10 Commandments for Impact Investors
With much chatter around “impact investing,” the fairly new and transparent form of investing remains a road less traveled. Intended to “disrupt the traditional systems that organize enterprises, investment, and charity,” impact investing entails an experience where both profit and social impact are achieved. Nearly a decade ago, the term “impact investing” was conceived during a Rockefeller Foundation convening organized by their then Managing Director, Antony Bugg-Levine. Encompassing a layered definition that describes “investments that unlock capital” and a system that “impacts how investing is done,” impact investing is transforming funding models and how communities’ needs are met. Many early adopters are seeking out and employing the best strategies and practices to see market rate returns alongside of social and/or environmental impact.
Last month, Antony, who is now CEO of Nonprofit Finance Fund (NFF), a CDFI that “helps organizations effectively connect money to mission and supports innovations such as growth capital campaigns, cross-sector economic recovery initiatives and impact investing, hosted a talk for impact investing professionals looking to become more effective in the field. During the discussion, Antony shared some words of advice:
- Structure finance to help nonprofits get the capital they need to expand services.
- Separate those who are tough minded in the field from those who are promoting easy answers and outdated solutions.
- Focus on what people do, not say. Listen to the doers.
- Don’t listen to anyone who isn’t able to say “I don’t know.” Surround yourself with people who have the mental discipline to admit what they don’t know.
- Couple tough-mindedness with a tender heart. If not, you’ll end up selfish and harmful to the work.
- Focus on power and the inappropriate and uneven concentration of wealth.
- Never hold a board meeting in a fancy office or law firm.
- Stop bullshitting each other. Find people who are doers and have the self-confidence to tell you the truth.
- Turn off CNN.
- Be as wise as a serpent and as harmless as a dove.
Following the talk, Antony welcomed questions from the audience made up of both seasoned professionals and grad students, many attending NYU and Columbia University nearby. Intrigued by Antony’s earlier reference to Dr. Martin Luther King Jr.’s sermon A Tough Mind and a Tender Heart, a student asked, “If you look at tenderness and toughness as muscles that need to be worked out, how do people do so?” Throughout the discussion, Antony urged each of us in the field to ask ourselves if we’re truly fit to do the work, noting:
“It’s easier to cultivate tender-heartedness. Humble yourself and go work with the people you’re claiming you want to make a difference with. Maybe for some, that’s connecting with family members in a way you haven’t been. For some, it may be doing the kind of work they’re not used to. A lot of people come to impact investing because they know they want to make a difference, but they need to come to terms with who they are and aren’t. It’s dangerous to pretend you’re actively playing or fit to play a role you’re not. Listen to those who are doing the work and read up on 4 Simple Tricks to Get Past the Impact Investing Bulls**t to build the tough mind muscle.” Following up on the concept of coupling a tender heart with a tough mind, another attendee asked, “From the outside looking in, impact investing looks great, but what are some of the larger questions that you don’t know the answer to that you’re trying to figure out?”
NFF has taken on significant risk but has seen only low-level losses considering the size of their assets and portfolio. Recognizing that both financial and social ROI are key, Antony questions what success truly looks like on the impact side of the deal:
“How do we know we’re making impact? We like to think we are after talking to our borrowers who are pleased, but how do we really know?”
Antony also emphasizes “complete capital,” a healthy blend of financial, intellectual, and human capital, that provide much needed support so that nonprofits and community based organizations are properly equipped with the necessary tools to revitalize and stabilize the communities they serve. Direct investments supported by human and intellectual capital position people and organizations to be able to support themselves.
With a number of impact investments being made in Baltimore, regional actors are looking to create deeper, more enduring impact that can be tracked and measured. A little over a year ago, Invested Impact partnered with the Calvert Social Investment Foundation, Goldseker Foundation, Humanim, and Straus Foundation to bring Ours to Own, a growing impact investing initiative, to Baltimore. Ours to Own has created the opportunity for residents to fund community projects and small businesses with as little as $20 and see a financial and social return on their investment.
Using impact investing, movements such as Ours to Own not only nurture local economies, but set the stage for investors to be successful in making money while they achieve social change. Breaking down traditional barriers, impact investing fills in where charity, government, and traditional investing have left room for change-making.
