What we learned about impacting investing that we didn’t know a year ago

An email conversation

Antony Bugg-Levine
May 7 · 11 min read

One of the most exciting parts of working in the impact investing industry is getting to work alongside inspiring, collegial, and committed people. I cherish the conversations we get to have which I often think will be interesting to others. So I asked Beth Bafford (beth.bafford), Vice President of Syndications and Strategy at Calvert Impact Capital, and recently named Nonprofit Finance Fund (NFF) Board member, to have a public email back-and-forth on what we’re seeing and learning. I always value Beth’s combination of honesty and optimism grounded in the great work she is helping to lead at Calvert. We started this in late December, thinking we’d get it out for the New Year’s reflection. Then day jobs and parental duties interceded. But this was fun for us and, we hope, useful for you.


I’ve always admired you as one of the clearest-thinking doers in the impact investing space. I still regularly send around your 2015 piece on the challenges of getting philanthropically motivated and commercially motivated investors together to people wrestling with that challenge. So I’m excited to hear what you’ve learned and to make sense of the crazy year that was 2018.

First on my list of “Things I know today I did not know on January 1st, 2018”: Opportunity Zones (OZ). I had to search my email to confirm it’s been less than a year since we realized the December 2017 tax bill included a provision to create a potentially massive tax incentive for investments in low-income communities. Reducing capital gains taxes for any investor who commits to investing in a designated poor community sounds amazing in theory (and the potential size of the program seems to have grown in the telling from $3 trillion to $6 trillion). Like others in the community development finance field I scrambled to find out if this program could help us bring new resources to the work we do. While we quickly realized it’s not a great fit for NFF to focus on for now, I remained optimistic that it could be a great source of funding for groups whose core business is to invest in start-up enterprises that create jobs, which appears to be the intended impact.

But I’ve been disheartened by what seems to be the asymmetrical way in which impact investors and mainstream investors are approaching this. While impact investors were quick to hop on conference calls, join working groups, go to conferences, and write papers about the way in which this program should be used to promote development, seems like mainstream investors were quietly working to ensure regulations would make it as easy as possible to get the tax break without doing much more than they typically do. And now that real money is starting to organize around this, I hear from people in large wealth management firms and investments shops that their clients and colleagues are aggressively looking for real estate deals that they probably would have done anyway that can help clients avoid paying their taxes. All the well-reasoned arguments about how this program could help low-income communities if only investors did more than the regulations require seem like screaming into the wind of the mainstream capital markets doing what they do best. Seems that there’s a real trade-off between what it takes to make a voluntary program like this large and what it takes to focus on impact. This roll-out is teaching me to be skeptical that mainstream investors can be counted on to do more than chase tax breaks at the lowest cost and risk to them.

Am I being too cynical? You tend to take the long view and see the positive in these developments. Can you talk me down?


Thanks Antony,

Back ‘atcha.

Yes, hurricane Opportunity Zone hit land for us around February/March 2018 when we first started learning from the amazing folks at the Economic Innovation Group about this legislation and what it means for our work.

I’m definitely more optimistic about the long-term potential for positive change (otherwise what are we doing in this crazy industry?!) There is no doubt that some of the first movers and first investments will be in projects and businesses that would have received capital anyway (this is the pipeline that won the OZ lottery). But I think the real potential is in what happens next.

As backdrop, I find more hope in the actions and decision making of mainstream investors at this moment in time. They are thinking about risk differently and understand that good corporate behavior is almost always rewarded over time — and bad behavior is often punished (see: Lehman, Facebook, Volkswagen, etc.) There is a large-scale movement to incorporate environmental, social and governance (ESG) factors into risk analysis and sign onto the UN Principles for Responsible Investment (PRI), paired with leadership in board rooms that are emphasizing better employment practices and recognizing the imminence of climate change. I don’t think we can discount this shift in thinking when we consider investor behavior in OZs.

I agree that we’ve heard pretty loud and clear that investors are seeking “market” returns despite the tax benefit — but it is our job to lay out the case for what risk adjusted returns look like in these communities.

Investors will assume that investing in low-income communities is higher risk but you all at NFF, and countless other CDFIs that do both real estate and business lending, have shown that not to be the case. Often times demand in these communities is so high that the investments — particularly in housing and community infrastructure — are much more resilient than speculative real estate investments in hot markets. We should price these investments to their actual, not perceived risk.

Investors can only react to product that they are offered, so it is our job (the royal impact community we) to develop the product(s) that (a) represent the best interests of and improve the quality of life for the residents in the communities that the legislation was intended to serve, (b) generate inclusive, long-term economic value that provides attractive risk-adjusted returns to investors, and (c) does so in a transparent manner, measuring, managing, and reporting on what the fund is doing and the long-term effects of the investment.

And then we have to make the case to investors that our strategies are better for communities, better for companies, and better for investors. If the only pitches they see are from commercial managers without any impact framework or community engagement strategy, that is where the money will flow. It is on us to show that there is an alternative path.

In other words, I don’t think we can judge the taste of the sausage until we make it.

So… what have I learned since January 1, 2018? Relatedly, I am seeing positive signs that we are getting beyond the “trade-off” conversation and starting to shift the conversation from impact investing as something that you “should” do if you have a heart to impact investing as a way to find market opportunities where no one else is looking. Have you noticed any such signs?



Thanks for this perspective. I really appreciate your ability to focus on what it takes to move the market (and the world) from where it is to where it should be rather than bemoaning the fact it’s not already there.

