First off, a big thank you to our panelists for coming! Elizabeth Glenshaw and Shuaib Siddiqui for sharing your insight and experience in the field. And a huge thanks to Professor Vogel for moderating the panel.
The discussion kicked off with an overview of the investing continuum. Professor Vogel discussed the segmentation of philanthropic investing – ranging from grants and program related investing to impact investing and diversified market rate investing. So what is impact investing? As described by our panelists, it’s social and environmental change through moderate finance return with measurable social impact. But we learned within impact investing itself, there’s a broad range of definitions. For example, the New Hampshire Charitable Foundation works to improve the standard of living in New Hampshire and is considered underneath the impact investing umbrella. At the same time, you can consider investing in GE stock – a firm that promotes clean tech and environmental sustainability as a level of impact investing as well.
Our panelist, Elizabeth Glenshaw, is involved with Clean Yield Asset Management, a firm that allows clients to dictate socially responsible investing. Her belief is that “social responsible investing is about reasoned returns.” Elizabeth discussed one of her client’s desires to double their assets in impact investments form 5% to 10% in the next year. The current portfolio consists of Vermont smoke and cure, organic valley farming cooperatives, Vermont natural coatings, etc. These investments might not be the most profitable, and in fact, might generate negative returns, but there’s no doubt that the firms themselves are making a social impact.
Shuaib Siddiqui, joining us from the Acumen Fund, is focused on non-profit social venture capital investments which provide critical goods and services to growing and impoverished economies. In recent years, they have focused on health, housing, renewable energy, and education efforts. The fund itself holds an expectation of getting 1 x return on their portfolio investments. As described by Shuaib, it’s “patient capital” – eventually, you will earn back your invested capital but this takes a back seat to social impact and innovation of the investments themselves. As an example, Shuaib described one of its recent projects in India – investing in a company that is able to take the “wasted” rice husks and generate energy. Acumen is one of the first base of capital for these entrepreneurial endeavors. This project has grown from 1 to 50 plants over the past few years, but the financial return is minimal compared to the social impact. But that raises the question - how do you measure the impact?
One of the key challenges facing this sector is its ability to quantify social impact. How do the clients know that your investment is benefiting others and on what scale? And how should you reward fund managers in this sector? It’s a strong believe that fund managers should be rewarded based on the overall social impact on their portfolio of investments. But the sector itself is still struggling on how to monetize social value. For example, Acumen Fund invests in a company that creates solar lanterns to replace kerosene in sub Saharan Africa. Can you measure social value from the savings from 3-5 year period that the households save on replacing kerosene with solar lanterns? Or, can you measure the decrease in air pollutants in homes and how the labor market is becoming more productive with reduced pollutants? What are the metrics to measure financial value?
Also, how do you ensure that companies you invest in will stay true to the social impact that they were originally founded on? For Clean Yield Asset Management, there are periodic audits on the company as the company holds them. For Acumen, they mitigate this risk by evaluation the values of the entrepreneurs and making sure they are aligned with Acumen funds shared values.
Great discussion and dialogue in this panel! After today’s panel, we hope many of you will consider a career in impact investing!
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