In this article for Minnesota Council on Foundation’s Giving Form I describe the challenges I see facing the field of impact investing.
After decades crying in the wilderness, I should be happy now that investing for good has hit the mainstream. Right? Mainly, I’m optimistic about the flood of philanthropically minded investors shifting their resources in pursuit of their mission, beyond the 5 percent customary for most foundations.
Perhaps it’s akin to sending your children off to college to live their independent, adult lives. I’m hopeful, but I worry.
As it moves into the mainstream, impact investing faces four threats: impact washing, insufficient diversity, lack of transparency, and risk aversion
In this month’s blog post I reflect on the incredible women driving impact investing innovation.
I was inspired; I was impressed; and I was informed by the High Water Women Foundation’s 5th annual Investing for Impact Symposium in New York City. There’s something thrilling about being in a room full of high powered women working in finance that gave me hope for the world.
Philanthropy Northwest is developing a fund inspired by the Minnesota Impact Investing Initiative which Cogent facilitated for Minnesota Council on Foundations. Visit their website to read more about their process and ours.
Philanthropy Northwest is exploring a bond fund that would give members an easy new way to make investments in the communities they care about. Modeled after a successful effort in Minnesota, we’re excited to explore this opportunity with our members. I’ll be hosting a lunch meeting during the annual conference where members can learn more and share ideas. In the meantime, here’s some background.
This month’s blog post which is takes a hard look at the “but for” test and its role in impact investing.
When I worked for Prudential Financial Impact Investments, we could only invest in projects that met the “but for us, this project won’t happen” test. For example, but for Prudential,the first grocery store built in Newark since the 1960s would not have been built.
In February of 2016, in partnership with Impact Hub MSP and support from the Bush Foundation, Cogent Consulting began a year long project to grow the Minneapolis-St. Paul impact investing ecosystem. We are sharing our process here in hopes that communities around the world will be able to grow their own impact investing ecosystems.
Before you can scale your impact investing ecosystem, you have to understand what it looks like. Who are the stakeholders and who isn’t yet at the table? What is working and what isn’t? What are the needs, roadblocks, and easy wins? If you begin your efforts to scale the ecosystem before answering these questions, you won’t have a baseline against which you can compare your progress. Secondly, if you don’t understand how your ecosystem operates, you will waste your time fixing the wrong problems.
In order to understand the Twin Cities impact investing ecosystem, we created a map of the impact investing activity and interviewed a broad selection of stakeholders. We decided a map would be the tool that best allows us to understand the ecosystem because we could easily share it with other stakeholders. Constructing the map took 5 months and included the following steps:
While the quantitative data that we collected for the map created an objective picture of the local impact investing landscape, speaking to the stakeholders about their experience gave us a deeper understanding of the ecosystem’s mechanics. We interviewed foundations, nonprofits, entrepreneurs, intermediaries, financial advisors, community development financial institutions, land banks, high net worth individuals, banks, and angel investors. In doing so, we learned that the biggest hurdles for our ecosystem were the need for a shared language, matching deal flow with investor appetite, and impact measurement.
As we finished work on the map we invited each of the participants to an impact investing ecosystem convening to build a community identity and unveil the map. Our goal for the convening was to give the attendees a space to peer into each other’s unique perspective on the impact investing ecosystem. We designed the gathering so that stakeholders could contribute equally without the skewed power dynamic of many investor-investee relationships. We assembled the attendees into teams that had a mix of sources of capital (investors), intermediaries, and end users of capital (investees). The teams explored the map by first locating their own organization and then analyzing the ecosystem through the many lenses of their team.
We paid special attention to creating a pitch-free and welcoming experience for everyone. Careful curation of the invitation list, pre-work with several intermediaries prior to the event, and active facilitation during the event created a safe, welcoming space for all, evidenced by many participants staying for the informal lunch following the program.
Once we had an understanding of what the ecosystem was, we could begin to imagine what it could be. We surveyed the entire ecosystem for their best ideas for scaling and mainstreaming impact investing in the Twin Cities. The ideas could be half baked, unrealistic, or already in progress—our only requirement was that they were bold.
Once we had collected the ideas, it was up to the project partners—Bush Foundation, Impact Hub MSP, and Cogent Consulting—to choose the most exciting ideas. Through a name blind process, we whittled 46 ideas down to 12 ideas that represented a broad range of topics and addressed the gaps we identified in Part I of the project. These ideas included a method of securitizing impact investments, a vehicle for charitable investments into businesses, and a for-credit student impact lab. We then worked with each ideator individually to develop and refine their idea until it was ready to be presented.
We designed the second convening as a series of short TEDx style Talks. Each of the 12 ideators had 5 minutes to present their bold idea to the ecosystem. Afterwards, attendees roamed the room to share their feedback with the ideators and sign up to support the ideas they believed to be most important.
Based on the reactions and feedback during the second convening, we chose the 6 most popular ideas to foster during the last phase of this project. For each of the 6 ideas we held 1 hour workshops with the ideator and those who signed up to support the idea. Since each idea was in a different stage of maturity and involved different stakeholders, each workshop looked different but was tailored to move the idea to its next action step.
While the first and second convenings were educational and program heavy, in the final convening we created more room for informal connecting and celebrating of the community. The ideators who presented at the second convening shared their milestones to a crowd triple the size of the first convening.
