Funding the Social Causes Worth Fighting For

Kim Syman has lofty ideas about how New Profit, a social-impact funding organization that she helped get off the ground 20 years ago this week, can do better work. Much of it involves changing perceptions around the role of business in social enterprises, which can be a daunting task. Case in point: New Profit’s mission to finance nonprofits in an unconventional way — that is, with venture capital funding. But venture capital is usually designed to make the rich even richer, while social-innovation organizations tend to address systems of inequality and oppression — systems that can be exacerbated by those very same investments.
Yet Syman is a firm believer that the tools of business can and should be used to propel people toward social and financial stability. So when New Profit founder and CEO Vanessa Kirsch proposed the idea of the organization to her, as a way to bridge the gap between investments and impactful nonprofits, Syman jumped onboard.
Part of the problem is that investing for social good is still a relatively new idea. “Venture capital, as a concept, wasn’t known in the philanthropy world, especially 20 years ago,” says Syman, New Profit’s managing partner overseeing field leadership. She also helps with the nonprofit’s annual Gathering of Leaders, taking place this week in Boston. “The idea of venture capital for nonprofits still sounds kind of crazy for a lot of people.”
Syman’s ambitious goals include getting nonprofits to refocus how they deploy their funding. Syman worked in media before transitioning into a role at the education nonprofit City Year, so she knows firsthand how hard it is for fledgling social-impact companies to create capital (spoiler alert: it’s not easy).
“There was this mind-set that the best way [traditional funders and philanthropists] managed risk and made sure their dollars were well used was to support direct service provision instead of, say, building internal capacity to grow and achieve more impact,” Syman, a NationSwell Council member, says. “Overlooking the latter can be a huge barrier to success on the former, but capacity-building is still an under-leveraged and underfunded approach in philanthropy.”

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“The idea of venture capital for nonprofits still sounds kind of crazy for a lot of people,” says social-impact investor Kim Syman.

Typically, nonprofits have relied on creating their own endowments — be it from fundraising or donors — that amass principal over a number of years and help finance the organization for the long term.
But even with endowments and other grants, there are often restrictions imposed by donors, such as only being able to spend the principal or only spending specific amounts on certain programs.
The problem with that, Syman says, is that the conventional wisdom where philanthropists double down on funding specific programs doesn’t help solve problems on a larger scale.
The reality New Profit found was that nonprofit organizations — just like their peers in the for-profit business world — needed to scale their brand and operations in order to be effective, but that requires lots of money, with fewer restrictions than what is typical with grants.
Besides challenging traditional funding models, Syman is focused on increasing diversity in the social-impact space. And she is doing this in part by formally recognizing her own organization’s lack of diversity.
“We saw that implicit biases come from within our sector and we needed to begin to tackle them, which meant holding a mirror up to ourselves and really asking the question of how much are we paying attention to this, each of us?” she tells NationSwell. “It’s clearly a work in progress on every level, but I will say that we have changed every aspect of how we work to prioritize diversity, equity and inclusion, and we’re working to make continued progress.”
To that end, New Profit is making a concerted effort to partner with organizations that are actively engaged in the communities they serve; they’re also taking into account gender and racial diversity with almost everything they do, says Syman.
But a lack of diversity is hardly unique to New Profit. Studies show that despite overwhelming representation of women in the nonprofit workspace — which bodes well for general gender equality — the majority of executives in those companies are white men, with minimal representation of black or Hispanic men and women in top roles.
Syman says there are ways to fix that, even for organizations that have little capital to invest in diversity action plans. One idea is to partner with other organizations to help provide mentorship on hiring or training — a concept inspired, in part, by a NationSwell Council event — or use firms that specialize in helping companies achieve more diversity.
Syman says her biggest lessons haven’t come from New Profit’s numerous challenges, but rather from the joy of the work she does, and from the connections she’s made with other people in the field. “It wasn’t a total surprise, but how deep and consistent those relationships have been with our [organizations] is the engine that really drives our work. It’s always a little bit surprising. But it’s always very real.”

This post was produced in partnership with the NationSwell Council, a membership community of service-minded leaders committed to moving America forward. To learn more about the Council, its members and signature experiences, click here.

