A special thank you to Karen Wawrzaszek, for sharing her vision in conceiving this article. Her leadership in the Impact Investing space, her knowledge of impact capital and her desire to advance impact investing forward has served us well in framing this discussion.

This article was put together over several months of research, organization of questions, interviews and drafting. I would like to offer my thank you to Alex Michael Perez, Graduate of St. John’s University, for his time and support in coordinating this effort. He helped make this article possible and I express my appreciation for his commitment. A professional having now entering the world of wealth management, I appreciate his skill and ability in helping us present a clear case for better advisor training on this often misunderstood investment strategy.

Impact investing is often misconstrued, and misunderstood by investors–especially larger institutional investors–who advance that investing for a resonant social impact is a distraction against investment performance.

Let’s reframe and consider how impact investing–in its many forms–can deliver competitive, if not enhanced returns, for the savvy institutional investor.

Governments may often play an important role in seeding investments with significant leverage in attracting private capital. Consider the New Deal–which in its essence–is a perfect example of how government seeded infrastructure projects, allowing the private sector access to labor, raw materials and other assets. The New Deal helped the United States grow away from its worst economic depression in history.

Uncle Sam and Cousin Tesla

Fast forward to present regional and global economic challenges. Partnerships between government and the private sector still stimulate social or economic change, allowing underdeveloped regions access to scalable technology needed to fuel sustainable, long term impact.

Let’s consider some examples across the horizon of impact investing, including partnerships that open new sectors–such as those driven by companies like Tesla, or comparable applications in Opportunity Zones, offering women–often lacking access to economic benefits–a seat at the table. According to Karen Wawrzaszek, Managing Director & Senior Impact Adviser, “You are seeing more creativity and innovation in partnerships between stakeholders that drive investment performance, beyond traditional returns, but with resonant impact and creating a larger, more sustainable overall performance.” This level of impact is not thought of when considering traditional investment structures–although one can point to examples where such impact was experienced.

Consider the case of Tesla where the federal government played a key role in seeding this innovative ground breaker.

David Yeh, current Managing Partner, Capital Hill (investment advisory firm) and former White House Senior Advisor on public private partnerships, shares that, “One could say that the federal government is an uncle of Tesla. In 2009, the DOE provided a $465 million loan to help Tesla purchase its first plant to manufacture its Model S, Model X, and Gen 3.”

Yeh’s experience offers a unique vantage point, from both the government’s and the investor’s perspective, weighing in on how the federal government seeds innovation, “As a White House executive, I drafted policy aimed at creating or accelerating billions if not hundreds of billions of dollars in new or changing markets.” Compared to his work as a venture capital investor, “I invest millions to tens of millions of dollars to seed and scale impact businesses. This gap between public sector billions of dollars and private millions of dollars highlight the government’s outsized role and impact on innovation. Sadly, mainstream investors often ignore or avoid government opportunities because they don’t speak or understand “government.”

Yeh believes that government partnerships serve as one of the most powerful levers to attract capital from private and public markets.

He adds, “This loan was granted at the height of the auto crisis when financing auto companies was difficult, to say the least. The federal government’s funding of the Tesla factory combined Tesla’s innovation, and leadership from possibly the best entrepreneur of our generation, transforming Tesla into an example of innovation and larger impact.”

Today, in spite of its recent challenges, Tesla is a testament of how the federal government can add value through application of innovations needed to drive new industry sectors.

Tesla has proven that electric vehicles are not science fiction but the future of mobility. It also shows how an electric vehicle startup has become more valuable–Tesla’s $57bn market cap as of 6/29/18–than GM and Ford with tens of billions of dollars being committed to catching up with Tesla.

The federal government seeded innovation that now drives capital from larger institutional investors. Tesla has changed the auto landscape bringing about fierce competition from Detroit, Europe and China.

In a Yahoo Finance Post, written by Aric Jenkins, David Whiston, an equity strategist for U.S. automobiles at investment research and management firm Morningstar, offered that, “The Detroit automakers have ‘much deeper pockets’ and significantly more capacity to crank out more units. Tesla would have to scale up its production–by a lot–and that would cost an enormous amount of money.”

Yeh offers another example of how the Federal government drives private and public capital into developing sectors.

He adds, “Federal policy, regulation, and programs especially around tax and credit such as the Department of Energy’s Loan Programs Office have created impact markets like the multi-billion utility scale solar market. The DOE financed the first five utility-scale solar PV projects, demonstrating the technology’s success to the market and led to private financing of an additional 45 utility-scale solar PV projects.”

Many of the DOE’s loans had side-by-side investment from mainstream lenders who stated that the government’s partnership helped de-risk the opportunity for the deal.

Demystifying Impact Investing

Impact Investing offers an opportunity for institutional investors to accelerate change in challenged markets while scoring market-rate returns. According to Global Impact Investing Network (GIIN) report entitled, Evidence on the Financial Performance of Impact Investment, “investors seeking market rate returns can achieve them. Across various strategies and asset classes, top quartile funds seeking market-rate returns perform at similar levels to peers…”

The United Nations Capital Development Fund (UNCDF) makes public and private investments in 47 of the world’s poorest countries with a focus on Africa and Asia, in particular countries emerging from conflict or crisis. It offers financial models designed to unlock public and private resources to reduce poverty and support economic development.

Working with local governments, UNCDF finances infrastructure projects–eliminating barriers to financing–and subsidizing local businesses targeting employment and social stability in poverty stricken areas.

