Green washing or ‘impact washing’ will be on the minds of global leaders when they gather in Delhi next week for a major summit on impact investing.
Speakers at the summit, such as Al Gore and Sir Ronald Cohen, have spent the past decade catalysing minds and money towards investments that generate not only a financial return but also social and environmental impact.
But as mainstream fund managers pile in to sell products, many are voicing concerns about what they are offering under the ‘impact’ brand.
Darren Walker, President of the Ford Foundation, that is co-hosting the GSG Impact Summit, tells Responsible Investor it’s an important issue to address.
“We are concerned about green washing and the move to see profit and opportunity on the part of some in the market. We, people like me and Sir Ronald Cohen, have to be vigilant to ensure that impact investing is defined as investing that generates a quantitative financial return and social impact.
“We won’t be well served if we allow traditional investors to just rebrand their funds as impact funds when they are really not seeking measurable social impact.”
Walker says there is ‘absolutely evidence’ of this happening, “I am wary if there is not an authentic commitment to social impact,” he says. But adds, “I am also encouraged because we see in the market a recognition by a growing number of market makers like BlackRock and Vanguard and other large asset mangers that clients increasingly want double bottom line returns [financial and social impact performance].”
BlackRock has a number of funds labelled ‘impact’, including the Impact U.S. Equity Fund with top holdings including Apple, Facebook, PepsiCo and Amazon and the Impact Bond Fund whose top holdings include Morgan Stanley, Goldman Sachs and JPMorgan Chase.
For both funds, BlackRock say they seek impact outcomes.
Meanwhile, Capital & Main, a non-profit investigative news site whose advisors include former Labor Secretary Robert Reich, recently released an analysis of Goldman Sachs’ JUST exchange traded fund here.
Concerns about dilution and confusion around impact investing have reportedly prompted the IFC to create a list of “the 13 principles of impact investing”, to be unveiled next month.
Walker says this will be a topic at the GSG Impact Summit. “This market is nascent and we need principled, articulated philosophies of what we mean by impact investing, and to gain more shared understanding of what actually is and is not impact investing.”
The Ford Foundation has been at the forefront of pushing the impact investment movement. It has a history of early support for innovative and visionary ideas to progress social justice, from training lawyers during the US Civil Rights movement, to financing the establishment of the UN International Criminal Court, and funding Muhammad Yunus in the 1970s helping to spawn the microfinance movement.Now, it is making big bets on impact with Walker saying it is a way to advance its mission of social justice.
Walker is trustee of the Global Steering Group for Impact Investment (GSG) seeking to catalyse the movement around the world and holding the GSG Impact Summit in Delhi.
“I’m wary if there is not an authentic commitment to social impact.”
He also chairs the U.S. Impact Investing Alliance, the US arm of GSG, which has already done much to help catalyse policy in the area such as the recent Social Impact Partnerships to Pay for Success Act creating a $92m US federal fund for social impact bonds.
But most significantly, the Ford Foundation is committing hard cash with a promise to invest $1bn of its $12bn endowment to impact investing over the next ten years.
Walker says the Ford Foundation has committed $40m so far, mostly in the area of affordable housing, but says it will expand its mix of asset classes. He only names one of the fund managers selected as part of the impact commitment – Jonathan Rose, who he describes as one of the most successful affordable housing developers in New York.
Walker also chairs the Presidents’ Council on Impact Invest, which comprises leaders from 20 private foundations, with a combined $60bn in endowed assets.
He says he is bullish on US foundations committing more endowment capital to impact investing. Council members the Nathan Cummings Foundation and the Meyer Memorial Trust have gone to 100% of their endowment being invested for social and financial impact, says Walker.
‘The Power of Impact’ is the tagline for next week’s GSG Impact Summit, and Walker, who before joining the Ford Foundation was vice-president at the Rockefeller Foundation when the term impact investing was coined in 2007 at its Bellagio Center in Italy, predicts big things for the meeting.
“We have all been inspired by Sir Ronald Cohen’s leadership, passion and determination to advance the global movement around impact investment. He has certainly helped inspire my colleagues and me.
“This conference will be the largest of its kind ever and for us all to really solve the major global challenges, whether it be climate change or access to affordable housing or healthcare we are going to need public-private partnerships and we are going to need solutions that are forged through collaboration. This meeting is one manifestation of that idea.”