, birth and the postnatal period. Shanti Uganda’s expansion plans include the development of a Midwifery Training School, which will offer a 2.5 year certification program to students throughout East Africa with both local & international faculty.

Telemed Medical Services/helloDoctor, Dr. Yohans Wodaje Emiru, Founder & CEO:

Telemed’s helloDoctor platform provides reliable and affordable access to health care. Through teleconsultations, we provide chronic disease follow-up and support to underserved people living in emerging markets by leveraging proven technologies and its unique partnerships.

Village HopeCore International, Dr. Kajira K. Mugambi, CEO and Founder:

Village HopeCore International (HopeCore) is dedicated to fostering integrated social and economic development in rural communities in Kenya and Africa. HopeCore enables and empowers members of rural Kenyan communities by providing health education and interventions, and microloans, business education and skills based training. We offer clinical curative services, preventative health information, and educational lectures to women and children to improve health outcomes in the community.

Jason Spindler, Managing Director of I-Dev International, an investment banking firm serving the developing world with an office in Nairobi, attended the event and reflected on what he saw. He said, “A majority [of the for-profit companies that presented] are ready for angel investment. Thirty to 50 percent are ready for later seed investment. Two or three could be acquisition targets.”

He noted that the capital markets in Africa are spotty, flush in some spots and thin in others. “Clean energy has a lot of capital going into it. Hundreds of millions more will be going in over the next few years.” On the other hand, tech ventures are struggling to access startup capital.

He is excited about Kenya’s prospects. “Nairobi is one of the best start up ecosystems in the world, including San Francisco. We’re building a car and you can’t drive it until you put the wheels on and the engine in. Kenya’s entrepreneurial ecosystem is ready to drive.”

This week, I’m traveling in Africa as a guest of Santa Clara University’s Miller Center for Social Entrepreneurship’s Executive Director Thane Kreiner and namesakes Karen and Jeff Miller. Read all my reports.

#17africa

Winter Innovation Summit: A Quick Report

Impact investors and government leaders from around the world convened in Salt Lake City at the Winter Innovation Summit hosted by the Sorenson Impact Center to focus on the ways that data can be used to inform both investments and government spending.

Jeremy Keele, President & CEO of Sorenson Impact, said, “The central theme of Sorenson Impact and the event itself is to explore how data, evidence, and innovation can be leveraged to solve difficult social problems like homelessness, chronic unemployment, incarceration, and poverty.”

Government leaders, including both Utah Governor Gary Herbert and US Congressman John Delaney of Maryland, address the conference.

Former CNN anchor and current social entrepreneur, Soledad O’Brien, New York Times columnist David Bornstein, and Academy Award-winning filmmaker were featured in a discussion about the role of media in creating social impact.

Salt Lake County Mayor Ben McAdams spoke at the conference. Salt Lake County, under his leadership, has successfully completed a second Pay For Success financing to reduce recidivism and homelessness in the County. The deal involves the County paying for services only if key results are achieved by providers. The providers, in turn, are paid by investors expecting that the results will meet the County’s requirements for a full payout.

DC Water and the Nation's First Environmental Impact Bond with Eric Letsinger (moderator), Beth Bafford, George Hawkins, photo by Decker Rolph

DC Water and the Nation’s First Environmental Impact Bond with Eric Letsinger (moderator), Beth Bafford, George Hawkins, photo by Decker Rolph

Eric Letsinger, founder of Quantified Ventures, George Hawkins and CEO and General Manager of the District of Columbia Water and Sewer Authority (DC Water), and Beth Bafford, Director of Investment at the Calvert Foundation, explained the structure and process for creating the world’s first Environmental Impact Bond. The Pay For Success program provided $25 million of financing to create “green infrastructure” to prevent sewer backups during rain storms. The deal was also unusual in that the payor and the provider are the same entity, creating a moral hazard that had to be managed; the payor/provider only has to pay back the money if the intervention works. They note that they will, however, be strictly required by contracts to do the work, even if it isn’t effective, mitigating the moral hazard.

Pay For Success financings, also called Social Impact Bonds, require the use of objectively obtained and evaluated data on outcomes–not outputs. This data discipline is required for PFS transactions. That same discipline is beginning to spread throughout government social programs and impact investments.

One of the challenges discussed at the conference is the threat that the Trump administration will limit access to data rather than expand it. Linda Gibbs, Principal at Bloomberg Associates, an international philanthropic consultancy, virtually shouted, “Data is a public good!” She made the case that data should be generally available to the public except when there is a compelling reason to keep it private.”

