Kim Wright-Violich is a Managing Partner at Tideline, an impact investing consulting firm, and a member of the ImpactAssets Board of Directors. Her career in financial services, philanthropy and academia have given her a unique and informed perspective on the rapidly growing world of impact investing.
Many family offices seek ways to address the critical issues of the day-from climate change to the coronavirus pandemic to the racial injustice exposed by the murder of George Floyd. To find some answers, Sally Boulter, the Senior Engagement Officer at ImpactAssets, sat down with Kim to discuss how family offices can invest in solutions to address these critical societal problems.
SB: What is impact investing?
KWV: The United Nations and World Bank in 2007 defined impact investing as “investments that are made intentionally with the idea of having an environmental or social impact.” More recently, managing impact — which is designing for, monitoring and measuring that impact — have become critical components to this definition. Some think of impact investing as limited to private investments versus public equities. More commonly, impact investing refers to the whole sector of responsible investing: socially responsible investing (SRI) and environmental, social and corporate governance (ESG) screened investing.
SB: How will the pandemic and Black Lives Matter affect impact investing?
KWV: Even before the pandemic and awakening of persistent racism, when there was low unemployment and economic growth, many Americans felt opportunities were not available to them. Impact investing and the thesis on which it was built — that business has an important role to play in addressing social and environmental ills — is needed if capitalism is to survive the current pressures. The question becomes, how can capitalism evolve to preserve the best of its characteristics, but be modified to ensure stakeholders share in prosperity? Along with policy changes, I think one of the first answers is bound to be impact investing.
SB: What does “impact” mean?
KWV: It can be as varied as investors’ interests — reducing the carbon footprint, providing affordable housing, ensuring access to transparent and inexpensive banking for the unbanked, creating jobs and a myriad of other issues. Some investors are agnostic as to a specific impact, but rather believe companies of the future will think longer-term, ensure the resources they depend on are sustainable and define success more broadly to include all stakeholders, not just shareholders. However, many investors do care about a specific issue.
SB: How do family offices typically approach impact investing?
KWV: Family offices often start their impact investing journey with charitable assets already dedicated to philanthropy, whether they are held in a foundation or a donor advised fund. Those assets are typically invested while they are waiting to be granted. Donors can achieve a “double impact”: the first impact resulting from funds being invested and the second when they are granted. This approach extends the life cycle of philanthropic dollars.
A family office portfolio can start from a “carve-out”: dedicating a set percentage of portfolio assets for impact investing (for example 10-20%). If you select a donor advised fund specializing in impact investing, such as the ImpactAssets Donor Advised Fund, they have built-in expertise. You will not have to do the heavy lifting of identifying investment opportunities, conducting the due diligence or monitoring. They have been making impact investments with philanthropic dollars for over 10 years and have dedicated teams and panels of advisors. All that expertise and experience is available to you and your investment advisor.
SB: What is a first step that family offices can take to begin the impact investing journey?
KWV: Well, there are consulting firms out there. Tideline, my firm, is one of them. However, we focus on institutional investors and asset allocators. There are firms and individual consultants that focus on family office consulting. A family office that is serious about this strategy should hire expertise. You can hire someone with a modest level of impact investment experience, and they can begin by being a liaison with experts and collecting data and resources for the family office.
SB: How are individual philanthropists and investors responding to the hardships facing our country?
KWV: When there is as much pain and fear as there is right now, the impulse to help is profound. Family offices and philanthropists are taking all sorts of action. For example, at ImpactAssets, grant activity is up 400% and investing activity has doubled, with more than $170 million across 100 impact investments in just the first half of this year. As we learn about the dangers and vulnerabilities of our health, the flaws of our multicultural society, and the inequities and environmentally unsustainable activities created by our investments and habits, we have a great opportunity individually to give, invest and vote our values. I find it inspiring and hopeful.
The ImpactAssets COVID Response Funds are a hybrid of fast-action charitable giving and flexible impact investing that address the immediate and evolving frontline COVID-19 healthcare needs, as well as systemic injustice revealed by the pandemic and Black Lives Matter movement.
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