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Impact Investing History


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Presentation by Jeff Rosen and Michael Lent of The Solidago Foundation and Veris Wealth Partners; at the Take Action! 2010 Impact Investing Conference in Boston.

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Impact Investing History

  1. 1. Solidago Foundation & Veris Wealth Partners Impact Investing History Michael Lent, Partner - Veris Wealth Partners Jeff Rosen, Finance Director - Solidago
  2. 2. <ul><li>Firm Overview </li></ul><ul><li>Sustainable Investment Focus </li></ul><ul><li>Recognition that Clients Need a Customized Approach to Impact: </li></ul><ul><ul><li>Consulting in policy and asset allocation development </li></ul></ul><ul><ul><li>Investments in all asset classes: public equities, fixed income, alternatives, impact investments </li></ul></ul><ul><ul><li>Shareholder Engagement </li></ul></ul>Overview of Veris
  3. 3. <ul><li>IPS should reflect mission </li></ul><ul><li>Discussion at the finance committee level and then brought to the board. </li></ul><ul><li>Identify a consultant who understands what options are available and is able to educate and guide the foundation through its process. </li></ul><ul><li>Asset allocation – Integrate Impact </li></ul><ul><li>Identify a starting point with institution </li></ul>Importance of IPS Process in a Mission Driven Culture
  4. 4. <ul><li>Foundation Opened Doors in 1996 </li></ul><ul><li>Commitment from the beginning: </li></ul><ul><ul><li>Developed social guidelines both avoidance and positive approaches in investments </li></ul></ul><ul><ul><li>Screened traditional managers (overlay screens) </li></ul></ul><ul><ul><li>Customized approach: globalization, etc. </li></ul></ul><ul><ul><li>Green Investing </li></ul></ul><ul><ul><li>Community Investments: up to 10% in community loan funds </li></ul></ul>Relationship to Solidago
  5. 5. <ul><li>Changes at the end of 2008: </li></ul><ul><ul><li>Best in Class </li></ul></ul><ul><ul><li>Strict Screens </li></ul></ul><ul><li>Corresponded to the specific mission of the foundation: what issues/concerns based on mission and grantees. </li></ul>ESG Screening
  6. 6. <ul><li>Community Loan Funds bought by manager </li></ul><ul><li>Additional due diligence </li></ul><ul><li>Fund of Funds: Calvert Foundation Notes </li></ul><ul><li>Private Equity Fund: Clean Technology </li></ul>Direct Investments
  7. 7. <ul><li>Partnership Between Financial Advisor and Foundation – But need Process to Determine Impact Accountability: </li></ul><ul><ul><li>On the spectrum of impact investing, what is financial advisor’s accountability for financial performance </li></ul></ul><ul><ul><li>If a market discount is tolerated for program returns, how is program impact assessed </li></ul></ul>The Gray Area
  8. 8. <ul><li>Worked Closely with Veris on Traditional Portfolio Management </li></ul><ul><ul><li>Cash Flow </li></ul></ul><ul><ul><li>Asset Allocation </li></ul></ul><ul><ul><li>IPS </li></ul></ul><ul><li>Worked Closely with Veris on Refining Screens </li></ul><ul><ul><li>Avoidance Screens </li></ul></ul><ul><ul><li>Manager Searches </li></ul></ul>How Did Solidago and Veris Work Together Across Spectrum?
  9. 9. <ul><li>Continue to Work with Veris in Search of Sustainably Integrated Managers </li></ul><ul><ul><li>Portion of Endowment Currently Allocated via Manager </li></ul></ul><ul><ul><li>Ways to Transition with relatively conservative risk tolerance (From IPS) </li></ul></ul><ul><ul><li>Are new, well understood options coming to the mainstream </li></ul></ul><ul><ul><li>Conducted research on sustainability oriented or green real estate funds </li></ul></ul><ul><li>Screened traditional alternative investments (Hedge Funds etc) for green and sustainable characteristics </li></ul>Continuing Efforts to Enhance Financial First Investments:
  10. 10. <ul><li>High Mission Engagement with Financial Manager </li></ul><ul><ul><li>Veris conducted due diligence on intermediary loan funds in early days. </li></ul></ul><ul><ul><li>Transitioned us to Calvert, which worked well for all </li></ul></ul><ul><ul><li>Worked with us on a few specific deals which they were bringing to multiple clients (equal exchange) </li></ul></ul><ul><li>Veris led some investments that were borderline PRI/MRI or designed for financial return: Clean Tech </li></ul>Collaboration on Blended Impact and Financial Investments
  11. 11. <ul><li>PRI Program changed over the years </li></ul><ul><ul><li>Initially crafting a diversified portfolio </li></ul></ul><ul><ul><ul><li>Scale makes this hard </li></ul></ul></ul><ul><ul><ul><li>Couldn’t ask Veris to conduct due diligence on one off deals that appealed to us </li></ul></ul></ul><ul><ul><li>Seek more connection to our program areas </li></ul></ul><ul><ul><li>We learn by doing (mistakes as much as planning) </li></ul></ul><ul><li>Impact Investing Strategy </li></ul><ul><ul><li>Program driven model, integrating grantmaking and program related investments – Grantmaking Enhanced by supporting investments: </li></ul></ul><ul><ul><ul><li>E.G. PVGrows – Lynchpin Activist Role </li></ul></ul></ul><ul><ul><ul><li>E.G. Green Jobs/Green Justice – Early Adopters Needed </li></ul></ul></ul>PRI Targeting – From IPS Set Aside (Implementation Open)
  12. 12. <ul><li>Financial Requirement: Return of Principal </li></ul><ul><ul><li>Below market rate deals cannot cover losses </li></ul></ul><ul><ul><li>Apply conservative financial review to assess programmatic returns </li></ul></ul><ul><ul><li>To date, few write-offs </li></ul></ul><ul><li>Now Apply Program lens to PRI work </li></ul><ul><li>Small funders have to assume alignment between strategic thinking and outcomes </li></ul><ul><li>We’re a small funder, focused on system change. We are not looking at particular impact measures such as jobs, displaced carbon or food miles. </li></ul><ul><ul><li>Program Partners Focus on Measurables </li></ul></ul><ul><ul><li>We do measure impact in financial leverage </li></ul></ul><ul><ul><ul><li>Financial Partnerships Critical at Scale </li></ul></ul></ul><ul><ul><ul><li>Program Partnerships Drive Models </li></ul></ul></ul>Measuring Impact - Program Side First
  13. 13. <ul><li>Process informs itself and discipline to mission generates positive, though unpredictable outcomes </li></ul><ul><li>Process Evolves </li></ul><ul><li>No one “correct strategy”. Needs to be customized for each institution </li></ul><ul><li>Clients are interested in collaborating where there are similar investment focuses. </li></ul><ul><li>Chance to leverage both experience, simplify follow-up. </li></ul>‘ Conclusions’