Philanthropy debate: Investing’s most important evolution?


Helen Avery
Published on:

Impact investing – putting money to work both for profit and social impact – is in its infancy as an industry. But it has the potential to become part of the fabric of financial markets. A group of leading wealth managers, foundations and sector specialists discuss how impact investment will develop, and the challenges they face.

See philanthropy debate participants, including video interviews on impact investing

View video interviews with the individual roundtable participants to find out how:

• social impact bonds are structured and when they are launching;

• foundations and family offices are looking to work with governments to solve social issues;

• impact investing will boost the microfinance industry;

• private banks and asset managers are developing impact investing products and platforms.
Euromoney What do we mean when we talk about impact investing?

ABL, Nonprofit Finance Fund It is essentially addressing social problems with the same part of the portfolio that is trying to make returns – the idea that for-profit investment can be both a morally legitimate and economically effective way to address social problems.

Euromoney It’s not an entirely new concept, but it is garnering significant attention and seems to be on the verge of becoming an industry in its own right. Do you think this is how it will and should develop?

ABL, Nonprofit Finance Fund Absolutely. In some ways it is simple – in the US, for example, the community development industry has been a means by which that for-profit capital has been put alongside government and philanthropy to address issues of poverty and inclusion. It’s an approach also pioneered by the microfinance industry. But on a larger scale, impact investing is also a very radical approach as most of our wealth and institutions are organized around, on one side, investing to make money, and on the other side, giving away money to solve problems.

Euromoney Is there any overlap with sustainable or socially responsible investing?

PFR, Veris Wealth PartnersInvesting for impact is the most important evolution in investing we have seen in our lifetime. There is enormous crossover between sustainable investing and impact investing, but an important distinction lies in what is being monitored and measured. In sustainable investing, for example, you are analysing a company based on its environmental, social and governance practices. In impact investing you are emphasizing measuring the outcomes of those practices. Are the company’s practices and products providing solutions to social issues?

BA, Citi Impact investing should be sustainable and sustainable investments may have an impact. But as Patricia says, impact investing is a step beyond screening.

MB, Rockefeller Foundation There is a real spectrum of what impact investing is. But I think there is a distinction between impact investing and what many people refer to as sustainable investing. Impact investing is more than an innovative approach to long-term shareholder value. It is an investment designed for stakeholder value.

MM, UBS This discussion shows the challenge we are having!

AC, Morgan Stanley
There is a spectrum of investment opportunities that vary by risk-adjusted returns and that vary with social impact that fall under impact investing. If we want to get to the core of people’s investment portfolios we will need to be clearer about the kind of investment opportunities.

TP, Social Finance Inc I agree. And as the impact investing industry continues to develop both in the US and globally, we will see a growing diversification of products available to investors. These products represent different levels of risk-adjusted returns and provide investment opportunities in all of the asset classes across the asset allocation spectrum, from cash to fixed income to public and private equity to alternatives.

PFR, Veris Wealth Partners It could be community loans or social impact bonds. It can also be investments in a public company such as Fedex that has designed a plan to have a fleet of all-electric vehicles. But there has to be an impact and you have to be concrete about what the impact is.

ABL, Nonprofit Finance Fund Mario, Patricia, Audrey, how do you describe it to private clients?

There is no one way as yet. Less than 1% of investors understand this area. For those that do, product becomes the discussion, but for the others the challenge is – how do we introduce the topic? We talk about the financial dimension and then the impact it could have, and then the range of investments and instruments with their different risk-return profiles. Studies show that something like 90% of investors care about investing around social gain, but only a small amount will do something – and the gap is that they don’t fully understand how to go about it. Having a clear message from the advisory side is important in moving impact investing forward and that is the key challenge at the moment.