A relatively new field within impact investing is gender lens investing. Jackie Zehner, President of The Jacquelyn and Gregory Zehner Foundation; Jackie VanderBrug, Managing Director, U.S. Trust, Bank of America Corp.; and Robyn Scott, co-founder and CEO of Apolitical, made the case for investing after measuring the number and proportion of women employees, managers and board members. They presented data that suggests that this approach to investing improves returns.

Much more happened at the Summit than can be covered here in a short story. Watch for follow-up pieces here and at Forbes.com.

 

2017’s Top Sustainable Investing Trends From Green Alpha Advisors

This is a guest post from Garvin Jabusch, Co-founder & Chief Investment Officer of Green Alpha Advisors LLC.

What are prospects for sustainable and impact investing in the New Year?

With the election of Donald Trump and his selection of a Cabinet packed with fossil fuel executives and climate change skeptics, sustainable and impact investors are facing stiff headwinds.

Despite political challenges, Green Alpha Advisors sees resilience in an emerging economy that is powered by low-carbon, fueled by innovation, locally focused and addressing the looming systemic risks presented by climate change and resource scarcity.

Here are six trends that Green Alpha’s co-portfolio managers Garvin Jabusch and Jeremy Deems say will drive sustainable investing in 2017:

Energy Tipping Point: Though a Trump Administration pledges allegiance to coal and other fossil fuels, Jabusch and Deems say simple economics portends a structural decline in fossil fuels. Put simply, renewables are becoming too cheap for fossil fuels to compete. Solar module costs have fallen 80% since 2008, and solar power can be generated for as little as 2.42 cents per kilowatt-hour—less than half the price of fossil-based electricity.

With solar panels continuing their dramatic fall in price, panel producers face some market headwinds. But Yieldcos, such as 8.3 Energy Partners (CAFD), should benefit in 2017. 8.3 owns, operate and acquire solar energy generation projects and its primary objective is to generate predictable cash distributions that grow at a sustainable rate.

Bridging the divide with wind: What issue can unite Republicans and Democrats? The answer, say Deems and Jabusch, is blowing in the wind. Across the country, wind power has become the new corn for Red State farmers, providing a steady source of income in low-income, Red State rural areas. In fact, the 10 Congressional districts that produce the most wind energy are represented by Republicans. California and other states, meanwhile vow to push ahead in the fight against climate change—with or without President Trump’s blessing.

Vestas Wind Systems (VWDRY) and other original equipment manufacturers are well positioned for continued growth in 2017. Vestas has already sold out its 2017 capacity and with 78 GW of wind turbines in 75 countries, it has installed more wind power than any other company.

Storage Surge: Last year’s massive methane leak from the Aliso Canyon natural gas storage facility outside Los Angeles has put battery storage of electricity on the fast track. Utilities such as Southern California Edison and San Diego Gas & Electric have moved to battery storage for back-up and GTM Research estimates that as much as 1,800 megawatts of new energy storage could come online by 2021, (see: http://bit.ly/2iAbNUy). Companies that stand to benefit from this trend include, ABB Ltd (ABB), Solaredge Technologies Inc (SEDG) and Tesla (TSLA).

Jobs, Jobs, Jobs!: Though coal jobs were a focus of the 2016 Presidential election, renewables are where the most paychecks are. Wind power supports 88,000 jobs, while close to 209,000 U.S. workers are currently employed in solar—and that number is predicted to rise to 420,000 workers by 2020. As of October, coal employed fewer than 54,000, according to the Bureau of Labor Statistics.

Organics poised for record growth: As the fastest growing category in the food and beverage consumer sector, organics continue to set records. Jabusch and Deems believe 2017 will see expanded M&A activity in the category as food companies look to capture market share and growth. Deals like Danone’s $10.4 billion takeover bid for White Wave will become more commonplace with rising consumer demand for organics. Investors can catch this wave with companies like Hain Celestial Group Inc (HAIN), which produces organic food and personal care products; SunOpta (STKL ) which specializes in the sourcing, processing and packaging of natural and organic products from ‘field-to-table;’ and United Natural Foods, Inc. (UNFI), a leading distributor of natural and organic foods in the U.S. and Canada.

