I’ve been stalking the impact investing space closely for the last few years and it seems that across research papers, from the recently released Acumen Fund–Monitor Group: Case for Philanthropy in Impact Investing (which is a great read!) to goals of foundation tackling impact investing – a systemic issue that resurfaces is the lack of infrastructure to help people identify and function as a part of the impact industry. A recent conversation with a friend on movement creation sparked this idea on figuring out how to build this infrastructure. It also reminded me of a old twitter exchange I had with Steve Wright (Grameen Foundation) and Kevin Jones (SOCAP) on the value of marketing and storytelling in the social context. A snippet of our conversation is below:
I believe that marketing/value-positioning is an undervalued practice in the impact investing space. However, if we’re looking to expand the space beyond those who care about the impact value of capital, we have a to start looking at creating a movement of impact investing – a sustainable and scalable platform. We have to look closely on how we can create pull-factors needed for a successful impact movement. Now, I am not as naive to think that the world of philanthropy and for-profit investing should cease to exist. What I am suggesting is that the movement’s aim is to help the general public and those in the investing world to have a third way to think about capital: a blended value of capital and impact.
So, this is my attempt to build this movement’s basic framework and my vision of what core elements of an impact investing movement would contain and look like.
Defining the Movement’s Core
Education is the key to the movement and a first step is shifting people’s perspective to a third way to think about capital. I would like people to think of their portfolios as follow (Note: the pie charts below are based on a hypothetical way to think about capital – main point is to illustrate the inclusion of impact investments when an individual thinks of capital):
I believe the core of an impact investing movement should be two-fold:
1) The choice between impact and profit should not be a binary one.
2) Close the mental disconnects and isolation between the different components of the Impact chain of capital: (Input –> Output –> Impact)
Distinction of Target Groups
Just like the ‘real’ investing world, in the impact investing world, there are two distinct investors to target: Institutional and Retail. By the nature of the way that capital flows into the space, influence on the retail end is bottom heavy + personal and on the institutional side, it is top heavy and politically barriered. (Sidenote: A great report to read to understand the institutional-policy relationship in impact investing written by Pacific Community Ventures & Harvard Uni).
Another target group (and this is admittedly the harder group to penetrate than the former) would be both institutional and retail investment advisors. Straight away, the inherent challenge to create this movement is how to create a simultaneous pressure on both ends and in each respective groups.
In creating this ‘pull’ platform, because capital flows through a system through an impact chain, the platform should become the mechanism by which ‘push’ platforms must engage in. The graphic below illustrates this point using the recently announced Morgan Stanley Investing with Impact platform. The idea is that on Morgan Stanley’s end, they can only get so far by engaging their current clients. However, if they look beyond their Investing with Impact platform, and engage in a middle ‘pull’ platform that educates the masses, their message and reach would more than double.
I believe that a successful impact investing ‘pull’ movement would contain the following practices:
1) Radically lower knowledge barriers
The landscape of impact investing is slowly coming to light. There is great research and data that heavily supports the sector. However, bite size pieces of information are far and few in between. Investors and advisors need understand: the reason for impact investing, proof of concept, and how it would affect an institution’s or individual’s portfolio. The knowledge barrier should also include a way to disseminate authentic and real stories (see: twitter exchange above) about impact investing and the results of the investment – a form of curated ‘entertainment’.
2) Uncover and disrupt offline analogies
Most form of human interactions surround a pre-existing way of thinking. e.g. before email, people would send letters. In the case of thinking about capital, the tipping points of where someone starts to think about money is in the education system, with a focus on universities and college (typically an individual’s first experience in managing a substantial amount of money).
3) Empower key community leaders
I’m a big fan of Seth Godin’s practice of building tribes. People are more passionate about this issue than you think they are. A great organization that organically (and perhaps unexpectedly) tapped into the power of tribes is Acumen Fund. (Full disclosure: I currently volunteer with them, and this is by no means a representation of their perspective on the matter. Just my own). Acumen Fund currently has 12 volunteer-led chapters around the world that support and spread their cause. These chapters are going into local communities with a depth and reach that Acumen would not have been able to achieve just by themselves.
4) Reduce friction
Thinking about capital – can be an overwhelming experience, especially on the retail side. The movement needs to create a frictionless and simple experience that catalyzes ‘pull’ for transactional activities. A great example of this practice is by LearnVest, a budgeting and advisory platform to help individuals achieve their goals. Simple and clear. I envision a successful impact investing platform to embrace a similar frictionless user experience.
5) Getting started
No single agenda or strategy is equally relevant to all target groups. I see two main engagement strategies embedded in the movement, which in some cases can be executed separately or combined. One is a online-mass led proposition with multiple knowledge engagement pieces. The other is a high-touch with direct channel distribution. The latter would fit in more with the advisory/’push’ platform engagement target group whereas the former would fit into a engaging retail investors. The high-touch component is definitely more of a challenge as we would be looking at a target group of banks/corporations/venture capitalist that have systems in place in order to achieve execute their business model.
There are multiple ways to continue to build out this framework. The points above are merely a starting point in the basic wireframe of this impact investing movement. All ideas are welcome, and if you want to have a brainstorm session about this – hit me up!
Thanks to Erika, Jo-Ann, Steve and Kevin for inspiring this post.