Build Your Nest Egg, Support an Organic Farm

Making money and doing good aren’t mutually exclusive.
When it comes to investing, earning a significant profit is typically the No. 1 goal. For stockholders looking to do more than simply earn financial returns, impact investing can allow them to generate social and environmental impact while increasing the balance of their portfolio.
With 85 percent of Millennials stating that it’s important for their values to align to their investment decisions, impact investing is growing in popularity. A recent poll finds that more than half of Americans ages 18 to 34 plan to put money towards socially responsible and impact investments in the future but haven’t done so yet, while 24 percent already own socially responsible investments.
Here’s how to sink some cash into the companies, organizations and funds that are doing good and providing a financial return for their efforts.

1. Know your values.

Investors can make a difference in a number of different areas.
Some of the most common sectors for investing include sustainable agriculture, renewable energy, conservation, microfinance, and affordable basic services including housing, healthcare and education, according to the Global Impact Investing Network, a nonprofit dedicated to increasing the scale and effectiveness of impact investing around the world.
Nonprofits are also open for investment dollars. “The nonprofit sector has [previously] been excluded from impact investing where the focus is investing in for-profit social enterprises or rebranding past investments with an impact lens,” says Catarina Schwab, NationSwell Council member and co-founder and co-CEO of NPX, a company that partners with clients to pioneer new ways of financing impact. “Until recently, the financial products that enabled investment in a nonprofit organization were largely limited to loans.”

2. Understand potential returns.

Impact investments aren’t more volatile than traditional investments — but there are inherent financial risks involved. As with all portfolio holdings, diversifying is the best way to minimize your exposure.
According to GIIN, most investors pursue competitive market-rate returns, although some intentionally invest in causes that align with their values but will likely deliver returns below market rate.
Impact investors also have access to another type of return not available with traditional holdings: the social performance and progress of their investments. Values-based investments measure these in several ways, including the setting of performance metrics and targets, monitoring and managing the performance of investees against those targets and reporting on the social and environmental accomplishments that stakeholders establish as relevant to their goals.

3. Choose your investments

In the U.S., responsible investing assets have more than doubled to 8.72 trillion from 2012 to 2016, reports the Forum for Sustainable and Responsible Investment.
Because of this, investment options are plentiful.
You can opt to invest in a socially responsible mutual fund or an ETF sold by an investment firm, such as Fidelity, Vanguard or Merrill Lynch. Or you could purchase individual stock in, say, a sustainable farm or a wind power project. The app Stash allows investors to choose from more than 30 ETFs to create a portfolio that reflects their beliefs.
Tools like NPX’s Impact Security, as well as Social and Development Impact Bonds, provide new ways to invest in nonprofit organizations.
Impact investments can also be made through specific companies that specialize in socially responsible investing. One such organization, Wunder Capital, connects individuals, institutional and corporate investors with commercial scale solar energy projects across the U.S. To date, it’s completed more than 120 financings in 18 states.
“In most cases, the businesses who are transitioning to solar have in the past exclusively bought their energy from the local utility,” said Ilyas Frenkel, director of growth for Wunder Capital. “The local utility in most cases burns fossil fuels — natural gas or coal — to create that power. When a business is able to add solar to their energy mix, they’re reducing their reliance upon fossil fuels.”
For investors, this means their money is helping small businesses transition off fossil fuels and reduce greenhouse gas emissions, all while making up to 7.5 percent annually on their investment.
If you’re not sure where to start, check out GIIN’s ImpactBase. Potential impact investors can use the searchable, online database to learn more about the businesses and organizations working to create a better future.

How Does Clean Energy Help Us Grow?

The foundation for a low carbon energy future, involving not only power sources like wind and solar, but also such wide-ranging industries as lighting and transportation, continues to strengthen. Renewables and clean technology are scaling up faster than expected, with advancing technology and significant cost declines drawing investors and accelerating growth. What’s more, substantial economic benefits have become more obvious, perhaps most significantly in the expansion of infrastructure and local jobs.
Goldman Sachs has been instrumental as both an investor and financier in clean energy development. Since setting our initial target in 2012 to deploy $40 billion over 10 years in the clean energy space, we have invested and financed $54 billion and expanded our goal to $150 billion in capital by 2025. This will ensure that we continue to play a key role, leveraging capital markets to aid in the global transition to greater energy security and sustainable economic growth.
The impact of our investment and expertise has been visible and substantial. From 2012 through May 2016, when we reached the initial $40 billion target, we helped 89 companies and projects scale up clean energy and renewables in 29 countries, helping facilitate 31 gigawatts of renewable electricity generation — enough to power 5.5 million U.S. homes. Our investments and financings have also fueled the broader clean tech ecosystem: the development of electric cars, smart grids and manufacturing capacity for solar components and advanced biofuels.
Together, these companies and projects have helped to employ tens of thousands of people and have had a significant positive economic impact on local communities. What’s more, they are helping to avoid millions of metric tons of greenhouse gas emissions per year.

