Institutional impact investing: practice and policy

Abstract

This article examines how public policy can and does play a role in enabling impact investing by U.S. institutional asset owners. We outline how government often plays a key role as underwriter, co-investor, regulator, procurer of goods and services, or provider of subsidies and technical assistance, thus enabling intentional investment for social and environmental benefits by asset owners. The article focuses on how policy intersects with the specific legal requirements and a distinct investment culture that often constrain the ability of institutions to invest with impact. These barriers must be taken into account for the institutional role in impact investing to grow beyond the current limited activity. Careful coordination between policymakers and institutional investors will be essential in building private investment markets that deliver positive social impact. We concentrate on more narrowly construed impact investment policies. Examples include geographically targeted economic development, and energy-efficient real estate investments.

Keywords:

• impact investing
• responsible investing
• institutional investors
• economically targeted investing

Acknowledgements

This article is drawn from our recently published reportImpact at Scale: Policy Innovation for Institutional Investment with Social and Environmental Benefit. The research continues the work of the Global Impact Investing Policy Project, a partnership between In Sight at Pacific Community Ventures and the Initiative for Responsible Investment at Harvard University, supported by The Rockefeller Foundation. We are indebted to everyone with whom we have interacted while on the Project, including over 50 institutional asset owners and intermediaries, particularly in the United States. Special thanks to Beth Sirull at Pacific Community Ventures, Steve Lydenberg at the Initiative for Responsible Investment, and Margot Brandenburg and Justina Lai at The Rockefeller Foundation for their leadership. Thanks also to our two anonymous reviewers from theJournal for Sustainable Finance and Investment.

Notes

See, for instance, the work of Tessa Hebb, Lisa Hagerman, and Gordon Clark from the Oxford Pension and Worklife Program at http://urban.ouce.ox.ac.uk/research.php.

Florida House of Representatives. 2008.CS/SB 2310-Economic Stimulus

FL State Board of Administration. www.sbafla.com/fsb

The F.B Heron Foundation.Mission-Related Investing. www.fbheron.org/programs/investing.html

Meyer Memorial Trust.Mission Related Investing. www.mmt.org/node/901

For more on mission investing see www.moreformission.org

For illustrative examples see our reportImpact at Scale.

29 U.S.C. § 1104 : U.S. Code – Section 1104: Fiduciary Duties.

29 C.F.R. § 2509.94-1. Economically Targeted Investments (Social Investing).

29 C.F.R. § 2509.08-1. Supplemental guidance relating to fiduciary responsibility in considering economically targeted investments.

H.R. 402- National Infrastructure Development Bank Act of 2011. www.opencongress.org/bill/112-h402/show