FaithInvest’s Steven Owen
A series of events in the Netherlands this past week served as a powerful testament to a tide of energy and progress sweeping the area of faith-based investment for impact. I had the privilege of attending these events and have come away with a renewed sense of the possible, both 'here and now' and going forward.
Our friends at Anthos Fund and Asset Management hosted a one-day programme on Monday in Amsterdam that brought together approximately 130 investment professionals from family offices, faith-based organisations, foundations, and intermediaries, who came to learn about impact investing and share their knowledge. The group included a diverse group of impact practitioners in private equity, private debt, public markets, multi-asset, impact advisory, and responsible investment.
The structure of the day moved thoughtfully and well from a high level, starting with big picture issues such as the need for clear definition of terms across responsible investing, sustainable investing and impact investing – not to mention the bewildering array of acronyms in the space – and the need for reliable impact measurement.
Anthos Director of Responsible Investment Jelena Stamenkova van Rumpt shared some resources from the Impact Management Project, including a helpful graphic to position Impact investing in the broader context of socially conscious values-based investments, shown below.
From there the programme moved to more specific and granular impact investment examples and discussions by experts on how venture capital investors manage impact from the early to growth stages, the role of public equity and public debt in creating a positive impact, and private debt funds and innovations in impact measurement. A stimulating day, with some pointed questions raised about the extent to which faith organisations have entered the impact investing space.
On Tuesday afternoon, prior to the GIIN Global Investment Forum, Kate Walsh, Associate Director of Faith-based Investor Initiatives for GIIN, hosted a half- day Faith-based Investors Convening for upwards of 50 investors, asset managers, service providers and others in the faith-based investment ecosystem. The rich and interactive agenda interspersed panel discussions with small group work.
Notable themes included the challenge – and importance - of connecting the investment side of faith organisations with their faith leadership and their counterparts on the philanthropic side. Hilly Hirt, Head of Impact Entrepreneurship at the Edmond de Rothschild Foundation, sees the connection as critical, because essentially, ‘Philanthropy leads naturally to impact’.
There were wonderful examples of connecting a faith organisation’s mission to its investments. For example, Hann Verheijen, Managing Director at emergency relief and development organisation Cordaid, described how his group’s focus on fragile economies and the poor has led it to target three specific industry sectors. ‘We focus on agriculture, energy, and waste management, as investments in these sectors align best with our mission.’
It struck me at how critical it is for faith groups to connect mission with investment strategy, though this is often easier said than done, particularly as faiths may have a very broad range, or generalist, approach to applying their faith values. There is room for work within faiths, I believe, to better define this connection.
The GIIN Global Investor Forum was attended by nearly 1500 impact investors from 67 countries. This annual event is now a seriously significant gathering, with representation by all manner of impact investors – faith-based, ‘faith-informed’, and secular.
A faith-based breakout session on Wednesday focused on Islamic finance, a field described as having ‘centuries of experience that has increasingly rich applications in modern finance.’
The breakout explored Zakat, the annual tradition when Muslims donate a portion of their wealth to charitable causes, and which is a core pillar of Islam. A key message: Islamic philanthropies are increasingly using a combination of grants and investment techniques to pursue impact goals.
With Zakat in mind, Panelist Iqbal Khan, Chief Executive Officer of Fajr Capital, stressed the value of impact projects that strive to build the middle class, ‘as this demographic is quite active with Zakat’. This represents a potentially large pool from which to draw on for impact projects that help targeted groups of marginalized people, such as refugees.
On Thursday at the ‘GIF’, a breakout session was held entitled Investing With Purpose: What Faith-Based Investors Would Advise All Asset Managers. In this session, faith-based asset owners from the Catholic, Protestant, and Jewish faiths were represented.
Questions were addressed to the group that probed the tradeoffs between investment returns and impact, and a specific question addressed ‘how much return would the represented faith groups be willing give up in concessionary returns,’ in order to achieve intentional impact.
This conversation exposed the operational and accounting challenges of combining the concept of ‘intentional impact’ across the investment and philanthropic arms of organisations. For example, if an organisation’s investment arm is committed to generating a return of 8% to fund its philanthropic arm, some portion of the investment team’s efforts must be ‘counted’ toward to the total impact being achieved by the organisation, if funding directed to the philanthropic unit are reduced.
This session concluded with a question from the moderator: ‘What would your organisation like to see in its portfolio in five years’ time?’, to which one panelist responded, ‘I’d love to see our portfolio 40% to 50% invested in Impact’.
A lofty goal, one of many to which faith-based organisations can aspire.
The overarching take away for me, from this fascinating four-day deep dive into faith-based investment for impact, was the eagerness of many faith groups to apply more of their resources toward greater intentional impact, and to create more sustainable revenue streams to build upon this important work. An understanding of the connection between mission and strategy is essential to this, as is navigating the many relationships and tradeoffs involved, both internal and external.