News & Insights
4 things learned at Mission Investors Exchange
by Jason Henning, VP, Investor & Donor Relations, Global Partnerships
I recently attended the Mission Investors Exchange 2014 National Conference, a gathering of foundations and others in the philanthropic community focused on sharing insights and experiences around investing for social impact.
This is the third MIE I’ve attended, and one particularly encouraging trend I’ve observed is this: foundations are moving off the sidelines. They are going beyond educating themselves on program and mission-related investments, to exploring opportunities that can enable them to acquire firsthand experience. Over three days of smart, substantive conversations, here are four of the most compelling insights I heard:
1. “The capital markets are great at scaling things, but not at pioneering.”
- Kat Taylor, CEO, One PacificCoast Bank
While microfinance has been heralded around the world as a successful example of a market-sustained approach to alleviating poverty, most people forget the sector was originally nurtured with billions in philanthropic support. Foundations, with a range of capital at their disposal, can play a vital role in testing and proving early stage opportunities that have enormous potential.
Similar to point #1, most of the capital stacking up in the impact investing sector is seeking risk-adjusted market rate returns. The problem is there aren’t enough impact-generating opportunities to match this type of capital. What’s truly needed in the field are investors willing to take bets on emerging, disruptive business models that have the potential to scale and reach millions of people living in poverty. Or more appetite for opportunities that focus on underserved, last-mile communities, understanding that the economics of serving these communities don’t lend themselves to high financial returns.
The inference here is that “intermediaries” does not fully describe the value these actors bring to the impact investing space. Fund managers and other intermediaries provide sector expertise, lower risk for investors, manage strong networks along specific value chains, hold the capacity for impact measurement, and provide investors broad exposure to market innovation. A recent Alliance magazine article reinforces this concept, pointing out the need for intermediaries (e.g. nonprofit impact investors like GP) because of the added value they offer by way of “human capital” (e.g. staff time/expertise to provide social organizations with technical assistance in addition to financial capital).
4. “Foundations can provide much more than an investment.”
Foundations can deliver much more beyond investment capital. Foundations provide accountability to their investees, can serve as partners in the development of social metrics, offer legitimacy for new intermediaries, provide trust-based introductions to other investors, and can collaborate in fund structure development.
Foundations are playing an instrumental role in growing the impact investment sector, from capacity-building grants to deploying a broad range of capital directly, and through funds. And the Mission Investor Exchange is at the forefront of helping those foundations develop the financial and educational tools they need to align more capital with mission.
Why does this matter?
Foundations, investors and intermediaries each have unique opportunities to help grow the impact investing sector and generate more social impact.
Foundations can fund risky early-stage opportunities as well as grow the networks and institutions needed to advance the sector. Investors can seek opportunities that prioritize impact over returns. Intermediaries can continue proving that they can provide value beyond financial capital.
Each opportunity and each actor’s potential to meet the need complements one another; through continued collaboration, we have a tremendous opportunity to achieve collective impact.