Absolutely agree that 2018 has brought new evidence that impact investing is here to stay in new ways. With the traditional private equity giants ramping up their marketing of impact funds (TPG Rise, Bain Double Impact, and now KKR), they’re making the case about how an impact thesis supports financial returns. And the recent US climate change report seems to have woken people here up to where others have been for a few years about the profound economic impact climate change is already having. In other asset classes as well, I’m seeing more mainstream investors increasingly make the case that impact (on climate, inequality, health access, etc.) is good for business.

I do regret and maybe even resent the fact that scaling up capital in impact investing appears to require appealing to people’s greed. With all the social and environmental injustices out there, it’s frustrating to me that we have to make a purely profit case to get often incredibly-wealthy people to pay attention. And what will be lost if we unlock capital for impact but don’t impact the basic ways the investing industry works? I think the Global Impact Investing Network has got it right in describing the challenge of the next 10 years as figuring out how to Scale with Impact. Sounds easy. But, as we’re seeing in Opportunity Zones and elsewhere we’re still too often stuck in a trade-off between the two.

Which brings me to my second lesson from 2018: effective leadership requires balancing outrage and optimism. I realized this when NFF had the privilege to co-host an event as part of our national knowledge campaign on results-focused funding at Paul Quinn College, a historically black college in Dallas. I realized that their president Dr. Michael Sorrell is so charismatic because he keeps that balance and so did so many of my heroes.

There are so many reasons to be outraged these days. But outrage without optimism can be paralyzing. So I’m working on reminding myself how amazing it is that just 12 years ago I had a google alert on the phrase “impact investing” and was thrilled when an obscure Australian paper used the term. Now we have most of the largest financial services institutions talking about, organizing around, and now making impact investments. We dreamed of “mainstreaming” and we’re getting there. And the more time I spend with the amazing clients NFF is able to invest in, the more balanced I can stay. What’s keeping you optimistic in these crazy days?



So many things.

My son, Jack. He is now 19 months old and keeps me smiling, laughing, and challenged every day. Thinking about the world he will grow up in — as scary as that can be to imagine (will he ever need to learn how to drive?!) — also keeps me hopeful. At the end of the day, all we are really doing is fighting for them so that their lives — and their opportunity and ability to help others — are better than ours. Certainly a reason to jump out of bed every morning (some mornings much earlier than others… )

The power of giving women a voice. The 2018 election proved that women who have the courage to step up and lead will get the support they need to do so. Like many, I feared after 2016 and the Kavanaugh hearings that we, as a society, were not nearly as close to equal as I thought or hoped we were. The election of hundreds of women leaders in November helped pick me back up. I can’t wait to see what these women do to change policy, public opinion, and lives. And, of course, Michelle Obama. Her choice to open up about so many things — including challenges with infertility and miscarriage — will have lasting effects to empower women to know and own their whole selves. I just finished her book and did not know I had the capacity to fall in love with a complete stranger.

The global consensus on climate change. As you mention, I’ve been blown away by the global response, despite some obvious haters. Mayors, governors, heads of state, and CEOs across the world have taken responsibility for their contribution and committed forcefully to change course. In our age of political division and “us vs. them” mentality, this has become a rallying cry for 99.99% of the world. It has yielded expedited innovation, millions of quality jobs, new financing schemes, and much more. We have effectively acknowledged that the old way of doing business was slowing killing us and our planet and are fighting inertia to do something about it. Pretty powerful and exciting stuff.

What keeps you going?



My daughter, who is just few months older than Jack, is a clear window into a world of joy and hope and love, so completely innocent of everything the world is going to throw at her. I alternate between hoping and worrying that the world she grows up in will be unrecognizable to us. It does make the abstract calling to “make the world a better place” so much more concrete. (But we do need to teach them to drive? Or is that going to be a skill like knowing how to drive a manual transmission — not something you need every day but something you’ll really regret not knowing how to do if it’s the reason you get kicked off Amazing Race in a country without driverless cars?)

And to keep my optimism about the future, I’ve been spending more time learning about the past. When we meet them, the inspiring clients NFF lends to are well-run organizations with sophisticated financial models and typically diverse revenue streams. But most began, as most good things do, with a community’s basic human impulse of generosity or defiance in the face of injustice.

Whether they are a food bank, a homeless shelter, a charter school, or an immigrants-rights center: they are the institutional embodiment of individuals with a conviction that their communities could be more inclusive, vibrant, and caring places and the will to do something about it. And in almost every case, they faced far worse obstacles than we do.

One particularly inspiring example is the national “food is medicine” movement, a group of organizations around the country that distribute healthy meals to people suffering chronic illnesses. Some of them are now negotiating contracts with hospital systems and insurance companies because it turns out that providing healthy meals and love improves people’s wellbeing more cost-effectively than treating them with medicine and hospital stays. They are the leading edge of a movement that could transform how we support all people with a web of social services integrated into a health system that recognizes that up to 80 percent of your health is determined by where and how you live, not the medical care you get. And, if that’s not inspiring enough, many of these organizations were born three decades ago during the worst part of the AIDS crisis, when people refused to let their brothers starve alone. To think of the courage and optimism required to look past the daily horrors of that plague to imagine a future when that suffering could lead to a national movement that could substantially improves millions of lives is so humbling.

At its best, impact investing is an expression of optimism. When we make investments, we are putting money behind the belief that our investees have the vision and capability to make whatever they are working on successful and that will make the community they serve better off. If they can focus on forging a better future for our children and all people, then shame on us for not finding ways to support them.



Amen. I always say that we — as the investors — have the easy (and privileged) job of allocating capital. Our investees are the ones doing the hard work to serve their clients on limited budgets in broken markets.

2019 has already gotten off to an exciting start and it is bound to be a busy and crazy year.

Let’s check back in soon to see how it all plays out.


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