June 9, 2016 | This is the first in a series of briefings from the partners at Tideline, Christina Leijonhufvud, Ben Thornley and Kim Wright-Violich, sharing insights from our work with a diverse group of clients at the forefront of impact investing.
In this edition, we discuss:
We hope you enjoy the correspondence and welcome reader comments.
Mission investing: aligning before acting
Movement among foundations to put more of their assets to work for impact through mission-related investing (MRI) appears to be gaining ground, as reflected in the theme of the recent Mission Investors Exchange conference in Baltimore, “Seizing the Momentum.”
Traditional beliefs among trustees, foundations executives, and even investment office staff regarding fiduciary duty and investment purpose are indeed shifting, even as an imbalance between talk and action remains.
Launching an MRI strategy requires patience. For example, we have seen in our own work how valuable it can be when first embarking on an exploration of MRI to not talk about investment strategy at all. Trustees and foundation executives are well-served to start with an open, exploratory dialogue regarding the institutional beliefs and threshold requirements that inform investment policy and those that may warrant revisiting to incorporate social and environmental objectives.
This is not a substitute for moving to action. In fact, airing tough questions and wrestling with conflicting beliefs at the outset encourages deeper research, fact-finding and ultimately contributes to a more robust understanding of key issues, a clearer definition of success, and lays the groundwork for “learning by doing”.
In some cases, foundation trustees and executives may have never had the opportunity to articulate or revisit the beliefs, intentions, and guidelines that they think should inform a foundation’s investment policy. Indeed, it is tempting to bypass these inherently complex conversations and jump straight to a low-stakes strategy that does not require the alignment of board, staff and the investment office.
While different investment strategies will be suitable for different foundations, all institutions have a lot to gain from aligning beliefs and intentions, wherever possible, and identifying areas of disagreement or uncertainty before a strategy is adopted.
From impact measurement to impact management
One term we expect to hear a lot more of in coming months is impact management – an expanded view of the impact in impact investing that links an investor’s specific social or environmental objectives not just to rigorous measurement and evaluation practices, but to a) constructing investment portfolios for impact; and b) the active effort to optimize an investee’s impact.
At the portfolio level, Bridges Ventures is expected to release another seminal report in the coming months, sharing an approach to impact management designed for the family office Anthos and its investment management affiliate, Skopos Impact Fund.
At the enterprise level, there is both an increasing recognition that investors play a critical role in driving the impact of investees, and a growing body of practitioner experience upon which to draw. For example, the San Diego-based impact fund, HCAP Partners, is not just in the job creation business, but is instead focused on a “gainful jobs approach” to assisting portfolio companies in understanding and implementing improvements in job quality standards. And Pacific Community Ventures has recently released a “quality jobs” definition that will help HCAP, and others, institutionalize the practice of what it means to drive impact through employment
Tideline is making its own contribution in this area, exploring the concept of “impact classes” as one tool for providing clarity along the impact value chain, from investors, to intermediaries, to investees, thereby making impact management more feasible. You will be hearing more from Tideline on impact classes shortly, for which we have Omidyar Network to thank for its generous support, and our project co-lead, Cathy Clark, from Duke University.
The conversation on impact management is about to switch into high gear.
Perspectives on aspiration
We were fortunate to attend the launch of Upstart Co-Lab recently at the Ford Foundation in New York. Congratulations to Laura Callanan and the team at UpStart, which will fill a clear need for intermediation in the creative economy.
The highlight was a lunchtime performance by Elizabeth Alexander and Yo-Yo Ma. Alexander recited three of her poems, accompanied by Ma – but not before the two had engaged in a fascinating Q&A.
Among the questions Ma asked Alexander: why the focus on “aspiration”, a word that appeared twice in the poem Stravinsky in LA? Alexander responded that it was one of her favorite terms because it refers not only to the idea of vision and ambition, but also to something so fundamental and powerful as the process of drawing breath.
We, too, love the word aspiration. It describes why clients come to us, and why we created Tideline in the first place: our aspiration for a shared, sustainable prosperity, powered by market-based solutions.
However, it is easy to lose sight of the aspirational drivers of strategy when the realities of moving to action bear down. Implementing new directions can be unpredictable, tumultuous, and ultimately incremental, which is why we often find ourselves delivering sobering news to clients. Some markets are more investable than others, organizations have weaknesses as well as strengths, market conventions are rigid, and the work of collaboration is, typically, labyrinthine.
In truth, we need to do a better job of seeing aspiration and action as two sides of the same coin. Without aspiration, action is aimless and unruly. Without action, aspiration is empty and distracting.
Here at Tideline, we strive to do just that, preserve a blend of aspiration and action, a challenge inherent to all of us in impact investing, and to which we all must rise.
We are privileged to call the readers of this briefing our friends in impact investing and look forward to the many opportunities for partnership that lie ahead.