Investing in community infrastructure provides a stimulus for private investors. Schools, markets, and roads produce an environment necessary to attract private investors. Governments receiving and spending capital help create accountability needed for attracting private investors.

Esther Pan Sloane, Advisor, Head of Policy, Partnerships and Communications at UNCDF,-offers insights on the agency’s work.

“Access to financing is one of the greatest barriers in Least Developed Countries, where we invest,” argues Pan Sloane, adding, “Governments and local entrepreneurs are often challenged in securing financing at preferred terms.”

Risk perception is another barrier for investors whose experience is largely within developed countries. “Investors assume all poor countries are equally risky,” Pan Sloan explains, “but our interventions — including marking loans, guarantees, and co-investments — can de-risk deals and draw in private capital.”

Wawrzaszek adds, “Opportunity for risk assessment is tricky. U.S. Investors have a tendency to paint non-U.S. and poorer countries with the same brush, however, there is plenty of data to support the investment case. We, as investment professionals, could do a better job at telling the investment story.”

GIIN shares in the same report that, “Returns, as well as risk, vary by asset class. Like mainstream investors, impact investors face different risks, and thus develop different returns and expectations, by asset class.”

However, as a nascent strategy, more research is need to give larger institutional investors’ confidence in making larger allocations to impact strategies, with an understanding of timely investment results. That said, UNCDF uses its grant resources to de-risk and draw investors in who otherwise would not participate in targeted efforts.

GIIN in its study further adds that, “The emergence of this variety of financial performance research is indicative of a maturing market and plays a key role in scaling and deepening the industry. However, a number of gaps remain. Further research to deepen insights into the market’s potential should include an analysis of targeting financial returns across strategies as well as investors’ abilities to meet them, the performance and role of below-market capital across asset classes, fund and investment performance across asset classes at a more granular, geographic and sector level and the relationship between impact objectives, impact measurement and management practice, and financial returns.”

Women Having a Seat at the Table

In both developing and developed countries, women face difficulty in accessing benefits, such as education, healthcare and business financing, needed to maintain economic independence.

Pan Sloane explains that UNCDF applies a gender lens to its development work, adding that, “Our Strategic Framework has a gender theory of change that, the impact our development programs make in empowering women and girls and enabling them to become active economic participants in their societies.” UNCDF tracks data on how women gain access to savings, credit, and other financial tools needed to improve their lives, as well as the measurable impact this access has on the quality of life enjoyed by their families.

More women are more intentional with their capital in their desire to leverage gender-based businesses. Wawrzaszek argues that, “Investing in women is economically sound and promotes fiscal sustainability. Women need to see this behavior modeled to fully appreciate their role.”

Sonal Shah, Executive Director, The Beeck Center for Social Impact + Innovation at Georgetown University, Former Deputy Assistant to President Obama and founder of the White House Office of Social Innovation and Civic Participation, examines impact investing through the gender lens.

Shah offers, “Women are coming to table with capital to support investments that are gender focused. More will come if asked. We need to reach out to women and build a movement designed to create a flow of capital at a greater momentum. This is a long term proposition. There are increasingly more funds for investments in business owned by women.”

That said, the role of men in creating capital flows and other support into women owned businesses is core to effective advocacy of women entrepreneurs. Many of the funds that are opening are from the male investor community. Shah offers, “We need both, but we also need more women to join as they are the ones who understand many of these markets. In fact, women are the majority of the buyers for consumer goods.”

On the subject of the role of women in economies, Wawrzaszek offers, “It seems like a paradox that this excellent judgement isn’t extended to consideration by investors or their decision making committees. However, we are making progress. More and more firms are cropping up with investment models that cater to gender lens.”

There are many ways women contribute to exponentially growing opportunities for entrepreneurs.

“We, as women, have networks and need to use them just as men are using their networks to grow their businesses,” Shah adds.

However, data does demonstrate that women do not reach out to their female peers for support in the same way men do, and therefore often do not fully leverage their available opportunities.

According to Wawrzaszek, “Women are gaining traction and not backing off from using their voice in rooms that were typically occupied by men — women are creating more space to collaborate and share ideas together, whether it is co-working space or investment and philanthropy space. Both women and men as well as investors and entrepreneurs need to advocate for women to step up to the challenge of solving the critical impact issues. As Sonal asserts, forums needed to educate interested investors are key to connecting networks and women.”

Shah closes with, “Many women believe in impact investing. We need to connect them to our networks, we need to advocate for them, and we need to support them. If they fail, so what? The more we help, the more likely they are to succeed.”

Translating Client Demand into Capital Deployed

As noted by GIIN in the same report, “One current bottleneck in translating client demand into capital deployed is that many financial advisors lack experience with impact investing. Advisors with too little knowledge to confidently recommend investments tend to avoid doing so, steering interested or potentially interested clients away from the field. While much attention has been paid to the surge in interest among business school students, we cannot lose sight of the fact that, to move quickly as a field, we also need to engage those mid-career and senior professionals already working in finance.”

In closing, Wawrzaszek proposes that, “There is a role to play for all stakeholders in ensuring that we are advancing the great efforts of the investors, investees, and the sovereign nations that are supporters. It’s clear that the world is hearing this call to action–whether you are thinking about impact from a global or local perspective. Great outcomes are destined to be achieved with the trajectory of this momentum.”

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Originally published on Forbes.com. More articles by Christopher Skroupa on his Forbes column.

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