Philanthropy Perspectives is a platform to lift up thought leadership from the field. In select editions of the Weekly Download, guest contributors will share their insights on philanthropic issues, innovative ideas and best practices from the sector. 

Impact Investing in our Great State: What's in a Name, and an Investment?

Jennifer Oertel, CMF's impact investing expert in residence, is the guest author of this edition in which she shares insights from the field of impact investing in Michigan. 

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"What’s in a name? That which we call a rose by any other name would smell as sweet.” –William Shakespeare

“Impact investing” is also called “mission investing,” “social investing” and a myriad of other things. The name inspires excitement in some and fear or disdain in others.

Whichever name is used, at the core is this concept: deploying at least a portion of investment assets intentionally to support positive social impact with the expectation of a financial return. It’s seeing a need in the community and finding a unique way of solving it. It’s another tool available to philanthropy that can be used in addition to, or in conjunction with, grants (which hopefully generate social impact but a negative 100 percent return of capital).

It is that point which begs the question: Is it enough, with the knowledge that we possess today, for those of us in philanthropy who dedicate ourselves to the social good, to be content dedicating roughly 5 percent of our assets to our respective charitable missions while “the other 95 percent” is invested in the traditional manner? What if our investments are supporting activities and producing social results that go directly against our mission, that perpetuate the social problems our charitable dollars are aiming to solve? For example, consider an environmentally focused funder that unknowingly invested in fracking and fossil fuels because the investment was buried within funds of funds of funds.

Instead, can we manage our investment portfolios with the same care and thoughtfulness we apply in grantmaking decisions? Imagine if we actively engaged a portion of investable assets to bridge the gap between the amount of available charitable dollars and the resolution of seemingly insurmountable issues we aim to solve.

Our investment assets have an impact, whether intentional or not, whether that impact is in line with our values or mission or not. It’s possible for the impact of our investments to in fact go directly against our mission and vision, to perhaps even undo the work of our grantmaking. 

We are at a critical point in Michigan’s impact investing ecosystem. Through the efforts of CMF and many of its members, Michigan was an early adopter of the notion and lifted up as a national leader. The momentum continues as not only private foundations but also community foundations, corporations and individuals are taking steps to more intentionally invest their assets with an eye toward creating positive social impact. We are also seeing more stakeholders at every level desiring to learn more and do more.

But we are also facing challenges. Lack of resources. Lack of coordination of efforts causing various stakeholder groups to work in silos. Misconception, misunderstanding – or fear – causing some in the field to reject the notion of more intentional deployment of investment assets altogether. Incorrect assumptions that financial returns must be sacrificed. In some cases, even when people have seen the results and been pleased with the social and financial returns, they recoil at the thought that they were involved with an “impact investment.” 

In the coming weeks, I will be presenting a blog series hosted through CMF: “The A to Z of Impact Investing.” We’ll take our readers on a journey from the basics of impact investing and how to get started, to overcoming barriers and finding deals. 

So, let’s not get caught up in names. Let’s focus upon our shared mission of doing good. We hope you’ll join us in the journey to a realization that one can do well and do good at the same time.

As CMF’s impact investing expert in residence, Oertel works closely with the impact investing committee. She provides impact investing assistance and resources to CMF members, as well as anyone located in Michigan and those seeking to make impact investments in our state. She is helping to develop the emerging practice throughout Michigan through her leadership in continued implementation of the HUB model and connect with the national and international field of impact investing.

Connect with CMF’s impact investing resources.