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Devin D. Thorpe
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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.

FB Heron Foundation Leads Foundations Toward 100 Percent Impact Investment

This post was originally produced for Forbes.

When people hear about impact investing, a light goes on. People immediately begin to see the potential. Once they do, they often assume that foundations must be doing the bulk of impact investing. In fact, relatively few are actively doing it.

The FB Heron Foundation has made a bold, public commitment to move 100 percent of its assets to impact investments by the end of 2017.

In her President’s letter issued last month, Clara Miller wrote, “In 2014, we continued to push forward on our core operating principle that “all investing is impact investing,” meaning that we believe that all investments (spanning the range of debt, equity, cooperative shares, warrants, and hybrid instruments) have social as well as financial repercussions. These social and financial repercussions can be positive or negative and vary over time. Bidden or not, intentional or unintentional, all of the enterprises that we invest in have impact that goes well beyond a financial return to an individual investor.”

On Thursday, July 2, 2015 at 2:00 Eastern, Miller will join me for a live discussion about the Foundation’s remarkable commitment to deploy its investment capital 100 percent toward its mission. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.

More about the FB Heron Foundation:

Twitter: @HeronFdn

The mission of the FB Heron Foundation is to help people & communities help themselves prosper, especially those that are economically disadvantaged. Heron is looking for ways to help rebalance the economy so that it ensures opportunity for all, which is a critical responsibility not only of philanthropy and government, but of business and investors. Heron invests in enterprises as if people matter.

Heron is uniquely investing all its assets for mission. Its funding is tax-status agnostic (for-profits and nonprofits) and utilizes all forms of capital.

clara_miller-1940x1940

Clara Miller, President, FB Heron Foundation

Miller’s bio:

Twitter: @ClaraGMiller

Prior to assuming the FB Heron Foundation’s presidency in 2011, Miller was President and CEO of Nonprofit Finance Fund which she founded and ran from 1984 to 2011. NFF serves as a “philanthropic bank” for both social sector organizations and their funders, and has invested and managed more than $1.5 billion in financing for social sector organizations.

In addition to serving on The F. B. Heron Foundation’s board, Miller is on the boards of Family Independence Initiative, the Sustainability Accounting Standards Board, StoneCastle Financial Corp., and The Robert Sterling Clark Foundation. She is a member of the Social Investment Committee of the Kresge Foundation and the U.S. National Advisory Board to the G8 Social Impact Investment Task Force. In 2010 Miller became a member of the first Nonprofit Advisory Committee of the Financial Accounting Standards Board.

Miller was the inaugural laureate of the Prince’s Prize for Innovative Philanthropy awarded in 2014 by the Prince Albert II of Monaco Foundation and the Tocqueville Foundation-Institute of France. She was named to The NonProfit Times “Power and Influence Top 50” for the five years from 2006 through 2010 and received a Bellagio Residency in 2010 by The Rockefeller Foundation.

In 1996, Miller was appointed by President Clinton to the U.S. Treasury’s first Community Development Advisory Board for the then-newly-created Community Development Financial Institutions Fund. She later served as its Chair. She was a member of the Community Advisory Committee of the Federal Reserve Bank of New York for eight years, and she received the “Shining Star Award” in 2014 from New York City performance space PS122.

Impact Investing Goes Mainstream; Is It Time You Thought About It?

This post was originally produced for Forbes.

Recently, I had the opportunity to moderate a panel discussion on impact investing going mainstream at the Los Angeles Sustainatopia conference. The panelists were all new to me; their insights really got me thinking. I’ve followed up with them in an effort to organize their collective thoughts.

Jonathan Storper, a partner at Hanson Bridgett who founded the firm’s sustainable law practice, effectively highlights the changing perception of impact investing, “Traditionally, impact investing was thought of as low profit or even nonprofit work. Increasingly, there has been the realization that there does not need to be any tradeoff between profit and purpose if the business has the right idea and is run in a disciplined manner.”

Paul Herman, inventor of the “HIP = Human Impact + Profit” ratings system and author of The HIP Investor: Make Bigger Profits by Building a Better World, agree, “ Investing to build a better world can be financially attractive. Sustainable products are growing revenue at higher-than-average growth rates.”