AC, Morgan Stanley Yes, from our clients we saw a tremendous hunger for impact investing but a lack of clarity around how to do it. So our approach was to talk about "investing with impact", which we thought opened up the concept of a spectrum of ways to invest. And we offer clients different buckets they can invest in along that spectrum: values alignment; screening out for ESG [environmental, social and governance] factors; sector-specific investments such as affordable housing, education and cleantech; and then pure impact investing. We wanted to respond to the broad client interest but we also have to apply the same clarity, transparency and due diligence around impact investing as we would for any other type of product as a financial institution. Otherwise no clients will want to invest.

Euromoney Paul, as a foundation allocating to this sector how do you view impact investing? Is there some overlap with philanthropy?

PB, Pershing Square Foundation Traditionally, investors who also gave philanthropically operated in a dichotomy where they are either giving money away or making money. But that is an inefficient way of looking at it and that barrier needs to be broken down. Can we be more open and fund for-profits, non-profits and hybrids to achieve social change, so we can allocate to any programme at any time depending on what achieves the highest impact? For example, in the past a donor might have paid tens of millions of dollars to build a charter school. This was hugely inefficient for the school. Now there is a for-profit real estate fund to build schools, offering a return to investors. There is then a dual gain, as the school invests the money it raises in education, while the market provides the facilities. Investors, philanthropists or others, earn a return that can be put to work to do more good.

BA, Citi Indeed if you look at the beginnings of impact investing it started with philanthropy. Numerous foundations have used their capital for programme-related investments tied to work they are focused on. As a result of philanthropy, most helpfully, there is a history and track record of wealthy foundations trying to measure and establish how their philanthropic donations have had an impact.

MB, Rockefeller Foundation I think we need to be careful in using philanthropy as a starting point for impact investing. For one, philanthropy varies greatly by region. In east Asia, for example, having philanthropy as a reference point may be less salient than in the US. And also, we must be careful not to cannibalize philanthropy. The two are related and complementary but one is not a substitute for the other.

TP, Social Finance Inc I agree that the geographic context is very important. I grew up in China where the philanthropic sector is relatively undeveloped. Impact investing could very well leapfrog charity in the region. However, in the US, philanthropy has played and will continue to play a critical and catalytic role in enabling other investors to participate in impact investments. This has been evident in the community development sector and we expect philanthropy to play a vital role in building the market for social impact bonds.

Euromoney Why is impact investing suddenly starting to resonate with clients?

MB, Rockefeller Foundation It’s a confluence of factors. There is now a track record in areas like microfinance and negative screening methods. We are seeing an increase in values-driven behaviour among investors and consumers. That hit an inflexion point last year with the social protest movements around the world and there is now a real Zeitgeist that has taken off.

ABL, Nonprofit Finance Fund In the west, there has been a growing realization that government and philanthropy cannot alone provide solutions to social problems. Regardless of who is elected into office in the US, we are not going to have enough money to create the basic safety nets if we rely on the old approaches of taxes and philanthropy. In the UK, the coalition government has been explicit about negotiating between the public and private sector.

In the east, drivers are different but just as strong. Impact investing can help ensure that growth is continued and increased – funding companies whose products and services can improve services to poor people. It is an exciting idea that seems to have met its moment.

PB, Pershing Square Foundation I’d agree that there is an awareness now that social change can also be driven by commercial investment, rather than by governments and philanthropy alone. More people in their commercial activities are thinking about how to have an impact. It’s about adding all the components together for greater impact rather than looking at them separately as before.

PFR, Veris Wealth Partners The credit crisis certainly played a role. But also it is a response to an increased awareness of environmental and social issues. Using entrepreneurial skills and business acumen to invest to solve social problems is accepted as smart investing.

Euromoney There seems to be a lot of hope riding on impact investing. Is there a danger that it is being deemed a cure for all ills?

AC, Morgan Stanley I’d say we need to be realistic. With the fiscal crisis facing many governments, people view market-driven solutions as a Holy Grail, but not every problem can be solved by impact investing. There are some situations that will need grants without debt repayments or equity kickers, or that will require regulation. I think as an industry if we tout impact investing as a panacea we risk giving organizations solutions that are not best suited to them. We need to be responsible about distinguishing where is the need for grant dollars and government levers, and where private capital comes in.

