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Financial experts of diverse skill sets are banding together to utilize their funds towards placing their investments as a means of creating value beyond strictly monetary returns.

Kate Kohler is co-leader of Korn Ferry’s Impact Investing Practice. A principal in the Washington, D.C., and New York offices, she serves as a specialist in the Financial Services Sector and leads the firm’s relationship with the World Bank Group.


Christopher P. Skroupa: How do you define “impacting investing”?

Kate Kohler: The short answer is we define it however our clients do—and there are many ways to make an impact. In general, impact investments are investments made into companies, organizations, or funds with the intention of generating measurable social, sustainable, and/or environmental impact. The social investment continuum ranges from grant support and loans to investments, such as by private equity and venture capital, that seek to generate a market return. Overall, participants in this sector hold the deep belief that investment activity can also make a powerful and measurable social impact in areas such as health, education, and the environment. In addition, investment managers are closely examining public companies and their practices around fair pay, gender equality, socially responsible supply chains, and the environment. Major asset managers and asset owners, as well as endowments and foundations, are involved in this space, and it’s likely to see continued growth.

 

Skroupa: Given that breadth, how do philanthropists, investment managers, venture capitalists and others determine where they want to make an impact?

Kohler: One of the emerging trends in impact investing is for asset owners and managers to take a specific view or concentrate in a particular area. For example, an investor may be focused on better living conditions, access to clean water, or investing in communities for better health outcomes. We are observing that, whatever the area of interest, leaders in this space are more targeted, which means being more specialized and better educated in order to make a more measurable impact.

 

Skroupa: What are you seeing in terms of talent in this sector?

Kohler: Impact investing has become very popular over the past few years. If you aggregate who is coming to the sector, it resembles a barbell curve of talent. At one end is a large cluster of people under 30 who are highly values-aligned, but they don’t have deep financial skills. They may have some expertise in financial analysis or risk analysis and management, but only in one sector. They haven’t been in their careers long enough to have experienced a full market cycle. At the other end is another large cluster of experienced financial and investment professionals who may not find much fulfillment in their current roles. Now they are looking to make an impact, but they don’t have any knowledge or long-term commitment to social impact or development. In the middle, is a smaller group in high demand. These professionals have both in-depth financial experience and a track record of social impact—maybe they served in the Peace Corps after college or they volunteer and actively support charities. This group is “multilingual” in terms of development, government, and public policy—but their native language is finance.

 

Skroupa: As you look at that group in the middle, can you give some examples of specific expertise they bring to impact investing?

Kohler:  The needs are very specific in terms of a particular fund or investment manager—for example, expertise in securitization, microfinance, or multifamily real estate. When that expertise is combined with the knowledge of how to make an impact, these executives can make significant investments and create a measurable social change. Take the example of real estate: A multifamily development can change a community, providing more access to quality education and food. Upgrading a heating system improves air quality, which makes people healthier and decreases school absenteeism. Investing in a childcare facility allows mothers to work and be more consistent in their jobs, which also means access to healthcare and improved quality of life. Real estate investments, as one example, can make very positive—and measurable—social outcomes.

 

Skroupa: Speaking of measurement, how do investors, philanthropists, and venture capitalists know they are making an impact?

Kohler: Measurement is a big part of it—sophisticated investors are mandating that investment managers or social entrepreneurs quantify the impact, whether on individuals, families, the community, or the environment. For example, one of the companies we’re working with is buying large tracts of forested land. Knowing how many trees are on 100 acres provides a very accurate picture of the carbon offset that leads to an improved atmosphere. Or, when investors are looking at companies, they are seeking specific data around an environmentally responsible supply chain or workforce equality. Investors are approaching this space with goals, which makes measurement of outcomes all the more important.