Achieving a market return is something investors are comfortable with, but a lower return makes it harder to attract enough investors, said Trenton Allen, executive director and chief executive officer of Sustainable Capital Advisors. “It’s not impossible,” he said. “But you’re reducing the number of investors you have access to.”
Traditional impact investors also argue that different returns are already being accepted for different investments. Consider bond-like returns for fixed income risk types.
“Impact investing is a big tent and should be a big tent,” said Nancy Pfund, managing partner at DBL Partners, an impact venture capital fund. “The challenge is that we shouldn’t cloud the water and think that impact-first is the only type of investment. We also don’t want to step back and grapple with prejudices about returns that we’ve been fighting against for at least 10 years. “
Even those who have taken this approach agree that it is a luxury.
“When organizational priority has an impact, it’s a privilege, but you must be deeply risk-tolerant,” said Margot Kane, chief investment officer of Spring Point Partners, a Philadelphia-based social venture fund founded by the Berwind family. whose wealth goes back to the coal mining industry in the 19th century.
For anyone looking to strike a balance, here are the two most important questions: How do you determine whether an investment qualifies as an impact first? And since impact, not return, is the main motivator, how do you measure it?
Let’s start with the selection.
“One of the things that we ask ourselves in due diligence on any of these projects is, ‘Is this a really great catalytic investment, or a very bad market price investment?'” Said Liesel Pritzker Simmons, co-founder and director of the Blue Haven Initiative and a family member whose wealth comes from Hyatt Hotels.
“In all honesty, it usually comes down to the problem you are trying to solve, and is the nature of that solution over-scalable or not?” She said.