In the latest edition of the Robert L. Conconi Foundation’s “What’s on our Mind” series, we’d like to share the framework we’ve been using to deploy some of our capital for the purpose of social impact investing, our observations, and why impact investing matters to us.
- There is no standard for impact investing
Social impact investing, especially in the context of charitable foundations, is such a nascent field that we have yet to agree on a standard definition of impact, let alone impact investing. We’ve seen a proliferation of publications, conversations, conferences, webinars, dedicated organizations, and guidelines but, in reality, very few things have been standardized or accepted as universal frameworks for this type of work. The team at RLCF is experimenting with our own small portfolio of investments, testing and learning along the way what social impact investing could mean to our organization and how it can exist within our structure.
- Start small, then build
Learning by doing has always been our philosophy and we designed our social impact portfolio to do just that. We allocated a small portion of our endowment (< 5% of our assets) to this initiative. Through our investment policy statement, we established a social impact asset class into our asset mix and are in the process of constructing a portfolio within those confines. We felt that this amount was small enough to still remain prudent with our capital, and also significant enough to make an impact.
- Try different things and don’t be afraid to fail
At RLCF, we are fully aware that some investments will work and others won’t. We take the approach that we will learn along the way, (and already have) mostly from the mistakes we make. Our portfolio currently consists of four private equity investments: one Canadian (early stage) company and two US (early stage and growth stage) companies, and lastly a commitment to a Canadian Social Impact fund. We intentionally chose this mix to help diversify our risks (sector, company, geography, management, concentration), spread the workload, and limit the burden of due diligence involved.
- Focus on your mission and granting priorities
Firstly, our mission and granting priorities always outline and inform our impact objectives. The social impact investment is designed to act as a bridge between grant-making and more traditional investment. Social impact investing offers an alternative way of deploying capital towards the changes we want to see in the world. It gives us an opportunity to further advance our granting interests through a different vehicle and lens, while obtaining an option for an upside return.
- Take your time
There is no need to rush to make an investment decision. Impact investing is a unique market, capital remains limited, and things move much slower when compared to public equity markets or more traditional venture capital. In Canada, we still need more clarity and guidance from the CRA on how these types of investments fit within the existing investment structure of the foundations and endowments.
- Look for the right fit
There are plenty of investment opportunities available. However, very few will be sufficiently aligned with RLCF’s mission and the impact we set out to achieve as an organization – and that is okay. At RLCF, we want to invest in the opportunities that match our objectives and not lose time wandering along paths following breadcrumbs that don’t lead home. This was perhaps the biggest lesson learned in our short experience with impact investing. We now understand the value in taking the time to find the right fit for our organization and walking away when an investment is just not right for us.
The team at RLCF is incredibly excited to be involved in impact investing, and our hope is that we continue to help deliver innovative solutions to Canada’s social challenges. Interested in following along on our journey? Follow us on Facebook, Twitter, and LinkedIn – we’d love to hear from you!