Activating Individual Investors for Impact

ON November 5, 2023

What We Learned in 2023 and What’s Next

When we mapped, convened, and grew the Twin Cities Impact Investing Ecosystem in 2016-2018 we identified a substantial gap. Equity investments were not going into social businesses, especially those owned by women and Black, Indigenous, and People of Color (BIPOC) individuals.

Since then foundations and other investors have stepped up to invest in impact funds and nonprofits. A few have even made direct investments in social businesses. Locally headquartered corporations have also joined the party since 2018, including Allina Health, Target, Xcel, Allianz Life and Best Buy. The government is investing likewise, devoting billions to environmentally sustainable development projects. This begs one to question: where in this picture are Minnesota’s high-net-worth individual investors?

We are the 2nd most charitable state in the nation and pay high taxes. Our people care, yet our regular individual investing community is nascent compared to the wealth here. People are somewhat familiar with socially responsible investing, Environmental Social Governance (ESG) investing, divestments, and some forms of impact investing, but impact investing is not the norm here as it is on the coasts.

Why is this so important? Social businesses owned by individuals in marginalized communities need equity investments flowing into their companies versus compounding debt. We launched the Investors for Impact Project in May 2022, with support from local foundations, nonprofits, corporations and government, to investigate the needs of our investors, discover current gaps in capital, and research promising local and national models to address these needs. Our research was informed by talking with 80 investors, analyzing 60 models, and market testing our findings with selected ecosystem leaders.

In short, here’s what we learned about local high-net-worth-investors:

  • They are generous and philanthropic but, when it comes to investing, they expect to get a full financial return. The concept of blending the two ideas–doing good and doing well–is still somewhat foreign to them. Many are skeptical it can be done. 
  • A significant subset care a lot about two impact themes: racial justice and environmental sustainability. 
  • For those interested in impact investing, they prefer a central, trusted source for due diligence rather than doing it themselves.

The most surprising finding of our year-plus-of-work is that there are at least 60 models that focus on engaging high-net-worth investors:

  • Minnesota has 17 local models, including funds, networks, and hybrid organizations; however, most are not well known by the investing community.
  • There are many national models that might work here as well to engage these investors.

To read more about our findings, our Executive Summary is available upon request here.

It is Cogent’s goal to bridge this gap in knowledge and connection by bringing investors, investees, and intermediaries together. We invite you to join us!

How you can get involved:

  • Attend impact investing/ESG/SRI educational sessions sponsored by financial institutions and others including Gratitude Railroad and Big Path Capital.
  • Check out the Twin Cities Impact Investing map and ecosystem resources.
  • Share your space to host a small, private gathering and we will find engaging, inspiring speakers and models. You can invite your friends to learn about investing for a positive impact – it is possible to make money AND do good. We will coordinate highlighting any of the emerging local and national models.
  • Talk to your financial advisor, wealth manager, or family office. If they don’t know about impact investing or try to steer you away, find a new advisor through ValuesAdvisor or US SIF.
  • Share your thoughts and offer to help grow the movement by contacting our team devoted to growing our local ecosystem.
  • Try it out: open a Venn Foundation account, join Groove’s Angel Network, or mentor an entrepreneur.

Susan Hammel Bio: As a philosophy major who went to Wall Street, Susan Hammel translates between passionate social changemakers and expert accountants. In her role as President and Founder of Cogent Consulting PBC., Susan serves as MCF Executive in Residence for impact investing and led the charge to map the Twin Cities impact investing ecosystem. As a native Minnesotan, Susan is dedicated to the entire community and brings professional experience from New York, Washington DC, and Chicago to the region.

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What I'm doing now

The tide is turning: more people are thinking about their moral, social and environmental values when they shop, play, and invest. Impact investing is going mainstream with more robust and consistent impact measurement and monitoring happening every day. The blowback on ESG (Environmental, Social, Governance) makes true impact investing (which requires impact measurement) all the more relevant. Will changing how people view money change the world? Well, it isn’t a panacea for all that afflicts us but as they say, “follow the money”. Investors have power. Use yours wisely.