Get out and be bold. Impact investing as a tool is only as innovative as the investor who wields it. As a lean family foundation, we at The Fink Family Foundation have challenged ourselves to utilize all forms of capital—human, intellectual, social, spiritual, and financial—to make the change we want to see in the world. Impact investing enables us to leverage all these assets to identify, research, and build replicable and scalable solutions that pave the way for follow-on impact investments by larger funders. Our goal is to spark a broader impact investing movement that leverages dollars from larger foundations and market rate investors, and it all starts with people.
Investing in Human Capital
One challenge facing the impact investing field is a widespread lack of knowledge and skilled human capital. Awareness, education, and skillsets among funders, intermediaries, and impact investing advisors need to advance at a faster pace. The latter two groups now can't resist the pull from their clients to provide advice and investments that align with family and foundation missions, purpose, and investing style.
The Fink family started its impact investing journey in 2001 by focusing on mitigating climate change through energy efficiency, solar business model development, and carbon markets. We believed investment in this area would have the largest impact across the environmental and ecological sectors. We then expanded our investment scope to include adaptation and resiliency, with investments such as green housing in New Orleans and storm water infrastructure, to keep pace with the changing world. Our next focus will be on understanding risk in our portfolio as a whole in this volatile environment, including stranded assets evaluation and longer-term shocks to portfolios due to climate change. Each of these phases has required that we invest in distinct types of human capital—environmental experts in the carbon markets early on; then solar, wind, and energy efficiency practitioners; and now specialists of risks and volatility.
Understanding how important this expertise has been to our own effectiveness, one of our main initiatives is now building the capacity of the impact investing sector, in part through leadership development. We have supported interns, fellows, and MBA students interested in pursuing impact investing, at both for-profit and nonprofit organizations. Proudly, many of those young professionals are now up-and-coming leaders in the field. We are in the company of other pioneering organizations in this area, including Cordes Foundation and Sorenson Impact Foundation, and it is encouraging to see more and more higher-education institutions creating curriculum for impact investing and the CFA Institute and other credentialing organizations building it into their training.
Investing via Collaboration
A common challenge for foundations is getting the investment side of the house speaking with the programmatic side. Without this, we lose the bigger picture of trying to solve a problem.
To break through this barrier in one of our issue areas, food waste, we provided seed funding and human capital to create ReFED, a nonprofit initiative focused on bringing together US organizations to glean economic, social, and environmental value from the reduction of wasted food. We realized that to move the needle, we needed far more investment than our foundation could provide; we needed to collaborate. Our grantmaking had been active in food insecurity and sustainable agriculture, while the investment team at MissionPoint Partners had deep knowledge and investment expertise in the agriculture and waste sectors. Under ReFED, we came together—along with nonprofits, policymakers, and other investors—as a single team to tackle the problem of food waste. By involving everyone in the discussion and facilitating dialogue, the ReFED effort has provided a framework for investments to achieve the food waste reduction goals. Annual catalytic investments of $100-$200 million over a decade can unlock $18 billion in financing, leading to a $100 billion gain in economic societal value (see ReFED report) An example of this might be investing in food recovery infrastructure to leverage foundation grants to existing NGOs.
Investing in the Future: Millennials and Diversity of Voice
My wife Betsy and I are thrilled to have our children Drew and Carly as equal trustees in the Fink Family Foundation. We are all learning to make decisions as a team with different generational viewpoints. Drew and Carly are pushing us to get out of our “environmental” silo and think more broadly of the impact on people, such as climate refugees—communities affected and displaced by effects of climate change.
Millennials have a wonderful way of looking at the world's problems, highlighting authenticity and transparency enabled by new technologies. They raise questions like: How could you make grants to a climate NGO and keep obfuscating fossil fuel companies in your portfolio? They believe being authentic is a total alignment of all your actions. As a result, we have shifted toward the goal of achieving 100 percent impact over time in our investments, aligning our entire investment portfolio with our mission. The Heron Foundation’s early efforts to organize for 100 percent impact have been instrumental in raising the bar, with the KL Felicitas Foundation and the Blue Haven Initiative family office leading the way and seeding the 100% Impact Network.
We also plan on diving deeper into issues that millennials care about, such as environmental justice. Foundations focused on environmental issues are not consistently looking at the bigger picture of health and access to healthy food, clean water, and climate refugees. We need to operate beyond our silos and work with environmental justice organizations; we need look at water quality in Flint and elsewhere, and consider rising sea levels affecting small island nations and our coastal communities right here in the United States. Grants alone will not solve these problems. Actively engaging millennials will push us to apply our knowledge and expertise holistically, and bring perspective and insights we have lacked.
We also feel the lack of cultural diversity in impact investing is holding us back. This is all too apparent at conferences and meetings, and even among our own fellows and interns. As we learned through ReFED research, not proactively talking directly to those we are trying to help leads to an inefficient use of resources and suboptimal impact. Consciously engaging in authentic and open dialogue with the full spectrum of stakeholders allows us to elevate our solutions and long-term sustainable systems change.
Going forward, we will explore how to integrate this into our initiatives. Our challenge will be to find those areas where our knowledge and expertise might help elevate the conversation, plus how our impact team can offer insight into how foundations can leverage impact by aligning their portfolios with their programmatic areas. As we internally focus on cross-generational conversation to enhance impact, we intend to support this dialogue throughout the sector, bringing together seasoned investment professionals with young social entrepreneurs and NGO professionals trying to scale solutions.
Philanthropy is reinventing itself for the 21st century. Foundations in general need to take the lead, and family foundations can be uniquely influential. Millennials will push us there faster. And by being inclusive, we will elevate our insights. What an exciting time.