BA, Citi Yes, just because the money is there it doesn’t mean the solutions are evident. And the reality is that we have different levels of risk that need to be taken. Philanthropy and the public sector will generally always be the first risk-takers.

MB, Rockefeller Foundation
And in some cases policy and regulation are the drivers of impact investing. For example, I just got back from South Africa where regulation 28 has been passed which creates a safe harbour for pension funds to invest up to 35% of their investment in unlisted investments. It also requires ESG integration and includes an encouragement for what we would call impact investment. And look at the US where the Jobs Act that just passed will now allow individuals to make equity investments in business through crowdfunding.

TP, Social Finance Inc It’s not an either/or situation. The public and private sectors need to work together to drive the most efficient allocation of resources. Impact investing ultimately is a complementary tool to philanthropy, civil society and government in addressing our social and environmental challenges. Paradoxically, impact investing has gained new momentum in the aftermath of the global financial crisis and has sparked a new mindset and approach that uses some of those very same market-based mechanisms to solve the problems the crisis created.

Euromoney Has the low interest rate environment made impact investing seem more appealing?

ABL, Nonprofit Finance Fund I think for some investors there is certainly something in this idea that there is no trade-off right now in some products in terms of returns. For example, the debt notes offered by the Calvert Foundation offer a rate of 1% on a two-year note. But also the interest rate environment has made it more competitive for us. We borrow at around 2% and lend at 6% to make a spread income. The banks, however, also borrow at a low rate and can offer competitive rates to ours and are eating up the best credits.

BA, Citi We committed $100 million to the Communities at Work initiative with Calvert Foundation actually but rates were not a driver. I don’t think investors go into impact investing to maximize profits.

AC, Morgan Stanley
Maybe not, but I think this perceived trade-off between social reward and financial reward has held people back in the past. We are trying to lead with the financial return and then say to clients: "If you want that risk-return profile, this product is similar but it also has a positive social impact". Also investors want clarity around relative rates of returns, and also risk. Talking about a 1% or 2% return is not meaningful unless you also say what the risk is. If we want to start opening up to the $25 trillion in assets under management in the US instead of just the $290 billion in philanthropic dollars, we need to look at the risk/reward profiles of other investments for comparison so we can integrate impact investments into investors’ core investment portfolios.

PFR, Veris Wealth Partners Yes. It’s back to this idea that people have tended to separate out how they view their investments versus how to allocate money to solving social problems. We say to our clients – here are some comparable options where the risk adjusted returns are competitive or better but they also have a social benefit. Although you can’t easily do that with all asset classes – there are asset classes, commodities for example, where there are only a few impact options. As the impact space evolves this issue will be resolved with new impact products.

Euromoney Impact investing seems to be the domain of wealth management at present. Can it be scaled up to institutional investors? How important is a track record?

TP, Social Finance Inc Not all investors are equal and different investors are subject to different investment parameters. Pension funds and other institutional investors are bound by strong fiduciary duties, limiting their ability to participate in impact investments without a track record or with sub-market rates of return. High-net-worth individuals and family offices, through private banks, typically have greater flexibility in their investment mandates and have been instrumental in pioneering and scaling up new products to make them more investment-ready for institutional investors. Foundations and high-net-worth investors can help pave the way for the participation of more risk-averse institutional investors over time.

PB, Pershing Square Foundation As more organizations take part and build a track record and the risk/reward profile becomes clearer, the impact investing industry will grow more. Look at Root Capital, the non-profit social investment fund in Africa and Latin America. It was hard to see in 1999 when it was founded how to provide finance to agriculture businesses, such as coffee collectives, and get money back. But in 12 or 13 years they have done precisely that. So now they are evolving from being purely philanthropic to attracting more commercial capital – although always protecting their goal of alleviating rural poverty.

BA, Citi And also bear in mind that in many countries impact investing is the norm. It may appear impactful to finance a cooperative but there is funding and financing going on all the time from domestic sources so the track records are there.

