By Curt Lyon, Executive Director of Transform Finance
Last week, I had the pleasure of attending the Total Impact Summit in Philadelphia. Hosted by ImpactPHL and SOCAP, the event demonstrated the high demand for impact investment community and knowledge: in just the 4th year, it’s already grown to a national audience of over 300!
I walked away from the conference holding – even more than usual – the tensions of convening a big tent in the impact investing space: how do we direct the massive amounts of capital needed in order to tackle the issues of our time, while acknowledging the constraints of investors and even trying to bring in new ones?
On one side of the room, there was a sense of optimism. We cheered at the growth of impact investing over the past several decades. We discussed amazing work being funded by impact funds, like tech entrepreneurs developing solutions to the climate crisis. Some speakers looked at major societal challenges, like the racial wealth gap, as opportunities for economic growth, as with the potential left on the table by investing in only white male entrepreneurs.
On the other side of the room, there were some strong critiques of the assumption that impact investing is always a win-win. At times, this led to mixed messages. Take DEI investing, broadly defined here as investing in entrepreneurs of color and hiring diverse managers. Some mainstage panelists praised the ability of DEI investing as a solution to inequality and even the national deficit, while others, notably Jessica Norwood of RUNWAY, criticized the DEI approach. Norwood made clear that if you as an investor are starting from the goal of maximizing returns, you cannot make investments reparative to Black communities and other communities left out of the economic system. This means going beyond just the “who” of investment, and more towards the “how:” more favorable investment terms, from return target to timeline to the resulting ownership; and engaging deeply with communities of color in determining their needs. This point was echoed by Allegra Stennet of New Majority Capital, who encouraged audience members to look deeper at the economics and how value is distributed between investors, fund managers, and entrepreneurs.
As this tension simmered throughout the conference, my interest was caught by the high density of individuals, family offices, and small family foundations at the Summit. These are the types of asset owners that are most flexible and nimble to make changes to their approach to impact. As surfaced in Margot Kane and Teresa Araco Rogers’ workshop with individual investors and family offices, there is a massive generational wealth transfer happening right now. 80% of heirs will seek a new financial advisor after inheriting their parents’ wealth, a figure that shocked me to learn. A major driver behind that is a generational difference in values.
As someone at an organization that promotes impact opportunities that deeply reconsider who wins and who loses in the economy, I see the transfer of wealth as a major opportunity to fund the corners of the impact space that are hard to fund. Imagine what would happen if new wealth holders shifted away from maximizing the growth of wealth towards preserving it (let alone redistributing it). It would open up much needed flexible impact capital: catalytic investments that anchor emerging managers in innovative impact areas (e.g. Unlock Ownership Fund, which uses capital earmarked for charitable purposes for emerging ownership-focused funds); a willingness to actually shift decision making power to community organizations and grassroots-led funds (e.g. Justice Funders and Just Futures’ JTIC Fund), and opportunities to build up track record for emerging impact areas (e.g. Community Ownership of Land). These types of transformative investments were the subject of my workshop at the Summit, which I led with Cisco Garcia of Just Futures.
But in order to support asset owners in making those kinds of investments, some things need to change. Here are some pieces of advice that emerged from conversations at the conference:
- Question the mantra of “doing well by doing good.” Fortunately, there may be answers in Marjorie Kelly’s new book, Wealth Supremacy, which was the topic of her pre-recorded closing plenary at the Summit. The baseline assumption that investors exist to amass wealth and maximize return on investment (even in an impact context) encourages the use of conventional investment frameworks that are ill fit for impact-oriented funds and enterprises.
- Look for communities of practice and resources to turn to for guidance and dealflow. Some sources of dealflow for these investors mentioned at Total Impact Summit: place-based networks that connect asset allocators and investment opportunities, like ImpactPHL’s OptImpact; membership networks like Toniic, which can be forums for sharing diligence and peer-to-peer learning; even media sites dedicated to impact investors, like ImpactAlpha. But still, deals often come to an investor’s table through word-of-mouth, and, as Margot Kane of Spring Point Partners said in her workshop, “we have a co-investor problem, not a pipeline problem.” The field needs more spaces to guide new investors and share transformative investment opportunities.
- Encourage your advisors and wealth managers to push other clients to be more transformative, and to go in on investments as a cohort. Many first-time funds and fund managers of color, which unsurprisingly are those who are most likely to shift power and buck conventional impact trends, have difficulty raising capital without getting on advisors’ platforms. For example, at the conference we heard from Blackstar Stability, a fund that supports people of color to replace extractive contract for deeds for conventional mortgages and become true homeowners. Blackstar completed their first raise in part due to the approved diligence by several advisory platforms.
- Center yourself as someone within an institution of power and influence. We live in a society where the vast majority of people don’t have capital to invest, and those who do wield an enormous amount of power to dictate resource flows that affect us all. To truly build an equitable society through moving capital, those who sit in that seat must grapple with the various privileges that got them there. This isn’t easy, and requires potentially uncomfortable processes. But it’s the only way that investments can start to shift power dynamics between investor and investee, and fuel an economy where decision making power and economic benefit are significantly shifted.
- Learn from organizations who are already doing the deep work of organizing wealth holders and shifting their practices. Resource Generation (through their Transformative Investment Principles), Justice Funders, and radical advisors (like Chordata Capital, who participated alongside me in multiple Total Impact Summit sessions) are all working to fundamentally shift the capital conversation for asset owners.
As surfaced at the Total Impact Summit, there are plenty of understandable constraints for investors that will prevent them from jumping straight into the “deep end.” But many investors are actually more capable of pushing boundaries than they might think. The different impact approaches on the Total Impact Summit stage is an opportunity for impact investors to learn from those who have worked to free themselves of those constraints.
