How Does Impact Investing Work? Insights from Darden’s Impact Investing Conference

by   |  March 23, 2016

Impact Investing Forum IIFive young panelists shared insights at the Darden Impact Investing Forum in what students called a “spirit of Millennial altruism”. These business women and men collectively shared two decades of experience in the new and rapidly-growing field of impact investing.

As Millennials create their own wealth, will they continue to invest in traditional methods as their parents did? Or will they fulfill what some deem their destiny to push impact investing forward into truly changing the world?

Below are my favorite (paraphrased) quotes from the conference that was hosted by Darden Impact Ventures with support from the Net Impact at Darden Club, Batten Institute, Darden Richard A. Mayo Center for Asset Management and Darden Institute for Business in Society.

Ross Baird, Village Capital

Impact investing is not making the lives of well-educated people slightly better. Be clear in defining what impact investing is for you and how it makes a difference.

For us we’re very interested in businesses that close the gap between rich and poor, and those that have an environmentally sustainable angle.

Less than 5% of funds go to women CEOs. Less than 3% goes to people of color. The people at the table making the decisions isn’t representative of the rest of the world. If we bring lower-income people to the table we will get better solutions.

Ben Cullop, Manchester Capital

Your expectation should either be to get above market returns or below market returns plus something else. (That “something else” can take the form of carbon reduction, other environmental improvements, infrastructure, job creation, and other things you care about.)

We have found success investing in smaller indices, thought it’s a challenge. If you want to do the same, track the people who are doing that really well. You can impact investors that want to make a difference but don’t have a really good way of doing it.

My job on this panel is to be a realist for you and say that this stuff is pretty complicated. Mission related investing is hard. It’s okay that it’s messy and the industry is still figuring it out right now.

Liz Doerr, New Richmond Ventures  

A typical investment at NRV ranges from $500 thousand to $2 million. Our investment demographic is 60+ wealthy white male. Sentiments of this demographic aren’t always aligned toward driving the impact investment movement.
Investing in Virginia has its advantages. Companies are tremendously undervalued in this region as compared to Silicon Valley, so there are very strategic reasons for which we are investing in our community.

Alla Jezmir, CCM Energy

CCM Energy focuses on three main investment classes:

1) Commercial Real Estate
2) Pre-made building parts that are energy efficient
3) Energy and resource efficiency

My most important considerations are product fit, market fit, and timing.

$70 billion is going to shift into younger hands over the next generation. From this we will continue to see growth in the impact investing arena.

Kristine Leary, Cambridge Associates

For us there is no trade off when you’re considering investments in this space. We look for impact investments that generate market-rate returns. We created a class of investments that measures only its financial returns, independent of its other impact metrics.

We’re also developing a class of sustainable real assets, so look for that one later in the year.

In terms of challenges for companies: it’s a struggle for them to know how to measure their positive impact. Some metrics lend themselves well to certain types of investments but not well to others. It’s not a one-size fits-all kind of deal.

Looking to the Future: It’s You.

Where can a person even start? If you’re working in impact investing or you want to break in, what are the best ways to break in and succeed? The panelists offer a few parting words of wisdom:

• See both sides of every issue
• Listen to your clients with an open mind
• Develop some skill you can bring to add value in your organization
• Understand the motivations of your stakeholders

Entrepreneurs and investors alike are jumping on the impact investing vehicle at increasing rate. It will be interesting to see whether Millennials take to creative market-based solutions to solve important social and environmental problems to the same degree that many experts speculate. In any case, educating oneself regarding how to invest in impact-related asset classes could be the key to creating real value and lasting change in the world.

More on: Business, Career Paths, Changing the World
About the Author:

Mimi West is a consummate entrepreneur, brand and marketing expert. This retired opera singer and Founder of My Dream Teacher is now pursuing her MBA at the University of Virginia Darden School of Business Administration. You can follower her on Twitter: @MimiGuynnWest.
Publshed: March 23, 2016  | 
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