Jumping into the world of impact investing isn’t exactly the same as any old investment game.
While investing in social enterprises has been present in the U.S. for more than a century, certain investing circles haven’t always been quick to adopt it. The Global Impact Investment Network estimated in 2020 that the size of the impact investment market is over $715 billion — a fraction of the more than $65 trillion in institutional assets (as of 2019).
But there are plenty of people out there who want to see their money work toward the social, economic or environmental ideas that they support, as panelists of impact investing advocacy org ImpactPHL’s latest event said Tuesday.
(What counts a social enterprise? Think Triple Bottom Brewing, the sustainability-minded brewery that employs fair chance hiring practices; ROAR for Good, the tech company making wearable safety devices; or Dropps, the direct-to-consumer brand that aims to reduce waste in the home products space.)
During the panel, “Impact Investing in the Greater Philadelphia Region: The Benefits, Challenges, and Opportunities,” three experts in the impact investing space shared the big ideas they’ve garnered in their years of experience. Below are three big takeaways to keep in mind, if you’re looking to get involved in the impact investing space yourself.
Understand the investments you do have.
Most people do have some money in investments, whether it be in a retirement account, the stock market or through active angel or portfolio investing. And if you’d like to take a step toward ethical or impact investing, a good place to start is with the investments you already have.
John Moore, an angel investor with Robin Hood Ventures and Social Venture Circle, said that folks should take a hard look at what’s in their portfolio and make some adjustments if they find ties to things they’re not excited about.
“Some people are doing active work against gun violence in their communities, but then they look at their portfolio and realize they are invested in guns,” he said. “There are situations where your assets are actively working against you at a scale you can’t work against.”
Most funds offer a range of investing types, including portfolios created around social issues, sustainability or corporate ethics. (Check out some firms that specialize in that here.)
Consider your time when impact investing.
Patience can really be a virtue when it comes to impact investing, said Michael O’Bryan, founder of Humanature, a consultancy that works on changing how people understand human development, interaction and performance. Some angel or seed investors are eager for a quicker return, but that won’t always be possible if you’re purposefully investing in small businesses with impact-minded missions.
“Time and experience, and making sense of how we think about time as a form of currency and a form of investment, needs to be put on the table if we’re going to really talk about making the journey of being mission-aligned,” he told attendees.
That consideration matters especially when it comes to how we deal with Black and brown entrepreneurs or women entrepreneurs, who get less venture capital overall.
“How do we think about our investments on a particular theme or issue, and what kind of patience we have or not on that issue? Do we understand the markers that we should be thinking about towards longer outcomes and achievements in that area?” he said. “Because maybe 18 months isn’t cutting it with the kinds of things we want to align our portfolio with.”
Philly is a good place to start.
Matt Taylor, partner of Conshohocken’s Permit Capital Advisors, LLC, said Philly’s a good spot to be if you’re interested in impact investing. The city has a long and rich history of social activism, entrepreneurship, and people and businesses with a mission-driven life. (Check out Generocity’s oral history of the rise of Philadelphia’s for-profit social impact scene.)
Catherine Griffin, founder of ImpactableX Analytics, agrees. ImpactableX assesses a company’s impact metrics, from its effect on income increases to employment opportunity and access to training and beyond. When considering whether to invest, some investors are looking at the direct level of impact per product or innovation, while others want to understand the broad impact a company may have, she said.
She touted institutions like Temple University, Drexel University and University of Pennsylvania — including Penn’s 2019-launched Wharton Impact Accelerator — plus the city’s wealth of mentors and accelerator programs, for offering support for entrepreneurs who are interested in building impact-focused companies.
All of those factors are exciting for investors, too, she said, calling out Social Venture Circle and others for making Philly a place to incubate early-stage companies.
“So many companies come here and remark on the value-add that being here offers,” Griffin said. “And I’m excited to explore the possibility of sort of expanding that network to include marginalized populations that often don’t gain access to the same level of resources.”