Global drive for Electric Vehicles: Deems and Jabusch expect Trump Administration policies may dampen electric vehicle prospects in the short term in the U.S. But globally, the EV market has taken off faster than a Model S. Mercedes plans to spend $11 billion to launch ten new electric models in the next decade, and “BMW will likely phase out internal combustion engines over the next ten years,” according to Baron Capital. Germany, Holland, Norway, India and other countries have passed or are considering bans on all internal combustion engines in the next decade, and the European Union says all new homes must have EV chargers in 2019.

As cities around the globe move to restrict the use of gasoline and diesel cars, Jabusch says investors should keep an eye on companies like FedEx, which is converting diesel vans to electric in urban areas because of greater efficiency and cost benefits.

UK Impact Investment Bank Launches Impact Measurement Tool

This post was originally produced for Forbes.

London-based ClearlySo is an investment banking firm that helps social enterprises raise capital from impact investors, those who seek a social impact along with a financial return. Last week, ClearlySo announced a new impact measurement service for private equity and venture capital funds.

Founder and CEO, Rodney Schwartz, is excited about the new product, which he says will make impact reporting easier. He says, “We launched our impact assessment tool, which, for the first time, specifically addresses the needs of PE/VC firms to measure and report on the impact of their privately held portfolio companies. It does so in a way that is portal-based, efficient, robust, easy-to-use, inexpensive and requires no lengthy questionnaires to be filled out by fund managers or investees.”

Rodney Schwartz, courtesy of ClearlySo

Rodney Schwartz, courtesy of ClearlySo

Mathew Holloway, the CEO of Q-Bot, a social enterprise client of ClearlySo, says, “Obviously ClearlySo has only recently launched ATLAS, but throughout our work with them over the last year, and more recently with ATLAS, they have created a structure by which we can more effectively and efficiency measure and communicate our impact. These tools have allowed us to set goals and targets for the future and track and report on their progress.”

Q-Bot’s ability to tell their impact story has made a big difference for them, including helping to drive top line growth, Holloway says. “This has added a huge amount of value by aligning the interests of different stakeholders, including employees, investors and customers, and creating a framework by which it can be clearly communicated. This has meant that Q-Bot has been able to have an even greater impact than expected and most importantly demonstrate it. Q-Bot works within the social housing sector where wider societal benefits form part of the procurement process and so has also greatly contributed to the growth of the company and winning of new orders.”

Luke Hakes, Investment Director at Octopus Ventures, has worked as an advisor to ClearlySo during the development of Atlas. He says, “Impact and its measurement is becoming increasingly important to both the VC and PE community and is increasingly high up on the agenda of LPs and indeed retail investors.”

The use for Atlas reaches beyond private equity and venture funds that focus on impact, Hakes notes. “Though we are not an impact investor per se, we are very aware that every investment we make has impact both socially and economically and it makes little sense for us to ignore this. Capturing and measuring the impact our portfolio companies have enables us to work with them to improve areas in which they may be weak and to raise awareness in areas where they are strong.”

Hakes also sees that market as the key to the success of Atlas. “To be successful, ClearlySo needs to help educate an industry which historically has been somewhat skeptical of the term ‘impact.’” He notes that mainstream investors view impact investors as sacrificing returns to do good. “They need to help VC and PE firms understand that by measuring the impact of their investments completed under their existing investment strategies and acting on the findings of that measurement, they have the opportunity to actually improve the performance of those assets and drive returns,” he adds.

Building the new platform has been no small task. Schwartz says, “This was the culmination of nearly 5 years of work, from concept development to implementation. ClearlySo built this tool with and for the PE/VC industry and with their needs and constraints foremost in our minds. The impressive and expert audience responded favorably and our first customer came forward, Octopus Ventures, a leading UK-based VC. Others seem set to follow.”

“When you launch something as a pioneer, something that has never before been attempted, and has been developed in a completely new way, you never know what the outcome will be–or even if the product will work,” he added.

That caveat notwithstanding, he says, “It seems to work extremely well and the market has responded in a very favorable way–exceeding our hopes and aspirations.”

Clearly so plans to market the product across Europe, where there is already growing interest, Schwartz says.

ClearlySo is, Schwartz says, Europe’s largest impact investment bank. He adds, “All of ClearlySo’s clients are great businesses, charities and funds doing something which changes the world for the better at the same time as building successful, valuable and profitable organizations.”

Holloway says, “ClearlySo helped Q-Bot raise a seed investment round in early 2016. During this process we found the team to be highly effective at connecting the company with relevant investors, managing this interest and balancing it with the needs of the business, and supporting the closing of the round.”

