RECAP: 2018 FOX Autumn Global Investment Forum
 | Presenter: Session Description: Many family members and family offices are attracted to the idea of aligning their values with their investing. Yet many are confused or frustrated by the lack of straightforward methods and metrics to define an “impact investment,” particularly how to contrast these to more traditional investments. This session discussed the significant evolution of analytics to determine whether investment returns on an “impact” investment are concessionary, and also new metrics to help quantify the social or environmental contribution of an investment. |
- Michele Demers
Nomenclature is probably the biggest challenge with impact investing. Many people are confused and that causes them to avoid the topic altogether. Most consider “value-aligned investing” as a spectrum. In its most mild form, you can opt to remove companies whose practices do not align with your values (SRI/ESG, socially responsible investing/environmental social governance), you can intentionally seek companies whose practices and behaviors align with your values (sustainable investing), or you can deliberately invest in companies whose products/solutions are tied to your values (impact investing).
Impact investing intentionally seeks social/environmental AND financial returns. It is a very deliberate use of capital and must achieve both types of return for it to be a ”success.” Impact investing has a social promise of harnessing the potential of entrepreneurship and market-based solutions to promote scalable solutions to some of the world’s most pressing needs. A clear measurement of outcomes is a cornerstone of impact investing.
You do not have to give up financial return to invest according to your values. Some investments naturally produce higher returns than others (i.e. – private equity vs. investment grade fixed income) and some investments have different purposes (riskier seed funding for new social initiative vs. growth capital for established and expanding organization). According to the GIIN 2018 Impact Investor Survey, 91% of investors reported financial returns in impact investments that met or exceeded their expectations.
Value-aligned investing is not one-size-fits-all. It spans the entire capital spectrum, return spectrum, and value spectrum. It can be a carve-out in your portfolio or you can align 100% of your assets with your values. It can be in your personal investment portfolio or your foundation.
The session covered quantitative metrics to determine “impact.” Existing tools rely on self-reported, subjective data and there are few frameworks that create a complete picture of how impact and profit align. A rigorous, data-driven methodology of defining and measuring impact can help investors track and manage outcomes relative to their goals, and make better financial decisions. Several data-driven methodologies were presented and continue to be developed.
Download the Session Presentation >
(FOX Members only)
Related Content:
Is "Impact Investing" the New Norm?
Blog post by Paulina Cromwell, Family Office Exchange