Social Impact Investing

I have been spending a lot of time reading about and thinking about social impact. Social impact is defined as the effect of an activity on the social fabric of the community and well being of the individuals and families. Given my asset management background, I am particularly intrigued by social impact investing and this growing and evolving investment opportunity.

I came across a report from Hope Consulting called Money For Good. The report identifies the US market opportunity for impact investments and charitable gifts for individuals. The report also looks at what for- and nonprofit organizations can do to tap into the market.

One of the Money For Good Project's main goals was to create a voice for donors. In their words, "The goal of this project was to understand US consumer preferences, behaviors, and demand for impact investment products and charitable giving opportunities (together, these make up the “money for good” market), and then to generate ideas for how for- and nonprofit organizations can use this information to drive more dollars to organizations generating social good."

The 100-page report is a good read, but I have summarized the findings and recommendations for institutions targeting these donors/investors interested in social impact investing.

Key Findings:
- Most individuals are open to impact investing, but need to know more.
- There is $120B of market opportunity, half of which is for smaller (<$25k) investments; even the wealthy want small investments.
- The opportunity is greater when positioned as investments, not alternatives to charity.
- Once people get involved, their willingness to invest increases (ramp in effect)
- People discover & transact through their advisor.
- The key barriers investors see relate to the immaturity of the market, not the social or financial qualities of the investment opportunities.
- Overall, downside risk is more important than upside financial returns.

Recommendations for Institutions:
- Segment on behaviors, not demographics.
- Tag and track your donors by segment.
- Determine what segments are best for your organization, given your strengths.
- Develop consistent outbound marketing that appeals to target segments.
- Prioritize investments based on what will drive donor behavior.
- Capture donors early.
- Understand how to manage different segments when approached.

This is an immature market. Like so many different approaches to investing and gifting, an inexperienced donor can struggle with figuring out where to start and how to go about finding the right opportunity. From my readings and conversations the tough part is getting the right level of information into the hands of these donors/invesors and then cultivating the decision process in such a way that gives comfort and satisfaction.

Managing Relationships with Advisors

I listened in on a conference call hosted by The National Center for Family Philanthropy on Thursday, July 8th. The topic of discussion was Managing Relationships with Your Legal, Financial, and Investment Advisors. The presenters were Patricia Angus, a New York-based philanthropy and family governance consultant and Dawn Dobras, a trustee of the Stocker Foundation.

Three most important take aways:

1. Do your part! The families, foundations and staff are actively engaged in the process of selecting advisors.
2. Use a systematic process through every stage. The process should be independent and non-subjective. You’ll know what you are getting out of the advisors you hire and you’ll know when its time to change your advisor.
3. Learn and grow! Take away something from every experience going through the process of selecting and working with advisors.

Support For Donor Education

Rockefeller Philanthropy Advisors just announced a new grant received from The Bill and Melinda Gates Foundation to develop tools and share best practices with emerging donors. The grant is a one-time gift of $3.7 million. The initiative is leveraging the high interest in effective philanthropy.

They are looking to create a new culture of "great giving" by providing knowledge and resources to allow families to create their own roadmaps for their philanthropy.

Over the next three years they aim to develop more than two dozen guides on issues such as giving motivations, approaches, vehicles, family roles, operations and impact assessment. The guides will be available free of charge via the Rockefeller Philanthropy Advisors website. They will also embark on a program to ensure advisors to the wealthy have access to these guides to share with clients.

I believe that the role of the philanthropic advisor is critical because the idea of putting some thought and infrastructure to your gifting could be seen as daunting. This is really wonderful for everyone involved in the space. The end goal seems to be along the lines of - share stories and knowledge to create an even bigger source of funding. It helps to change the mindset a bit from set aside an amount for charity upon your death versus live it, experience it and manage it the way you want to.

More About The Giving Pledge

Eli and Edythe Broad, John and Ann Doerr, H.F. (Gerry) and Marguerite Lenfest and John and Tashia Morgridge have joined Bill and Melinda Gates and Warren Buffet in The Giving Pledge.

Charlie Rose interviewed the Gateses and Buffet. Its an excellent discussion and explanation of The Giving Pledge. If you have 55 minutes to spare I recommend watching it with your partner or spouse. The discussion makes you think about your own ideas about philanthropy - no matter how big or small.

Its interesting to hear some of their guiding thoughts. With $600 billion in potential pledged assets (according to Fortune), there is a lot at stake to do it right. This idea that you "do what your reference set does" is intriguing. It would be fantastic to bring the learnings and ideas of this reference set to those who have also amassed wealth and have committed a portion to their charitable interests. Success of The Giving Pledge, as defined by Melinda Gates, is having people plan for their philanthropy earlier in their lives. It would be interesting to explore how philanthropic advisors could tap into the work of these committed individuals and share the experiences, learnings and outcomes with the individuals and families with whom they work. Using the train the trainer model, a network of philanthropic advisers could be unleashed to share the wealth (of knowledge)!