ClearlySo didn’t walk away at that point, he says. “Since then they continue to support us by shaping our strategy and offering towards future growth and fundraising needs.”

Schwartz, who got is start on Wall Street back in 1980 working as an analyst at PaineWebber, later started a venture fund focused on fintech before launching ClearlySo in 2008. Schwartz seems to be focusing on impact ahead of profitability, acknowledging that the company, which has 25 employees and targets £1.5 million in 2017 revenue, is not yet profitable. His goal is to drive a 30 percent gross margin.

Rodney Schwartz, courtesy of ClearlySo

Rodney Schwartz, courtesy of ClearlySo

He describes his focus and strategy on impact, “Every company we help is a high-impact enterprise. We enable them to change the world for the better by getting investors to back them and support their growth. We also help investors to understand the impact of all that they do.”

On Thursday, December 22, 2016 at noon Eastern, Schwartz will join me here for a live discussion about Atlas and the state of the impact investing industry at the end of 2016. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.

Never miss another interview! Join Devin here!

Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!

New Partnership Seeks To Fund Artists’ Businesses With Impact Investments

This post was originally produced for Forbes.

You can download an audio podcast here or subscribe via iTunes.

Upstart Co-Lab is a nonprofit that has partnered with the Calvert Foundation and Artspace Projects to facilitate impact investments that support artists.

Upstart Co-Lab is a startup itself, launching earlier this year. The Calvert Foundation is a leader in impact investing, making such investments accessible to ordinary investors–not just the wealthy. Artspace, also a nonprofit, develops live/work projects for artists around the country.

While not seeking to invest directly in works of art, the new partnership is intended to fund businesses that artists often own, being social entrepreneurs by nature.

Laura Callanan, Founding Partner of Upstart Co-Lab, says, art is a big part of the economy but not enough investment is being made there. “The creative economy is more than 4 percent of the US GDP. But JP Morgan and the GIIN report that art and culture are 0% of impact investing. There are currently no tools, funds or manager strategies enabling impact investors to align their capital with the creative sector.”

Laura Callanan, courtesy of Upstart Co-Lab

Laura Callanan, courtesy of Upstart Co-Lab

Callanan makes the case that artists are entrepreneurs who need access to the right kind of capital. “Artists are social entrepreneurs and innovators. They are starting B Corporations and other social purpose businesses. But they are not always recognized as the innovators they are. That means they don’t have easy access to patient and flexible impact capital to bring their ideas to scale. And it is challenging to build a sustainable creative life.”

Kelley Lindquist, President of Artspace, focuses on place. “The problem is that artists across America, and really across the world, consistently lack safe, affordable space in which to live and work. Artists are often low income and as the cost of housing increases, particularly in cities where artists live, they are increasingly priced out, leaving them with with two main unacceptable choices: to leave their homes and/or work space, often forcing the abandonment of their livelihood; or resort to living or working in spaces that are affordable but unsafe.”

These inadequate options can lead to tragedy, he adds. “We have recently–in Oakland–seen the dangers of this second path.”

Callanan explains what Upstart Co-Lab is now doing. “Upstart Co-Lab is looking to unleash more capital for creativity. We are exploring with strategic partners like Calvert Foundation, B Lab and Veris Wealth Partners how to adapt existing impact investment products, tools and approaches.” She see creativity as a drive of sustainability.

Lindquist says Artspace sometimes repurposes existing structures and other times builds from the ground up. “Artspace works with artists and communities to develop and operate buildings that are safe and appropriate for artists and their families. Our projects include both adaptive reuse and historic preservation of spaces such as former warehouses and schools, as well as new construction designed specifically for artists.”

Artspace, he says, is working to create multi-generational affordability. “Our solution is a long-term fix. Rather than moving artists from space to space, following the whims of gentrification, to provide permanent anchors that remain artist-centric and affordable over generations.”

Callanan says one of the biggest challenges she’s faced is bringing the naturally entrepreneurial artists together with the less entrepreneurial funders. “Cultural institutions, foundations making grants in the arts, and others who work in proximity to artists–but are not artists themselves–are often less entrepreneurial, less comfortable with harnessing the power of the markets, and lack basic investment literacy. There is effort required to build understanding and engagement among these likely allies. This requires time and patience. Their participation will help build the enabling infrastructure for artist-innovators.”

Lindquist notes that access to capital for funding their projects is one of their biggest challenges. Of course, that is the purpose for the partnership with Upstart Co-Lab.

