With a growing number of family foundations and increasingly mission-minded private equity money, there might be competition for foundation talent to come. And it could be a start to “professionalize” the market.
That move toward professionalization has been the subject of recent initiatives by D.C.-based Case Foundation, the family foundation of AOL founder Steve Case and his wife, Jean. Kate Ahern, vice president of social innovation at the foundation, believes it is a good thing — though it might come with a hefty price tag.
“As more of the big time investors get into the space there’s going to be a little bit of a talent shortage,” said Ahern, noting that just a month ago Goldman Sachs acquired socially-conscious asset management firm Imprint Capital. “I think they realized they needed a lot more in-house expertise than they had. I think big banks and investment firms are also looking for that talent — not just folks who can evaluate companies but also folks who understand the education market or the clean energy market to be able to help evaluate investments.”
Ahern has been managing the foundation’s impact investment initiatives for the past two of her four years with the Case Foundation, though Ahern said the organization has been making impact investments for much longer. Ahern has been guiding the foundation to make more strategic plays in the market (such as partnerships with Entrepreneur Media, Impact Alpha, Duke University and Impact Assets) and becoming something of an educational tool for other family offices and impact investors alike by publishing impact studies.
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Those educational resources have become a crucial component of the Case Foundation’s recent push to further professionalize impact investment practices. What’s the incentive for others to follow suit? Ahern said that like anything else, it’s a collective realization that the time has come to start shedding old tendencies.
“There’s a growing realization, not just in early stage investing but with all companies, that we may have scurried a little too far away from this creation of long-term value,” Ahern said. “We’ve focused a little too much on the really short term returns and really only financial returns, but companies are capable of creating value beyond financial returns.”
As large investment firms begin to swallow up and deploy impact investment initiatives, it’s becoming increasingly important to educate adjacent communities on the outskirts of the social impact ecosystem — and it all begins locally, with access to the necessary tools those communities need to understand and apply models for social change. These tools are made available by local institutions like Wharton, which is hosting another iteration of its eponymous Social Impact Conference on Oct. 29.
The root of that comprehension is vocabulary — and social impact circles employ lots of it.
“When you look at the word ‘impact’ in general, in certain circles, it’s become very dilute,” said Stephanie Kim, associate director of community strategy at the Wharton Social Impact Initiative. “A lot of times, impact refers to intentionality – [but] can you measure it, can you see it?”
That’s why Kim said WSII never attempts to define social impact. Instead, the organization “tells stories” that affirm what it believes embodies the term. What it can define is “impact investing,” terminology that is still unfamiliar to many across philanthropy, government and business.
For those attending the conference, Kim said it will be near impossible to leave without a comprehensive understanding the realm of impact investing. From the beginning, she said, the conference will explain what impact investing means “in plain English.”
“We have a keynote and a panel and a special feature all focused on innovative finance,” Kim said. “Specifically on impact investing, because this is one of the areas we really specialize in at WSII.”
Ahern will play a role in that focus, which could very well include trends in the market. One of those trends is a growing cultural standard among millennials for supporting socially-conscious businesses. It’s a sentiment recently echoed by WSII managing director Sherryl Kuhlman earlier this year. Millennials, she said, were raised to see social problems as an opportunity for innovation — the drive is “in the air” they grew up with. Ahern said there’s a general sense that young people are not only wanting to invest in social enterprises, but wanting to create them.
That saturation is beginning to become a point of concern for the social impact community in the aggregate. Crowdfunding has become something of a reliable source of seed funding for social entrepreneurs — at least enough to capture the attention of early stage investors. But what then?
“Folks are starting to be concerned about liquidity. How do investors get their money out of these companies?” Ahern said. Social entrepreneurs don’t necessarily want to take the wrong kind of private equity, either. “They don’t want to sell a piece of their company to someone who doesn’t believe in their mission. They’re a little more wary of raising new money and being able to pay back early investors.”
These are issues Kim said WSII believes it can shed some light on at the conference by gathering agents of change and industry practitioners across sectors for a day of keynotes and panels surrounding impact investing, social impact bonds, social entrepreneurship, public-private partnerships and more.
It’s community building on a large scale. The bigger that community becomes, the better the community becomes.
“Sometimes it feels like we’re building the plane as we’re flying it,” Ahern said. “The more folks who are in building it with us, the better. There’s plenty of work to do. It’s still a really small sector, but I think we’re poised for pretty serious growth over the next couple of years.”