Social Impact Investments Get Boost From White House

June 25, 2014       Mark Hrywna      

Nearly $200 million in commitments by a coalition of foundations will help drive $1.5 billion toward impact investing as the group today also issued policy recommendations to incentivize impact investing.

The U.S. National Advisory Board (NAB) on Impact Investing released its policy recommendations as part of a White House roundtable this morning. The White House announced more than 20 new commitments from “investment firms, foundations and family offices that will drive more than $1.5 billion into impact investments that tackle pressing problems at the national and global level over the next five years.” A quartet of NAB members also committed $184 million:

  • Omidyar Network, $100 million: Early-stage risk capital over the next three years to new impact investments that create opportunity in financial inclusion, education, and consumer Internet and mobile technologies.
  • Case Foundation, $50 million: Increasing the foundation’s focus on accelerating the growth of impact investing by investing $50 million in impact-focused funds.
  • MacArthur Foundation, $25 million: To support the launch and scaling of several innovative energy efficiency programs to meet the challenges and needs of multifamily housing in the U.S.
  • Ford Foundation, $9 million: To increase economic mobility and opportunity of low-income families in the U.S., including expanding and creating equitable affordable housing with access to transit in the Denver area, addressing financial gaps in the Appalachian region to spur development and create jobs, and finance innovative health care models in low-income communities, with a focus on creating high-caliber jobs.

Prudential Financial committed to building a $1-billion impact investing portfolio by 2020 to eliminate barriers to in financial and social mobility while Capricorn Investment Group will deploy $100 million over three years in sustainable real assets, including renewable energy and energy efficiency. The McKnight Foundation and Rockefeller Brothers Fund will dedicate 10 percent of endowment assets, about $200 million and $84 million, respectively, to impact investing.

The Center for Advancement of Social Enterprise (CASE) at the Fuqua School of Management at Duke University will track the progress of today’s commitments and make the information publicly available.

“Impact investing uses the power of markets to unleash private capital for public good,” Matt Bannick, co-chair of the US NAB and managing partner at Omidyar Network, said. “Done well, it can scale sustainable solutions to some of our toughest social challenges, such as affordable housing, clean energy, quality education and workforce development,” he said. The NAB on Impact Investing has “come together to offer a policy framework that can help catalyze the market and transform millions of lives in a positive way.”

The organization’s report, “Private Capital, Public Good: How Smart Federal Policy Can Galvanize Impact Investing – and Why it’s Urgent,” can be found online at www.NABimpactinvesting.org. The report offers policy recommendations in the short-term and supports policy ideas to encourage impact investing in the long-term:

  • Remove regulatory barriers to unlock private impact investment. For example, the IRS could clarify and refine rules about foundations investments in for-profit enterprises to help fill the funding gap between grants and commercial capital.
  • Increase effectiveness of government programs, such as revising longstanding investment restrictions to allow agencies to participate in a wider range of impact investments, reinvest its proceeds for portfolio growth and develop next-generation financial instrument and models.
  • Provide incentives for new private impact investment as “some markets need a push to get off the ground.” Federal agencies should have authority to replicate successful impact investing programs like the Community Development Finance Institution (CFDI).
  • Support innovative impact enterprises.
  • Standardize metrics and improve data access. Development finance institutions could coordinate to create a platform that enables data sharing and due diligence, modeling efforts after the Department of Education’s Investing in Innovation fund.

“Innovative strategies by government can unlock new sources of capital and significantly advance the impact investing sector,” Tracy Palandjian, co-chair of the US NAB and CEO of Social Finance US in Boston, Mass., said. The report, she said, articulates strategies — most of which are budget-neutral — and provides a “roadmap to a more enabling policy environment at the federal, state and local levels.”