Garvin Jabush, cofounder and chief investment officer of Green Alpha Advisors, notes that the latest generation is helping to drive this shift, “There’s a general idea that I think people, particularly millennials, are now getting: the economy of the 19th and 20th centuries got us a long way, but from here, looking forward, it’s clear that this legacy economy is fraught with systemic risks, not the least of which are the worst effects of climate change and global resource scarcity.”

Seth Streeter, cofounder and CEO of Mission Wealth, explains the shift to impact investing, “ I believe the rapid rise of impact investing is a reflection of today’s society having an appetite to do ‘good’ per one’s own values.”

Storper points out that recent transactions are proving the validity of investing in social enterprises. He highlights the recent ETSY initial public offering, the sale of Method to Ecover and Plum’s sale to Campbell Soup.

Jonathan Storper

Jonathan Storper

One of the consistent themes developed as we discussed the latest thinking in impact investing is that divesting fossil fuels, for instance, is a prudent financial decision, regardless of your views on the environment or climate change.

“By choosing fund managers who select holdings for their funds (whether branded socially responsible or not), investors can benefit with potentially higher returns, lower risk, or both. Going fossil-free in your portfolio can accomplish this – including for university endowments and pensions — as oil, gas and coal have all dramatically lagged the general market over nearly 3 years,” Herman said.

Jabush notes that some have argued that advisors have a fiduciary responsibility to keep fossil fuels in client portfolios for the sake of diversification. “Nowhere in any fiduciary standard does a phrase like ‘must hold securities of fossil fuels’ come into play.”

“Obviously a part of being a prudent fiduciary is also about managing risk. Fossil fuels have significant embedded risk –beyond denuding our planet of scarce resources. Companies in the sector are debt laden and beholden to government subsidies and to supra national and national oligopolies to set prices and manage supply,” Jabush continued.

“The traditional assumption that divesting from fossil fuels will involve less than competitive returns has now been completely discredited,” he concluded.

Herman points out that risk reduction doesn’t relate only to fossil fuel divestitures, “Wind energy requires no fuel, and avoids volatility of oil and gas prices. Engaging employees encourages high retention, low turnover and thus higher productivity. And being innovative rather than extractive avoids legal lawsuits and penalties. All of these contribute to positive cash flow, profit and shareholder value at lower risk.”

Paul Herman

Paul Herman

Jabush agrees, “Now that there are 7.3 billion of us, our economic activities, for the first time in human history, are having existentially threatening effects. So, to prevent our own self-caused biggest threats coming home to roost, it’s time, or even past time, to change the way the economy works. So, folks are understanding that a way to do that is to change where capital is deployed. As long as we remain invested in the fossil-fuels based legacy economy, we’re going to get increasingly strong storms, acidic, rising seas, diminishing biodiversity, and all manner of risks from an increasingly warm planet. Impact can provide an alternative to investing in that future.”

The regulatory environment is shifting to allow for and even encourage social enterprise, Storper notes. “30 states and the district of Columbia have enacted for profit benefit corporation statutes allowing companies to combine profit plus purpose into the DNA of the corporate structure in a more meaningful and enforceable manner. Benefit corporations require purpose, accountability and transparency in addition to creating shareholder value.”

Furthermore, as the impact community becomes more sophisticated, impact measurement tools are beginning to allow social enterprises and investors to gauge their impact objectively. Storper said, “The “b corp” rating system helps measure what matters. In addition, groups like SASB (the sustainable accounting standards board) are developing industry by industry methods to take into account nonfinancial metrics.”

In addition to impact measurement, Streeter believes that we need to take a more holistic approach to defining wealth:

I have identified eight categories for wealth outside the financial definition. They include: physical health, emotional well-being, career satisfaction, thriving relationships, ample fun, social or environmental impact, spiritual connection and intellectual stimulation. Everyone has their own weighting scale as to which of these categories matters the most, because in the end, abundance is in the eye of the beholder. But by the traditional definition of wealth, a man who can’t climb two flights of stairs without being winded and who goes home emotionally distant from his wife and kids, yet has a huge balance sheet, would be considered wealthy.

