How to Align Investments with Values: Impact Investing

Last week, Hill Capital Corporation hosted a panel discussion around local investing and aligning investments with values.

The esteemed panel consisted of Katherine St. Onge, Senior Officer at Calvert Foundation, a nonprofit that invests in organizations creating measurable social impact; Jeanne Voigt, entrepreneur, impact investor, philanthropist, and Founder of Venn Initiative, a funding model that utilizes a five percent charitable distribution for social venture startups; Justin Erickson, Principal at Essex Capital, who represents seventy-five rural communities in the Midwest and aligns interests between companies, communities, and regional investors; and John Mowery, Managing Director at Trademark Financial Management and CoFounder of Able Seedhouse + Brewery.

Much of the conversation centered around a relatively new concept called impact investing. Impact investing involves making investments in companies or organizations that are providing some measurable form of social or environmental impact, while also providing a return of capital. Impact investing is a method to funnel funds toward pressing global issues, which historically may have been addressed by philanthropic donations. However, these type of investments may provide lower financial returns than more conventional ventures.

The assembled panel agreed that identifying impact investments can be challenging. Gopher Angels used to have an affiliate group that just looked at impact investments, Voigt related. However, the group identified very few companies that could articulate a sound mission. There are financiers seeking out this type of investment, but at the local level at least there may currently be limited organizations that are fulfilling the social impact piece, are well managed, and are likely to provide some financial return to investors.

Impact investing from rural areas might be even more challenging, but not impossible, Erickson suggested. These type of investors often can become isolated or overlooked. Erickson recommended these financiers keep the local economic development agency informed of their investment interests.

Once potential investors connect with impact investment opportunities, there are multiple ways they can express their values through an investment portfolio. This concept is the very essence of Calvert Foundation, which democratizes impact investments and provides local investment opportunities to anyone. Investors can also allocate assets and target money directly toward companies with similar interests, which involves extensive screening of funds by money managers like Mowery.

However, frictions can arise when aligning investments with values. No two investors are the same. Everyone has a different set of interests and risk appetites. For example, Calvert Foundation has a specific risk portfolio. They repaid all their investors within the past twenty years and screen for companies that are likely to provide a return of capital. So even if Calvert Foundation wants to invest, sometimes a company is just out of their risk profile.

Frictions can also arise between investors and the public sector if this sector is bringing in opportunities, but no one is biting. This could be due to a perceived imbalance between economic and social return on investment. The financial return might be unclear or uncertain. Usually impact investors are more willing to take a lower return on investment; the social implications outweigh the financial. Calvert Foundation offers a partial solution to this problem: a fixed income product that offers between a one to four percent annual return rate.

And really it all comes down to one thing: if something doesn’t seem like a good opportunity, then just don’t invest.


Tools to identify market opportunities and trends

There are several key tools and resources to stay informed including: The SRI Conference, Morningstar, and Calvert Foundation.


About Hill Capital Corporation

Hill Capital is creating a pool of funds to invest in local businesses, especially those reached by namesake James J. Hill’s Great Northern Railway. Hill Capital is conducting a $10-20M public offering for shares at $1,000 per common stock.