MB, Rockefeller Foundation
For those of you who work with private clients and so do not have this principal agent problem that pension funds have, how do you think about downside risk protection?

There is no one answer. It is about explaining the whole story and then letting the client make the judgment as to whether it fits them or not. Explaining it in a tangible way is crucial. Where does this fit in a portfolio? What is the trade-off? What is the risk? What do you want to achieve? It is a challenge as it seems so new but actually there are many products out there, particularly around the environment, that could be rebranded under impact investing.

PFR, Veris Wealth Partners When it comes to trade-offs I think clients are more forgiving when it comes to impact investing as long as they are fully informed. To be clear there are impact investments with comparable risk/return characteristics to traditional investments. We look at the overall portfolio from a risk/return perspective so that the percent of the allocation to a specific impact investment mitigates the risk of that investment.

TP, Social Finance Inc From a portfolio perspective, impact investing also has very little correlation to other asset classes, which investors find very appealing. Are farmers connected to the global supply chain going to repay their loans? Or with social impact bonds, will underlying non-profit providers be successful in reintegrating ex-offenders back into the community? These drivers of returns are not correlated to interest rates or public markets.

Euromoney And obviously financial risk tolerance will vary client to client...

BA, Citi There is a role for many levels of risk and returns. We have done bond issues in the public market for non-profits in Peru. You can create structures with different levels of risk for different investors – you just have to understand the risk tolerance of the investor and think about where they would slot into the structure. In the early stages of microfinance some bilaterals took the first tier and could leverage up and then investors came in at the lower-risk end of the spectrum.

ABL, Nonprofit Finance Fund I’ve had private banks come to me and say – will I get a risk-adjusted rate of return for my client? But it’s not binary like that, as Bob says. There are many options like going into different tranches in mezzanine, or early-stage fund managers or a new market or a new instrument. All of those are available to investors.

BA, Citi But you have to accept a degree of illiquidity with impact investing. We need patient capital whatever the risk profile.

PFR, Veris Wealth Partners
There are many opportunities to reduce portfolio risk with impact investing. Clients are going to demand more social impact from their portfolios and those advising them will have to be able to present the risk/reward story in a way the client can understand. Advisers understand risk and returns, though, so will want to focus on that. Talking about social gain will be challenging for them. I think when an institution the size of CalPERS makes the big move to incorporate environmental, social and governance analysis into all of its investment decisions, it will encourage analysts to address the current gap in providing insight into social returns.

Euromoney Let’s talk about social gain and measuring the impact. Is this the most challenging part to making impact investing mainstream?

PB, Pershing Square Foundation The same could be said for analysing the impact of grants. Lots of people out there are searching for common measures. Our view is that the definition of what you measure about impact depends on what you do and what you want to achieve – the chances are that it is unlikely that there will be a common measure in a broader investment market. So at our foundation we look at what is appropriate for the organization we want to invest in, and then look at the area they are working in and then define a set of impacts that fits with that. The question in impact investing is understanding what happens if you get to the point where the organization is challenged to achieve its social return. Then would you be willing to sacrifice something on the financial side?

PFR, Veris Wealth Partners Do you see standardization playing a role in that approach?

PB, Pershing Square Foundation
Standardization is important for intermediaries marketing to investors, but it is less needed for individual investors like a foundation. There is a place for standards certainly but the outcome could be that there is a range of tools for people to at least set some metrics for themselves and help them compare opportunities.

MB, Rockefeller Foundation Standards are very important, but can be difficult to achieve in part because investors come from different starting points. It may be hard to group investors that are each demanding slightly different demands for outcomes. And for unsophisticated investors, they may not be able to articulate what they want – is it the jobs created by an enterprise, or the improved health outcomes from the products sold? Or both? But also on this standardization topic, do we think we also need to distinguish between reporting standards, like what IFRS does for financial accounting, and performance standards like, say, S&P does for credit risk?