We are thrilled at the results of our ecosystem work and are happy to hear your thoughts. Tweet us at @susan_hammel, or email firstname.lastname@example.org.
This week Cogent Consulting has been featured in several articles for the fixed income bond fund that Susan Hammel and Eric White created for Minnesota Council on Foundations. Check out these articles from Chief Investment Officer, Mission Investors Exchange, and Philanthropy News Digest to learn more about the bond fund.
By Chief Investment Officer
Minnesota foundations are joining forces and putting investment dollars to work to help their neighbors. The Minnesota Council on Foundations (MCF), which includes members such as the McKnight Foundation, Bush Foundation and Otto Bremer Trust, has announced a collaborative effort toward impact investing targeting affordable housing and small business lending throughout Minnesota.
By Mission Investors Exchange
The Minnesota Council on Foundations (MCF) announced a first-of-its-kind impact investing collaborative in the US. MIE members The McKnight, Bush Foundations and the Otto Bremer Trust are among the lead anchor investors.
By Philanthropy News Digest
The Minnesota Council on Foundations, in partnership with three Minnesota foundations, has announced the launch of a statewide impact investing collaborative.
Inspired by a similar initiative established by the Michigan Council on Foundations, the three MCF member foundations — the McKnight and Bush foundations and the Otto Bremer Trust — have agreed to commit more than $17.1 million to an impact investing fund. The pooled funds will be invested in RBC Global Asset Management’s Access Capital Community Investment Fund, a fixed income bond fund focused on affordable housing and small business lending in Minnesota.
By The NonProfit Times
A group of Minnesota foundations are the latest to announce a commitment to impact investing with their charitable assets.
Led by the Minnesota Council on Foundation (MCF), a consortium of at least a dozen foundations has committed more than $17 million to a fixed income bond fund focused on affordable housing and small lending in the Great Lake State.
Thanks to support from the Bush Foundation, Cogent Consulting has spent the last year partnering with Impact Hub MSP to scale and mainstream the Twin Cities Impact Investing Ecosystem. During the course of the year, engagement in the project scaled from 50 to over 400. Here are the 5 biggest of the project:
In the first phase of this project we created an interactive map of the impact investing ecosystem. We built the map by seeking self reported ecosystem participant data through surveys and interviews of ecosystem members. By adhering to a strict definition of impact investing and including only impact investments made within the last two years, we were able to create a map that accurately represented the current impact investing activity in the Twin Cities. The map proved to be a useful tool in showing stakeholders where they fit within the ecosystem as well as creating a common understanding of the Twin Cities impact investing landscape. In addition, the map has been equally useful in communicating the breadth of our ecosystem to other communities. The map has been viewed thousands of times online. Susan Hammel presented the map at the Impact Capitalism Summit in Chicago, and Matt Onek, CEO of Mission Investors Exchange, included it as a highlight of his summer in the Mission Investors Exchange newsletter. This inspired Mission Investors Exchange member San Diego Grantmakers to replicate the model to map the San Diego impact investing ecosystem. Stephen Rueff, Director of Entrepreneurial Studies at Minneapolis College of Art and Design, presented the map to his students as an example of an effective systems map.
By interviewing stakeholders from all segments of the impact investing ecosystem we were able to understand the problems of the ecosystem from multiple perspectives. Most issues stemmed from opacity and lack of a shared language with which to discuss impact investing. The language of impact investing has been cobbled together from traditional investing and philanthropic jargon and is inconsistent from organization to organization. Furthermore, neither potential investees nor investors knew where to look to find deals or learn more about impact investing.
In all stages of this project, we have made a deliberate effort to bring ecosystem members from all types of organizations to work together on common goals. Integral to this process was removing the power dynamic of funder-fundee and investor-investee relationships. In both convenings for this project, stakeholders were brought together discuss the impact investing ecosystem in a context where any dealmaking or brokering was left at the door.
In the second phase of this project we surveyed stakeholders for bold ideas that would accelerate the impact investing ecosystem. From the 46 ideas that we received, the project partners—Bush Foundation, Impact Hub MSP, Cogent Consulting—chose the 12 that we thought would be most effective. These ideas included a method of securitizing impact investments, a vehicle for charitable investments into businesses, and a for-credit student impact lab. At the Second Impact Investing Convening on November 10th, each of the ideators was given 5 minutes to present their bold idea to the 79 impact investing ecosystem members in attendance.
In the third phase of the project, we organized and facilitated meetings around the ideas that received the greatest response during the convening. In these meetings we are bringing together stakeholders from all segments of the ecosystem to refine the ideas and outline the next action steps. The ideas we are convening are:
I am thrilled to share this month’s blog post which is about a new impact investing fund that Cogent Consulting created for Minnesota Philanthropists.
Minnesota is famous for its Midwestern modesty. Despite all efforts to stay under the radar, our philanthropic community is leading the nation once again. In fact, with $18.6 billion in foundation assets, Minnesota is a powerhouse on the national impact investing scene.
Event Name: Emerging Impact Investing Strategies for Rural Communities
Sponsor: Mission Investors Exchange
Cogent Attendee: Eric White
This month’s blog post is about rethinking where we put our assets and the power of investing locally.
Giving locally makes a lot of sense. We’re lucky in Minnesota to have one of the most generous communities in the country and world.* We also have innovative and effective not-for-profit organizations that make the most of each philanthropic dollar (click here forsome of my favorites and send me yours!).