Kelley Lindquist, courtesy of Artspace

Kelley Lindquist, courtesy of Artspace

He also notes that attitudes toward art have been a traditional challenge, but believes that is changing. “When we first started doing this work, it was a struggle to convince city leaders and others that artists are an asset to communities. That has shifted somewhat. One way of measuring that is that in the last year alone we received 170 calls from mayors, city department leaders, foundation staff and others asking for our help in stabilizing or growing their arts communities.”

Callanan says it is still early days for Upstart Co-Lab to see the potential limits of the work. “As our colleague Patricia Farrar-Rivas at Veris Wealth Partner has said, the conversation we have started about a creativity lens today is where the conversation about impact investing and climate change was 15 years ago.”

She adds, “We have set a three year schedule to implement five projects we think will prepare the system for a big shift. We are testing the potential and discovering the limits of our solution. The limitations of our approach will reveal themselves over the next few years.”

Artspace’s Lindquist notes with the benefit of more hindsight, that their work is primarily limited by their scale. “By some standards, we’ve created a lot of affordable space for artists and arts organizations, but the need is vast. In cities with high housing costs, such as New York, Seattle, Santa Cruz, and the D.C. metro area, we receive thousands more applications for live/work units than we can possibly provide.”

He notes that they are scaling up, but still can’t meet the need. “The process of developing a project can take anywhere from 3 to 5 years, and while we have grown from developing one project a year to now having a dozen in development at any one time, it still doesn’t meet the need nationally.”

Jack Meyercord, Head of Impact Investments at Bienville Capital, says the new partnership will have a positive impact. “Impact investing, at it’s core, is about generating a social return in addition to a financial return. Artists are innovators, social commentators and, in many cases, social entrepreneurs. Impact investing can unlock capital that allows artists to accelerate their creative endeavors, enhance the impact of their work and, in certain cases, create sustainable social ventures in the creative economy.”

Callanan remains optimistic about the impact of Upstart Co-Lab. “Upstart Co-Lab will chart its success through the new opportunities it opens for artist-innovators; the products, structures, and systems it puts in place to connect impact investors with the creative sector; and the engagement it fosters between social change makers and artists who share their goals.”

Lindquist, too, is upbeat about the future despite the challenges and limitations. “We know that the work we do has tremendous benefits to the individual artists and arts organizations for whom we provide affordable space. Artists are more productive and because some of the financial burdens are eased by the affordability, they are often able to devote more time and energy to their art and earn more of their income from that.”

On Thursday, December 15, 2016 at noon Eastern, Callanan and Lindquist will join me here for a live discussion about the partnership and impact investing within the artist community. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.

Never miss another interview! Join Devin here!

Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!

Prudential Working To Double Impact Investing Portfolio Focuses On Newark

This post was originally produced for Forbes.

You can download an audio podcast here or subscribe via iTunes.


In the Spring of 2014, Prudential Financial, Inc., announced a commitment in double its impact investment portfolio from about $500 million to $1 billion by 2020. Half way through that period, the financial giant reports it is making progress, with much of the investment going to redevelopment efforts in Newark.

Prudential was founded 140 years ago in Newark, New Jersey and remains there today. Lata Reddy, Vice President of Corporate Social Responsibility, says that the decision to stay in Newark was not simply “inertia.” She says, the company has repeatedly decided to stay in the community and to invest in it as part of its social mission.

Prudential reports investing more than $400 million in Newark’s civic infrastructure, to help create new jobs and attract more consumers. Projects include:

  • The redevelopment of the historic Hahne & Co. building into a mixed-use development featuring street-level retail, which will include a Whole Foods Market, mixed-income apartments, and space for Rutgers University.
  • The revitalization of Military Park into an epicenter of Newark city life, complete with a café and a spacious lawn where community activities such as fitness classes, concerts and movie screenings now take place.
  • The development of free ultra-high speed Wi-Fi in Newark’s downtown district accessible to anyone. The WiFi is 200 times faster than public WiFi networks available in other cities including New York.
  • The renovation of the former National State Bank building into Hotel Indigo, one of the first new hotels built in Newark in 40 years.
  • The conversion of a former warehouse into AeroFarms, a next-generation urban farming hub. AeroFarms will help bring a new, sustainable industry to the city, create jobs, revive deteriorating neighborhoods, and produce healthy food for residents.