Streeter also encourages other wealth advisors to focus on impact in their practices for practical and professional reasons beyond sustainability. “With mainstream investment management becoming more commoditized by the growth of higher tech, lower cost ‘robo-advisor’ platforms, conscious planning and investing is a differentiator in the marketplace, especially for the huge Millennial demographic who gravitate to more purpose-led initiatives.”

“Advisors will find more purpose and meaning in their own career and thus enjoy a ‘reboot’ to loving what they do on a daily basis even more than they did before,” he concludes.

The panel discussion was surprisingly upbeat, reflecting the optimism of the panelists that impact investing presents a key part of the solution to major world problems, including climate change. Jabush’s comments are representative of the mood of the panel:

In the next few years, trillions of dollars will be invested in efficient, innovation-driven tech, in solutions to the systemic risks with the power to disrupt the global economy, and in other mitigations and adaptations to the worst outcomes of climate change. This ‘great transition’ towards a global economy that can thrive side-by-side with its ecological underpinnings is now clearly underway. I believe that investing in solutions to our most dangerous risks is the clearest path to a sustainable economy, and also to competitive returns.”

Ben Hecht: ‘Inequality Of Income Presents A Threat To Our Society, Our Economy And Our Democracy’

This post was originally produced for Forbes.

Ben Hecht, CEO of Living Cities, is an impact investor whose passion makes him more of a crusader than a financier. (Disclosure: a former client has an application for a loan pending with Living Cities.)

Consider his statement to me, “Unless we ferociously change course, the majority of our citizens in 2040 will be less educated, less prosperous, and less free than our current majority, due to decades of dysfunctional systems, disinvestment, mass incarceration, and disenfranchisement of people and communities of color.”

Advocating a wholistic, collective approach to addressing urban problems, Hecht says, “A new type of urban practice aimed at dramatically improving the economic well-being of low-income people faster will require all players – individuals, business, philanthropy, government, nonprofits, and academia – to focus on their part of the solution and build permanent capacity that can insure we get increasingly better results over time.”

Hecht is calling for an radical acceleration to problem solving, “For too long we have been satisfied with incremental change for society’s most pressing issues, but it is time to look at the denominator and face how much progress still has to be made for these problems to be eradicated.”

“There is increasingly a growing awareness that inequality of income, wealth and access to opportunity, accentuated along racial lines, is one of the key social issues of our time.If left unresolved it presents a serious threat to our society, our economy and our democracy,” Hecht notes.

Living Cities is striving to play a central role in accelerating change. Hecht said, “Living Cities is on a course to do more than just imagining what’s possible. We want to work with a coalition of the willing to make the possibilities reality. In May, we took the conversation offline, convening over 100 folks in our networks—from our member institutions, to grantees, to our staff, to our social media followers, to a diversity of other thought leaders, dreamers and doers in such diverse fields as civic tech, impact investing, philanthropy, business, the financial sector, social entrepreneurship, government, and philanthropy—to participate in an active process of co-design.”

Two key opportunities were identified at the summit.

“One challenge we discussed at the summit was the need to create urgency without catastrophes, such as the bankruptcy in Detroit or Hurricane Katrina in New Orleans, to achieve systemic instead of episodic change,” Hecht said.

“Another was that public sector leadership, resources, and talent can and must be fostered, unlocked, and optimized in order to achieve dramatically better results for low income people. Along similar lines, it was clear that there is a need for an investment in talent across the social sector generally,” Hecht concluded.

On Friday, June 5, 2015 at noon Eastern, Hecht will join me for a live discussion about the programs that Living Cities is undertaking to make a difference in America’s inner cities. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.

More about Living Cities:

Living Cities harnesses the collective power of 22 of the world’s largest foundations and financial institutions to develop and scale new approaches for creating opportunities for low-income people and improving the cities where they live. Its investments, research, networks, and convenings catalyze fresh thinking and combine support for innovative, local approaches with real-time sharing of learning to accelerate adoption in more places.

