This post was written by Grace Webster, a CASE Fellow and CASE i3 Fellow who has just graduated from Fuqua. She reflects on a visit from the final speaker from this year’s CASE i3 Speaker Series, John Goldstein, cofounder of Imprint Capital. Watch our CASE Chat with John Goldstein here.
A recent White House gathering of up and coming young philanthropists noted the increasing interest in impact investing as an alternative to traditional asset management. Young millionaires with last names that are familiar beyond the pages of Us Weekly, like Pritzker, Carlson, and Rockefeller, were invited to learn more about how they could engage their charitable interests in a variety of social impact sectors. The article mentions that more than $30 trillion in wealth will pass from baby boomers to younger generations by 2050, a younger generation that is passionate about making a difference and having an impact beyond financial returns.
One investment advisory firm that is positioned to help educate and support investors in the new era of portfolio allocation is Imprint Capital. Founded in 2007, Imprint has two goals:
- take people who are interested in impact investing and move them to actually deploying capital, and
- build customized impact investing products.
Their clients include family offices, private foundations and endowments, and traditional financial institutions. Financial institutions in particular need assistance with bespoke products to meet the unique requests of their private wealth clients, and do not have the capacity or resources to identify such opportunities in-house. Many of the products that Imprint provides are customized to reflect the distinctive definition of ‘impact’ that each investor identifies with. Indeed, while financial returns can be measured and evaluated across commonly accepted Sharpe ratios and hurdle rates, impact investments adhere to much more personal benchmarks of success.
According to John Goldstein, Managing Director of Imprint Capital and recent CASE i3 guest speaker, true impact investors often lack the capacity and human capital to do the work that they want to achieve. In order to be successful, investors need both flexibility and capacity to meet their goals. Too often, impact investors tie their own hands by imposing too many constraints on their ideal investment. For example, a family office interested in supporting early childhood nutrition among children ages 2-5 years old in rural New Mexico might find a lack of investment opportunities simply because they have created too many artificial parameters around what kind of impact they are seeking. Similarly, it take a lot of empowered manpower to work quickly and nimbly to identify and respond to investment deals in real time. Having the flexibility to adapt impact definitions and the capacity to evaluate and assess deals as they emerge are critical to developing as an impact investor.
Furthermore, as impact investing becomes an increasingly mainstream investment option, there is a need to educate both investors and wealth advisors. Investors who are familiar with the traditional investment mindset can be shown that impact investing is assessed and evaluated just like a traditional investment product by contextualizing expectations and clarifying definitions. Highlighting the market realities and showing investors and managers the opportunities that are available to them can ease concerns about deal size, effectiveness, and track record. For wealth advisors who want to help their clients become active impact investors (like me, in a few months!), the ability to listen to and understand the frame that people are using is important to constructing an investment philosophy and portfolio goals. It is more difficult to build an impact investing portfolio than people think because advisors cannot just add some impact outcomes and call it a day. Learning to listen to and speak different ‘investment languages’ allows advisors to understand what social and financial goals their clients are seeking, and how to execute on these priorities.
In investment finance, there are a lot of incomplete thoughts and implied conversations, with a certain taboo around asking for help or clarification. As impact investing becomes more institutionalized, investors and advisors must get every detail clear and be specific about intentionality and outcomes. Providing tangible, concrete examples of impact and success and sharing information about what is happening in the field and where capital can best be utilized will help the next generation of young philanthropists invest in a responsible, innovative, and meaningful manner.