The Basics of Place-Based Impact Investing Series: Article 1
By Lauryn Agnew, Stephen Malta
Place-based impact investing adds another dimension to the exciting and growing field of impact investing: the investment strategy designed to combine financial returns with positive economic and/or environmental impacts. In its start-up phase, impact investing was predominantly associated with private equity investments into social enterprises to improve the lives of those at the global ‘bottom of the pyramid’ – the poorest of the poor. Broadening the concept of impact investing can open opportunities for place-based mission-oriented organizations to participate in investing in as well as giving to one’s mission and place.
“We have the opportunity to demonstrate that Place-Based Impact Investing can bring private capital, public resources, and philanthropic assets together to build a better and stronger long-term economic region.”
For those fiduciaries whose mission is to serve their beneficiaries in a particular geographic region, limited place-based investment strategies exist. The financial services industry is based on global geographic diversification strategies and regional/local markets haven’t justified the development of local investable opportunities. As we look forward to the local positive impact we can achieve together through impact investing, we have the opportunity to demonstrate that Place-Based Impact Investing can bring private capital, public resources, and philanthropic assets together to build a better and stronger long-term economic region. We believe the San Francisco/Silicon Valley Bay Area has the right combination of wealth pools, talent, innovative spirit and generous philanthropists suitable to direct a small portion of our assets towards enhancing the economic resilience, prosperity and sustainability of our own region.
Through a centralized approach that enables the collaboration needed, combined with transparency and stringent due diligence, we can confidently provide the tools to invest from wealth pools (retirement plans, community and family foundations, corporate charitable assets and endowments) into our local economy. By offering a family of funds, that is well due-diligenced by an expert team, the collective asset base can be managed in specialized multi-manager funds based on asset classes: infrastructure, real estate, public equity, fixed income (bonds), private equity, and a community investing/savings fund. Using these funds as building blocks for relatively small portfolio allocations to place-based impact investments (of 1-5%), investors can target their unique risk/return/impact goals. For these allocations, the risk and return are set to achieve the asset class’s individual benchmark risk and return profile (ie. public equities’ portfolio’s benchmark is the Russell 3000). Also, each of these funds will serve the purpose of seeking, investing, reporting, and disclosing their local—Bay Area—impact. In addition, each asset class provides specific targeted impact:
What sorts of impact can we expect?
We can expect to achieve impact on a number of fronts. With corporate managements, particularly those headquartered in the Bay Area, we can engage the Board of Directors on topics such as diversity, and encourage more diversity in the Board and senior management. For the employees of these companies, many of whom will be living in the Bay Area, we can encourage fair and non-discriminatory policies. At the same time, we can encourage stronger environmental protections around the Bay Area and the world. Additionally, we can encourage and invest in sustainable long term real estate projects and programs that will provide strong returns to investors while helping meet our pressing real estate and housing needs and goals. Also, within infrastructure are long-term investment options across the energy, information, health and education, and jobs and community development fields. Tying these options with private capital in social and job-creating companies, we can achieve the goals for a long-term sustainable, prosperous, and resilient community.