Hecht’s bio:

Mr. Hecht was appointed President & CEO of Living Cities in July, 2007. Since that time, the organization has adopted a broad, integrative agenda that harnesses the collective knowledge of its 22 member foundations and financial institutions to benefit low income people and the cities where they live. Living Cities deploys a unique blend of more than $140 million in grants, loans and influence to re-engineer obsolete public systems and connect low-income people and underinvested places to opportunity.

Prior to joining Living Cities, Mr. Hecht co-founded One Economy Corporation, a non-profit organization focused on connecting low-income people to the economic mainstream through innovative, online content and increased broadband access. Immediately before One Economy, Mr. Hecht was Senior Vice President at the Enterprise Foundation.

Mr. Hecht received his JD from Georgetown University Law Center and his CPA from the State of Maryland. For 10 years, he taught at Georgetown University Law Center and built the premier housing and community development clinical program in the country. Ben is currently Chairman of EveryoneOn, a national initiative founded by the Federal Communications Commission to connect low-income Americans to digital opportunity. He also sits on the National Advisory Board for StriveTogether and Duke University’s Center for Advancement of Social Entrepreneurship (CASE) Advisory Council.

Billionaire Offers Tips; Some Will Surprise You

This post was originally produced for Forbes.

Ranked #369 on the Forbes list of billionaires, Shari Arison is passionate about doing good business–and she means good.

Her bestselling book Activate Your Goodness shared her take on the impact of doing good on people. Her new book, The Doing Good Model, provides a thoughtful look at 13 values that are intended to help business leaders rethink their impact on individuals, their communities and the globe.

One of the most intriguing values that Arison puts forward in her book is “purity.” She explains it in the book, “Think of the many types of behavior that can affect you as a human being as well. For example, you might ask yourself, what am I putting in my body–is this good for me or not? What am I listening to? Is it something that is uplifting like music, or is it gossip that is unkind?”

Her thoughts on volunteering sound conventional to nonprofit leaders, I suspect, but may strike business leaders as a flash of insight. She says in the book, “The most motivated volunteers are the ones with passion for the cause.”

She goes on to share an anecdote to make an important point.

A funny thing happened to me right after I was talking to my editor on the phone going through this chapter on volunteering. I was called away and needed to rush out to a meeting outside my office. I went to another office building, and when I came out of my meeting, in the elevator on the way down, there was a husband and wife talking. The woman said to her husband, “Isn’t it amazing tha the doctor goes to Africa every six months and volunteers his time to perform surgery?” She went on to say, “Do you know he’s an eye doctor?” I smiled to myself as I was walking out of the elvator, thinking abou what a coincidence it was that I was just writing about volunteering. So you see, as I said, one can volunteer basically anywhere in the world, according to one’s talents, passions and time.

On Thursday, May 21, 2015 at noon Eastern, Arison will join me for a live discussion about The Doing Good Model. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.

More about Arison Group:

Arison Investments, the Arison Group’s business arm, houses companies that provide responses for the basic human needs of large populations, while yielding high financial returns. Shari Arison directs her businesses to maintain a diversified portfolio of ventures that have moral responsibility at their core. Arison Investments business companies include Bank Hapoalim, Shikun & Bunui, Miya and Salt of the Earth.

Shari Arison

Arison’s bio:

Shari Arison is an American-Israeli businesswoman and philanthropist, owner of the Arison Group that operates in more than 40 countries across five continents to realize the vision of Doing Good. Its business arm, Arison Investments, operates in the fields of finance (Bank Hapoalim), infrastructure, real estate, and renewable energy (Shikun & Binui), salt (Salt of the Earth), and water (Miya). Its philanthropic arm, The Ted Arison Family Foundation, houses the organizations Essence of Life, Goodnet, All One, and Ruach Tova that operates Shari’s global initiative Good Deeds Day. She is repeatedly ranked by Forbes as one of the most powerful women in the world, and as one of the world’s greenest billionaires. In 2013, Shari was named Honorary Doctor of Humane Letters by George Mason University.

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