Understanding the Different Actors in Impact Investing
January 13, 2016
For the past three years I’ve worked as an investment officer at Calvert Foundation. One of my goals this year is to do more writing about what I do, and I’m starting with a review of The Impact Investor by Cathy Clark, Jed Emerson, and Ben Thornley.
The book helped me better understand not only the transactions I manage, but Calvert Foundation’s position within the impact investing space.
As part of my job, I talk with a lot of prospective borrowers about their financing needs, and enjoy the diversity of organizations we work with--from U.S. Community Development Financial Institutions (CDFIs) that provide small business financing, to international Microfinance Investment Vehicles (MIVs). Examples of both types of organizations are profiled in the book: LiftFund (formerly Acción Texas) (a CDFI) and MicroVest (an MIV).
It was with a similar geographic and sector lens that I viewed the general impact investing sector. This helped me distinguish borrowers in my head but didn’t help me very much in understanding the space from a more strategic perspective.
Based on the fund landscaping analysis the book walks through, I can now position our borrowers in a simple matrix based on the type of the capital they raise and the investment strategy they use to deploy that capital. This approach provides much more insight into the individual organizations and the overall landscape.
As explained in the book, LiftFund is a “first responder” type fund with an investor base that is more policy driven and an investment strategy focused on earlier stage businesses. MicroVest is a “scale agent” with an investor base which is more private interest driven and an investment strategy focused on later-stage businesses.
Seeing where our own organization sits in the matrix (between LiftFund and MicroVest) helped me think about our current role and, more importantly, the direction we should move in to add the most value in the overall development of the impact investing ecosystem.
The matrix is just one example of the many things I learned from the book. In short, it’s everything I wanted to learn about impact investing that they didn’t teach me in business school. I’ll be back with more insights from the book, which you can check out for yourself.