Mission Investing or Impact Investing?

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By Maggie Cutts, MBA Candidate

Published 8.13.13

 

At Presidio we often see a debate develop around semantics in this growing field of sustainability. Sometimes it is our worst enemy, as titles become co-opted, or re-created and stigmas are born. But in the end, the debate itself is usually indicative of a larger question that is central to the content of our work. These moments should be seen as opportunities for organizations to look hard at their own definitions and thereby focus more acutely on their task at hand.

This issue recently surfaced for me at my current Fink-Sponsored Internship with Mission Investors Exchange. In the field of Sustainable Investing, many have heard the term “Impact Investing” in the financial sector, while others in the non-profit or philanthropic arena are more prone to use “Mission Investing.” For the financial folks, even if they serve in such capacity at a Foundation, the word Impact maintains the aggressive nature that embodies the intention behind their investing. For those on the programmatic side at a foundation, funding is not thought of this way. Instead, money is used to “support,” “foster,” or “incubate.” Impact could imply two forces driving at one another rather than working together. For them, Mission Investing is an appropriate term because it conveys an alignment of values toward a mutual good.

The two terms could remain distinct if only the growing movement toward increased impact/mission investing at Foundations didn’t require collaboration for success. The challenges many foundations encounter arise from the silos that have been built for generations around philanthropy and finance. Replace that with left and right, good and evil, or whichever two opposing fields of choice. But there is a rising consensus among leaders in business, government, philanthropy, and communities that there is tremendous advantage to collaborating across industries for a common cause.

So How Does This Relate To Community Foundations?

This came up as I was conducting an interview for one of the projects I am tasked with: helping to put together a resource called Community Foundation Field Guide to Impact Investing: Reflections from the Field and Resources for Getting Started.  Its purpose is to help Community Foundations navigate this new and promising area of investing in order to put more of their “dollars to work”. And since impact investing is a shift from traditional funding, there needs to be a corresponding shift both in thinking and in the literal infrastructure of an organization. It is a process rather than a box to check. Financial decision-making must open up to include the needs of the community. And program directors must get comfortable using financial terms to frame relationships. The Field Guide will make its debut at the 2013 Fall Conference for Community Foundations sponsored by the Council on Foundations.Mission-Investors-Exchange-logo1

If successful impact investing is achieved, Community Foundations can further their positive impact on communities by filling in where other organizations (banks, governments, businesses, schools) have fallen short. Loans to “high risk” projects at affordable rates, cash deposits in local credit unions, bridge loans or guarantees for seed funding of social enterprises, equity in neighborhood waste recycling, are all ways foundations can fund projects that stimulate the economy without sacrificing any of the grants on which other programs depend. It really is a question of whether foundations can rise to the challenge by proactively choosing innovative financial structures to fund the projects that will shape our future. This is the mindset of the most successful investees, the social and environmental entrepreneurs whose projects are waiting to change the world. The cross-pollination of ideas and influence that occurs both internally and externally at Foundations is what will push us forward. As Community Foundations are structured to be a center point of their community they are best suited in this role as convener.

My Experience as an MIE Intern

This discussion should demonstrate the degree of depth and breadth this internship has offered me. Mission Investors Exchange, in the end, is a networking and resource point for all Foundations interested in mission investing. In being so I am learning first-hand the array of financial and business models, scenarios, and ways to structure deals and leverage relationships that innovate the process and vehicles to fund what our communities need to grow and develop. Furthermore, I am lucky to have been matched with Melanie Audette, a supportive and generous supervisor who has allowed me to shape the direction and content of my work with them.

Apart from working on a team to develop the visual image and feel for the Field Guide, I also reached out to contributors and practitioners on their experience with the different areas of impact investing. What was it like to work with an intermediary? How were you able to work out terms with the investee that were appropriate and feasible from all perspectives? How are you measuring the impact of your investment? How does the Board of Directors feel about this new approach? What are the biggest challenges you face as an advocate of increased mission investing at your Foundation? The list goes on, but it should be clear that I cannot imagine a better learning opportunity than to engage practitioners on this level and understand what their work is really like. In association with the Field Guide, we are putting together a database of case examples that represent the spectrum of mission investing opportunities, including all asset classes, investment amounts, and issue areas.

Maggie Cutts, MBA Candidate

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