Antony Bugg-Levine literally wrote the book on impact investments.
The CEO of the Nonprofit Finance Fund discussed the topic with philanthropic, corporate and foundation leaders at a speaker’s series held by The Center on Philanthropy and Public Policy, based at the USC Price School of Public Policy.
According to the Global Impact Investing Network, impact investments are made in companies, organizations and funds with the intention to generate a measurable, beneficial, social and environmental impact alongside a financial return. The investments can target a range of returns from below-market to above-market rates, depending upon the circumstances.
Bugg-Levine was joined by Andrea Phillips, vice president of the Urban Investment Group at Goldman Sachs, to explore philanthropy’s role in this innovative approach to community problem-solving.
Impact investing may seem like a simple idea, Bugg-Levine noted.
“But it’s hard to do … it’s like brain surgery trying to get a deal done,” he said. “The organizations that are doing this [are] taking a big risk to do something differently.”
One of those organizations is the Urban Investment Group, which has created new instruments to invest in social impact bonds.
Phillips and her team led an investment in Rikers Island, stemming the inmate recidivism rates in partnership with public agencies and nonprofits. This was the first such transaction ever executed by a financial institution in the United States.
“We thought it was really an exciting way to use our human capital, our structuring expertise and technical understanding of public-private partnerships, as well as the firm’s capital, to make this type of investment,” Philips said.
She and Bugg-Levine pointed to a shift in wealth to a younger, more entrepreneurial generation, ongoing demand for social services and a developing range of tools and investment vehicles to explain the growth of impact investments in recent years.
“The millennial generation is really excited about this,” Philips said.
However, she added, “Impact investing is not a replacement for grant-making. It’s another tool in the tool box.”
Bugg-Levine discussed the future of impact investments.
“There is a gathering storm of evidence that if [philanthropists and foundations] are smart about it, you can both make money and also target social issues you care about; then the fiduciary duty of an endowment’s investment committee becomes very interesting. What is the responsibility of someone who is charged with investing in endowments assets?
“And the truth is this is really hard. It takes a lot of attention … it just depends on the will and the creativity of the foundation.”
The “Conversation on Philanthropy” was made possible by the sponsorship of the Goldman Sachs Philanthropy Fund.
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