From dealflow to a lack of education, this week leaders in social finance addressed some of the key barriers preventing the UK market from flourishing. Last month Antony Bugg-Levine, the chair of the Global Impact Investing Network, told delegates at London’s Critical Mass conference that in the world of social finance there were “hypers, haters and […]Read More ›
Unlocking Institutional Investment for Impact: Interview with Ben Thornley, Part III
Yesterday, I posted Part II of my interview (read Part I) with Ben Thornley, Director of Insight – Pacific Community Ventures’ thought leadership practice in high-impact investing. At InSight, Ben is responsible for PCV’s policy research and social performance measurement initiatives, advising some of the country’s most prominent institutional investors and philanthropic foundations. Here’s Part III, wrapping up with Ben’s hopes on what readers will take away from Impact at Scale: Policy Innovation for Institutional Investment with Social and Environmental Benefit and what’s next for InSight’s important work on policies around impact investing.
Becky Slater: More than anything, Ben, what do you hope that your readers will take away from the research and findings contained within Impact at Scale?
Ben Thornley: I think the most important thing is that people see that this is happening already and that it can be done. Yes, there are a ton of constraints that we need to be aware of, but that’s fine. We’re not trying to do anything to undermine the really important tenets of fiduciary duty. What we’re saying is that within those constraints there’s a lot that can be done.
I think what we’ve demonstrated in Impact at Scale is that there is a lot already being done. It tends to be the small scale, but it’s certainly a real diversity of activity – in a lot of different asset classes, through many kinds of products, and through several types of intermediaries. So I believe that the overarching demonstration that this is possible is really important.
The logical next step, then, is answering how the government can build on that track record and capitalize on the demonstrated interest that institutions already have in ancillary social and environmental impacts to really scale up impact investing. What Impact at Scale shows is that there’s a large diversity of ways that institutions can invest in this manner.
The second thing we do in the report is demonstrate that there are a lot of ways that government can support that activity. There are many policies that have already affected – or that have the potential to significantly affect – capital markets and make it easier for institutions to invest in social and environmental value.
In bringing these two things together – the fact that investment is possible and that government has a lot of tools at its disposal – you end up hoping that we can start a conversation that builds on a track record of experience. This allows us to move much more quickly in developing a set of policy innovations that can help to grow the impact investing market. It does need to be a win-win for both sides and it does need to be collaborative.
Becky: Building on the importance of collaboration, you mentioned in your interview with Forbes that you would like to see Impact at Scale as a tool for cross-sector collaboration. Is there a particular example of this that stands out to you?
Ben: Recently, there was a great Wall Street Journal article about a fund called SJF Ventures III LP becoming the first national impact investing fund licensed by the Small Business Administration. It’s a great example of precisely what we’re talking about, in that the mere fact of the fund becoming licensed by the government has unlocked private capital for SJF Ventures. More specifically, the article talks about a Citi investment in SJF of $15 million that has really been facilitated by the government, having gone through their own very distinctive due diligence with SJF and ultimately certifying SJF Venture’s fund as an impact investing fund.
That process gave Citi the assurance it needed to make such a substantial financial commitment. The government has not invested any money in SJF. It’s merely the rigour and credibility that the government has brought to its certification of SJF that has been the catalyst for additional private equity to come to the table. This is a classic example of the private and public sectors collaborating.
Becky: Finally, what’s next? What plans does InSight have for future research projects in this and related areas?
Ben: We were very proud to receive a significant grant from the Rockefeller Foundation of $1 million to continue this work, and we will be looking for investors to join the Rockefeller Foundation. Our plan is to continue building on the primary research that we’ve done already and that we have an interest in: sustainable cities, social and impact enterprise, and the kinds of policy environments that are shaping the growth of those markets.
Beyond that, we’re building a more formal network of researchers internationally to develop knowledge in the area of impact investing policy and to share best practices. We gathered together a first meeting of folks internationally doing this work last July in Italy and we’ll be doing so again in Brazil in July around the Rio+20 Conference.
We’ll also be developing a website and advisory group, of which Tessa Hebb from Canada will be a part. We’re really building an international network of researchers who can share best practices in the area as what we’ve found with policy is that it’s surprisingly transferable across jurisdictional lines. For example, policy innovation that originates in the UK can be very easily adapted to other markets.
Similarly, innovations out of the US, such as the creation of Community Development Financial Institutions, are things that other countries have looked closely at and have considered implementing in their own environments. We’re aiming to develop a set of case studies of policies, both those that have worked and those which have not been as successful, to create a set of best practices that can be adopted globally. There’s a real transfer of knowledge objective that we have for the project moving forward.