BA, Citi I think there will be financial returns linked to reporting and/or performance standards. For some products like social impact bonds there will need to be an explicit output. For other products there may just need to be data on reporting. What was the size of the loan? The income raised? The demographics reached? There are specialized ratings agencies that are trying to define that success. We have both reporting standards and performance standards for other investments. It will just take time to build for this sector.

MM, UBS I know we would love some metrics and numbers to be able to counterbalance the IRRs on the investment side. Then we can do the story justice. I don’t think we will reach standardization in the short term. But these numbers will be essential for intermediaries to help them with due diligence. When that happens it will bring impact investing to mainstream investors. That infrastructure around ratings, etc, needs to be built.

BA, Citi But it will come. Data and measurements will all come. Institutional investors, as they get more involved, bring that kind of infrastructure to the table.

PFR, Veris Wealth Partners
Ultimately we want to bring it down to a performance report for clients that says: this is your impact and this is your return. It needs to transition to something quantitative without losing the real impact which is the qualitative side.

Euromoney That is a good point. How do you make sure impact investing doesn’t get bogged down with quantitative reporting?

AC, Morgan Stanley Absolutely. We support a move towards transparency around social return but it is important not to burden the field with a higher hurdle rate than conventional investments. If you want to invest in a retail company you are looking at the profitability model of the company and perhaps an ESG screening. But you are probably not looking at the long-term happiness of the customers from having purchased that product! Impact investing will have a higher hurdle rate and we have to be clear that while we are in this phase of acceleration that we don’t get bogged down. We are looking at ratings and our investment opportunities have to have a social impact but we are trying to be pragmatic. We will evolve as the field does.

ABL, Nonprofit Finance Fund It’s true. We have to try not to get in our own way. We recently helped structure a $17 million financing programme to build a health clinic in one of the poorest Hispanic neighbourhoods in Detroit. For 30 years there had been a service providing healthcare there out of the car lot of a car dealership. It’s hard to look at that and say it’s not a high-impact investment. They will treat more patients, and be able to focus on prevention. They also had grant money. So on one hand you can say – why do we need all these standards when the anecdotes speak for themselves? But anecdotes, while effective, can be dangerous.

BA, Citi Anecdotes are not enough. When it is our capital we are investing we can make those judgments, but that is much harder for intermediaries who present to investors. If we are trying to tap larger sources of capital, we cannot rely on anecdotes. We may start with basic reporting standards then try to create some quantitative analysis such as, how many affordable housing units were created and what is that value? In terms where we can draw a conclusion.

But then you want to really know – what happened to the person who stayed there? But that is a much longer-term project and may take a different type of investor who is really in one project for the long haul.

ABL, Nonprofit Finance Fund There is ambiguity in many potential impact investments. There could be short-term gains with long-term losses. Such as providing poor people with loans but ultimately putting them in debt. As this industry grows we have a right to be concerned that intermediaries that appear to meet investor demand may put money in investments that are not having an impact. So as much as we don’t want to burden ourselves with too much reporting, we will need standards and data to accompany the industry’s growth.

TP, Social Finance Inc It’s exciting to be in an industry on the cusp of exploding, but the buzz around impact investing is ahead of its reality at the moment. However, there are a lot of great efforts under way to develop a robust ecosystem and to turn anecdotes into reality.

Euromoney How are you managing that with your discussions around social impact bonds Tracy? How are you clearly defining the outcomes that need to be reached?

TP, Social Finance Inc The foundation of social impact bonds relies on outcome measurements. Unless we achieve those outcomes, the investors will lose their capital. How does the diverse set of stakeholders – investors, government and non-profit providers – agree upon those outcomes? Is the outcome a social metric? Or is it value to government or savings? In the case of chronic homelessness, for example, we are speaking with Massachusetts and other states about investing in permanent supportive housing, a proven intervention. When homeless individuals are placed in supportive housing, they stop using the emergency room and other acute care institutions for primary care. As a result, we not only see tremendous improvements in their health outcomes, but also significant Medicaid savings. These Medicaid savings provide the financial returns to the investor. For the social impact bond to be successful, all stakeholders have to engage with one another in ways that are interdependent. The inherent system of checks and balances prevents any one stakeholder’s self-interest from undermining the shared objective. It is imperative that all of the stakeholders agree unambiguously on the measurement outcomes from the outset and that an independent auditor determines that they have been achieved at the end.