Clean Energy Impact Report

Clean tech and renewables are growing and are resulting in significant benefits, from reduced environmental impact to economic development in markets worldwide. What are the benefits of our own commitment to the clean energy space? We recently issued a report that gauged the impacts of our investments and financings across the globe. After conducting our analysis, here’s what we found.

The Three Drivers of a Low Carbon Future

Technology, capital and policy — all have a leading role to play in increasing energy security, reducing negative impacts and moving the global economy to a more sustainable energy system. Kyung-Ah Park, head of Goldman Sachs’ Environmental Markets Group, sees rapid technology innovation and convergence, catalyzed by capital and policy, driving a broader shift to a low carbon economy.
This article is paid for by Goldman Sachs.

What Is Powering the ESG Investing Surge?

Environmental, social and governance (ESG) investing, once a sideline practice, has gone decisively mainstream, and this is creating real opportunities for investors. These opportunities meet the interests of a wide spectrum of clients, from fiduciaries aligning their portfolios with the realities of a rapidly changing world to clients who are increasingly looking to have their investments express their values.
Better data, refined tools and improved methods have expanded the possibilities across all of those interests. As a result, ESG investing is no longer a carve-out within a portfolio — it is the portfolio for some investors. What was once the province of a small number of family offices and foundations has drawn sharply increased participation among pension funds, insurance companies, nonprofits and faith-based investors.
At Goldman Sachs, the growth of ESG investing has been significant in recent years. We have seen a virtuous cycle in which demand has driven product and service innovation, creating new models for success and driving further demand. As a result, our assets under supervision in dedicated ESG strategies have grown significantly, to $6.5 billion by the end of 2016.
Fundamental to this growth is an increased understanding that a disciplined approach to ESG investing can drive competitive risk-adjusted returns — just as with any other investment. Risk/return profiles of ESG portfolios now mirror the markets and span asset classes, fueling the evolution of impact investment strategies that meet conventional risk/return hurdles, but also include social and environmental impacts that are both intentional and measurable.

World Resources Institute

How does a research-driven, global institute focused on sustainability manage its portfolio for the long term? One way is by leveraging its own research on trends to more effectively steward their endowment while also using this work to create a model for other institutional investors. Here, the World Resources Institute’s President and CEO Andrew Steer and Head of Sustainable Investing Elizabeth Lewis discuss WRI’s objectives and investing approach with Goldman Sachs’ John Goldstein.

Municipal Bonds: An Overlooked Impact Investment?

As interest grows in achieving positive impacts while generating market-rate returns, investors may forget about the opportunity in their own backyards: municipal bonds. Often focused on financing redevelopment, infrastructure and key community needs for education, health, housing and sustainability, municipal bonds can drive ESG impact in addition to providing clear tax advantages. Senior portfolio manager Ben Barber and research analyst Michael Kashani of Goldman Sachs Asset Management explain. Read the discussion.
This article is paid for by Goldman Sachs.
Social thumbnail by Tzido Sun/Shutterstock.

The Rural Startup That Turns Invasive Fish Into Gourmet Delicacies, the Case for Reforming Terrorists and More

Get Rich. Save the World. Gut Fish, Bloomberg
Flashy tech solutions, artificial intelligence and all things “disruptive” have been in the spotlight for years now, but the latest presidential election has shed light on the rural areas left behind by these job-killing innovations. Now some venture capitalists are paying attention, investing in rural innovations like turning harmful fish populations into local delicacies. Industry optimists are betting on the rise of this “impact investing” to create both financial and social returns.
Can You Turn a Terrorist Back Into a Citizen? Wired
The threat of extremism looms heavily over the world today, but a fledgling program in Minnesota aims to do what some consider impossible — rehabilitate would-be terrorists back into the fold of society. The deradicalization process is painstakingly slow and delicate, but could end up both saving lives and building trust in a political climate where Muslim communities feel increasingly persecuted.
Eating Disorders Are Getting the Silicon Valley Treatment, Fast Company
More than 30 million Americans suffer from eating disorders, but the disease has long been written off as “a white girl vanity issue.” Now big players from tech and academia are stepping in to reduce stigma and foster community. The hope is that increased visibility and research will accelerate recovery for those affected and create a support network for the future.