Giving Compass’ Take:
• Hummayun Javed and Gabrielle Morgan share steps for those who want to ensure their investment portfolios are in line with their social impact goals.
• Which stakeholders will you need to engage with to ensure your portfolio transition is successful?
• Learn more about philanthropy’s role in impact investing.
Let’s begin with the most important lessons about getting ready for an impact portfolio:
1. Market-rate returns are possible for all types of investors. That said, it won’t happen overnight.
2. Impact investing is still investing. There are no guarantees in traditional investing, nor are there in impact investing. You still have to weigh the risks of any impact investment as critically as you would a traditional investment.
3. Don’t wait for perfect measurement. Many of the endowments and foundations we studied expressed frustration with the lack of comparability and uniformity among existing impact measurement tools. Don’t let this hold you back—choose a metric and get on with it!
4. Collaborate and leverage the industry. Throughout our research, one theme remained constant: Transitioning a portfolio to impact requires a wide range of expertise. Good news: There is no need to go it alone.
5. Be ready for a spike in engagement. Conversations about moving toward impact investing will change routine interactions with boards, investment committees, beneficiaries, trustees, and other stakeholders. Be prepared to get—and keep—all of them behind the transition.
There are meaningful steps you can take within your organization to kickstart your impact investing journey:
1. Figure out what you own. Start by asking a simple question: What are we invested in?
2. Put it in writing. No matter how broad or specific, add your intentions to transition to impact investments in official documents, such as the investment policy statement.
3. Make your intentions public to keep you accountable.
4. Leverage your liquid investments. Yes, private market investments make for the most compelling impact investment stories. But the fastest—and still significant in terms of impact—changes are made in the liquid part of a portfolio.
To smarten up the industry’s efforts, newcomers and old hands should take these case-study-inspiring steps:
1. Change others, not just yourselves. Impact investors should use their influence with service providers—such as wealth management firms, asset managers, pension funds, or 401(k) providers—to change their practices in ways that spread the concepts of impact investing even further.
2. Elevate more social issues. Most of the case studies we reviewed focused on a small number of impact themes, most notably climate change.
3. Share the journey, not just the results. Impact investors need to talk about more than portfolio returns.
4. Zoom out. Many of the cases we studied focused too closely on the individual or organization instead of the investments or lessons.
Read the full article about how to transition your investment portfolio by Hummayun Javed and Gabrielle Morgan at Stanford Social Innovation Review.
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