BA, Citi We are working on social bonds also. There is so much interest in it. But it is hard to measure outcomes and achievements in isolation. Over five years perhaps the decrease or increase in the number of people in jail could be due to a change in criminal law or cutbacks in public benefits or a shortage of shelters. In the early stages of social bonds and impact investing we need to be patient and willing to experiment. But I think this universe is a small one and so there will be a sense of collaboration as we grow the industry.

PFR, Veris Wealth Partners We have to be realistic about having some failures, just as in the traditional investment industry, and not be deterred by it.

ABL, Nonprofit Finance Fund Back to this idea of metrics versus anecdotes, the real long-term outcomes may end up being best measured by academia. What we need to do as an industry for now is to make sure we have measurements that allow us to allocate our dollars to the most effective problem solvers – not to the best storytellers. Being too rigorous could just add on costs so there has to be a balance.

MB, Rockefeller Foundation Metrics play an important role and actually just a discussion of metrics can be helpful so we shouldn’t be too hard on ourselves if the answer is not always a neat one when it comes to measuring social gain. Talking about outcomes and measurements can be frustrating but it pushes people to think about how they are investing and what those investments are doing. Those are not questions investors on the whole always ask themselves and actually just getting those questions out there could have a large positive impact.

PFR, Veris Wealth Partners We have had surprisingly few clients asking for well-defined social outcomes, but that is now changing. This is primarily coming from institutional investors. Whether that is because those questions are in the media today, or whether they have always wanted to ask but haven’t. I don’t see a large demand for metrics coming from individual investors.

ABL, Nonprofit Finance Fund So what do your clients ask for?

PFR, Veris Wealth Partners They trust us to vet the investments and ensure the outcomes are being met. And we do use anecdotes where we can’t use other metrics.

We have the same observation. We share anecdotal evidence but that would only work with sophisticated investors. We could not bring impact investing to retail clients or explain to intermediaries a product until there were standards in place and a comfort zone behind which we or the intermediaries can stand. I think at the moment retail would not be practicable at this time.

AC, Morgan Stanley But we also see macro trends making the case for investing with impact. For example, as the global population heads towards 9 billion, the greater the demand for water will be. You can talk about that meaningfully to investors as a compelling opportunity without drilling down into the micro-level benefits of individual water purification facilities.

PB, Pershing Square Foundation And don’t forget that retail investors are not entirely unsophisticated. The same debate occurs for them around charitable giving – how do we know when we put money into a bucket on the street whether it is well spent? Some people do think about that and can make their own decisions. And also, I think this idea of looking at a macro perspective is valid. Especially if it is something that an individual feels personally engaged with.

TP, Social Finance Inc And on the equities side, impact investing is simply smart investing. All companies need to have a macro-perspective and investors need to respond to geopolitical issues and non-financial factors such as labour and environmental practices.

Euromoney We’ve alluded several times to the fact that impact investing as an industry will require a deeper and more developed infrastructure. What specifically will we need?

BA, Citi Hopefully some of the mainstream intermediaries will want to get involved. That would give us more of a platform. And research would also be very helpful.

PB, Pershing Square Foundation Because of the complexity, more than anything I think there should be a focus on transparency and providing people with information so they can make their own decisions. That will bring in the broader investment market once the information is out there.

AC, Morgan Stanley I would agree that clarity and rigour around any investment is the most important means of changing attitudes around investing. We should be creating entry ways for every type of investor and taking into account their needs, be those tax considerations, risk and returns, or liquidity needs.

MM, UBS We need intermediaries for sure if we want to get the 1% of private assets into impact investing and we have three large financial institutions here at the table, so that is promising. But getting the infrastructure in place is a fairly urgent requirement. The movement has already started and we need to get going.