Jonathan Cortell, Vice President of Development for L+M Development Partners, says, “Lata and her team have been invaluable partners in our joint effort to restore the long vacant Hahne & Co. flagship building in downtown Newark. Our initial collaboration was to finance the property’s acquisition and it has steadily grown from there.  Vacant for nearly three decades, the acquisition was not the easiest transaction and I can’t imagine any other lender successfully pulling it off as Prudential did.”

Lata Reddy, courtesy of Prudential

Lata Reddy, courtesy of Prudential

Reddy, who rejoined Prudential in 2012 in her current position after a three-year stint as an independent consultant, sees Prudential playing a key role in addressing fundamental problems in Newark, which exist to a greater or lesser degree around the world. She worries that “too many people are excluded from the real economy.” She notes that some communities like Newark are “experiencing concentrated poverty.” This impacts women, veterans and people of color disproportionately.

Communities lose out when the upwardly mobile move out of the community, leaving the less fortunate to fend for the themselves. This impacts the city government, she notes, reducing the tax base and impairing the talent pool that government can draw from for leadership. Ultimately, however, Reddy says that Prudential sees these problems as opportunities for the firm to make a difference and a profit.

Reddy says, “Our goal is to create a thriving, walkable, 24/7 community.” She points out that Prudential is the largest company based in Newark, “the only Fortune 50 company headquartered here.”

Cortell agrees, complimenting Prudential’s work in the community. “Lata’s group consistently demonstrates flexibility and creativity well beyond what you typically see from lenders. Lata and her group encouraged us to raise the bar and actively engaged local institutions, like Rutgers University, that are helping to make Hahne’s a real resource for the City of Newark.”

Daryl Carter, Founder, Chairman and CEO of Avanath Capital Management, which has raised three funds to invest in affordable housing, says that Prudential invested in all three funds and provided debt financing on some of the projects as well.

Carter says, “Because of Prudential’s initial and ongoing investment in our funds, we have successfully acquired, renovated, and preserved over 41 affordable housing communities totaling more than 7,000 units throughout the United States.”

He explains the vital role affordable housing plays in building healthy communities. “For example,” he says, “providing resident services such as after-school programs for kids keeps them engaged and makes communities safer, and creating quality living environments that are also affordable contributes to the overall stability of a neighborhood. Prudential supports our vision and holistic approach in providing quality housing to a segment of the market that is often ignored by other investors.”

Reddy acknowledges that there are challenges. “Even with our resources, you can’t do it alone.” She says, attracting additional capital to support redevelopment has been a challenge. For some projects, the “capital stacks” are complicated.

There hasn’t, however, been a problem with finding good projects to fund. The scale of the problem–opportunity as she sees it–is massive, providing plenty of shovel ready project just waiting for capital.

She acknowledges that not all of the community’s problems can be solved by investments. Prudential also deploys some philanthropic capital to support job training and other programs in Newark.

Furthermore, the money presently allocated to philanthropy and impact investment is too small to solve the problems they hope to address. In order to actually solve the world’s biggest problems, “we need more capital,” she says. Traditional capital markets will have to be deployed with an eye toward impact to solve these problems.

In this regard, Prudential itself is a symbol of this problem. While building a $1 billion portfolio of impact investments by 2020 is a huge step forward, the firm has $1 trillion in total assets. The firm’s allocation of capital to impact is just 1/1000th of its total.

Reddy says that the bespoke nature of impact investing is part of the problem for achieving scale. She expressed hope that standardizing impact investment structures will make the market more efficient and attract more main stream capital.

The impact of the projects, however, is already being felt in Newark, she says. More people and companies are coming to live, work and do business in Newark. More amenities are being created. Prudential has catalyzed more capital by leading the way.

Reddy sees this work as being central to the firm’s commitment to the community and social impact. The firm was founded, she says, on the principle of helping people “achieve financial prosperity and the peace of mind at comes with it.” Impact investing is a contemporary way of continuing that legacy, she says.

On Thursday, December 15, 2016 at 11:00 Eastern, Reddy will join me here for a live discussion about Prudential’s investments in Newark and elsewhere on it way to building a $1 billion impact investment portfolio, Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.

Never miss another interview! Join Devin here!

Devin is a journalist, author and corporate social responsibility speaker who calls himself a champion of social good. With a goal to help solve some of the world’s biggest problems by 2045, he focuses on telling the stories of those who are leading the way! Learn more at DevinThorpe.com!

Never miss another interview! Join Devin here!
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