ABL, Nonprofit Finance Fund I share your urgency. It’s not just investors that are looking to move into impact investing. There is such a huge interest from the next generation that is coming into leadership roles to get involved in this industry through business. We need to make sure we have something worthy to offer them.

BA, Citi I have to agree that we are inundated with talented young professionals that want to come into the workforce and address social challenges. And there are not enough "boutiques of goodness" to take them. The hope is that they will influence the organizations they do end up joining by being creative around social finance.

PFR, Veris Wealth Partners I think you are seeing that. The younger generations see addressing social change through business as rational. It’s not like the babyboomers, who saw it as a grassroots movement or a social struggle. The younger generations seeking positive social impact are not running away from business but actually going into businesses in their endeavours for social change.

Euromoney And when it comes to the skills needed in impact investing, what would those be?

TP, Social Finance Inc In addition to the finance industry, we need people who have had careers in the traditional sectors of public policy or the private sector – like Audrey who was with the White House. The solutions that impact investing offers are multi-dimensional and diversity of experience is beneficial.

Euromoney The younger generations may be signed up to the new paradigm of private capital meeting public capital meeting philanthropy, but what about the senior people in organizations? Is the message coming down from the top?

BA, Citi Our CEO gets it, and the key is to engage people across the institution.

AC, Morgan Stanley
Absolutely. That cross-fertilization energizes people in large institutions. We are speaking with our risk experts and muni experts and they are excited to be applying their core skills to these areas. And I think it would help for the financial industry to think more about where it is recruiting from – public sector, non-profit, as well as finance.

BA, Citi It has to be embedded in the business model. The bulk of the business that is done takes place in the middle of the organization, so you need to build that ethos of finance meeting social needs into the debt-rating models or financing teams or within relationship management.

MB, Rockefeller Foundation And also including incentive packages. But coming back to infrastructure – it is broader than just having the right people. You want those pioneering institutions to have an underlying structure that supports them with things like basic research and networks where lessons can be shared. I think progress is being made there.

MM, UBS I agree progress is being made. I wonder what our discussion would be in a year’s or several years’ time – whether impact investing will just become part of how investors, organizations, businesses, etc, naturally proceed. And then it will be up to those networks like GIIN and the pioneers of the industry to keep pushing and growing how the investment side can reach the social side.

ABL, Nonprofit Finance Fund There is this point that we need to think about now as we are on the edge of impact investing taking off. And that is how will we define success? I think we can look at one route now and say our goal is to bring more capital into impact investing. Or we could say how can we make for-profit investing contribute to solving the issues of our time? Each of those leads to a different set of outcomes.

PB, Pershing Square Foundation Are you saying there is a choice for everyone to make?

ABL, Nonprofit Finance Fund We would argue that the challenge is the second part – otherwise we will only move money and not be relevant. That’s not to say we shouldn’t be bringing more capital into impact investing – we absolutely have to for it to become more powerful. But the result has to be solving the issues the investments were set up for.

PB, Pershing Square Foundation I’m encouraged by the fact that we can sit here as a diverse group. That would not have happened a decade ago. That breaking down of barriers between different types of capital and people and institutions means that private capital can today be used for social good, and philanthropic capital can be put to work in areas that commercial capital cannot get to today. It feels dynamic and indicates that progress is under way.

ABL, Nonprofit Finance Fund And let’s not forget that where we are now on the cusp of growing and facing all these challenges is no different to where the venture capital industry was at one point. Back in the 1960s that was deemed reckless and investors were not allowed into it, but there was financial innovation married with a structural change in perception that small companies can have great value, and standards were written; benchmarks set.

AC, Morgan Stanley That structural change is certainly happening here at lightning pace. Regardless of industry, the next generation will be relentless in demanding social return, transparency and accountability.

MM, UBS It’s true. I often say I will measure my success within impact investing the day I am out of business, because then it will be just part of the way business happens.