Are you investor ready? Or: Why we need better education in impact investing – and how to go about it

“There’s a real hunger to understand impact investing. Everyone’s talking about it, saying, “I have to go speak to my boss about it and don’t know what to say”, David Banks, the head of ImpactAlpha was quoted in a recent study on impact investing education in the US and globally conducted by the Beeck Centre for Social Impact and Innovation at Georgetown University.

Many of the existing learning initiatives in the impact investing field focus on impact delivery organizations and social entrepreneurs only. Accelerators and investment ready programs, for example, help them meet the expectations of a growing number of investors exploring opportunities in this field.

But what if part of the mismatch between demand and supply for impact capital was not only due to potential investees’ capacity constraints but also a lack of awareness, knowledge and skills on the side of investors and market intermediaries? In fact, Xavier de Souza Briggs of the Ford Foundation pointed to a significant gap on the supply side of the social investment market noting that there was “more investor appetite than […] investor preparedness” (Beeck report, 2016). An investor survey conducted by the Bertelsmann Foundation in 2015 found that asset owners lacked awareness as well as internal capacity to pursue an impact oriented investment strategy and identified a significant market gap of impact investment advisors and intermediaries with the required expertise and skills. For pioneer investors in the early days of impact investing, informal learning such as learning-by-doing, reading reports, following the industry events and networking with peers used to be the main source of learning. With the field maturing we see a range of formal learning opportunities emerging in the past years. This includes major industry conferences and events, customized learning opportunities and technical assistance for a specific target audience; research, trainings and webinars by academic institutions, non-profits and practioners institutions; fellowship opportunities and secondments as well as toolkits, best practice case studies and practioners research.

However, a closer look confirms that what we need to think beyond what is out there both in terms of what kind of learning, to whom and how it is offered.

In Europe, there are only few public, international learning initiatives for professionals and investors such as the Oxford Impact Investing Executive Program in the United Kingdom, the Centre for Social Investments at Heidelberg University in Germany and Finance for Change at the Impact Hub Berlin. In addition, the European Venture Philanthropy Association EVPA in Brussels offers trainings, research, events and peer learning for both members and non-members.In a few selected emerging country hubs such as Kenya, South Africa, India or LATAM countries a growing number of education initiatives target investors, fund managers and other financial practitioners often thanks to the direct or indirect support by development agencies such as USAID and DFID and a few market builders (e.g. ANDE trainings).

Most of the existing learning initiatives in this field however, are still based in the US or UK using the respective country context as the main point of reference for any learning initiative.

An increasing number of webinars, written material, conferences and 101 learning opportunities inspire and introduce newcomers to the field. Some complain, however, about the lack of consistency in the existing material, the confusion created by varying views on the same issues depending on the source of content as well as the superficiality of information provided. In fact, little content is available for those seeking in-depth knowledge to dissect what happens on the ground in actual deals. Guidance is also need for mainstream investors on how to apply traditional financial practice to impact investments including on exits, deal structuring, pricing or portfolio diversification and guidance to social and public investors on how to carry out due diligence and assess the financial potential of investees. A few players have published detailed experience and structures of investment mechanism such as hybrid finance, pay for success models, crowdfunding or community and place based investing (see case studies on hybrid finance by the German Financial Agency for Social Entrepreneurship FASE or guidance material on Social Impact Bonds by the UK Government) but practical interactive education on specific financial mechanism as well as sector specific instruments are still limited. The field also needs a broader understanding on mechanism for financing and supporting social innovation and systems change; on blended finance structures or on lean and integrated application of outcome measurement methods to just name a few.

Learning in the social impact investing field is as much about personal and collective leadership development as it is about technical skills. Many investors and intermediaries are driven to this field at an infliction point in their personal and professional lives looking for their role in the emerging impact investing ecosystem and how they may use their financial, human and social capital for the common good. Furthermore, the cross-sectoral and innovative nature of the impact investing field needs leaders, who are able to bridge divides and “translate” between different partners and who have learned the art of leading collectively. The challenge for designers of learning initiatives here is to apply and link individual and collective leadership development tools to the social investment context. The Finance Innovation Lab in London, for example, founded by individuals from WWF UK and the Institute of Chartered Accountants in England and Wales uses innovative leadership approaches and system thinking to build a financial system that serves people and planet. The Finance Innovation Labs at the Milken Institute regularly assembles a multidisciplinary group of investors, industry experts and public officials to tackle a specific financing or policy question.

Players that may potentially have a high impact on scaling the impact investing field include lawyers and accountants, investment advisors and banks as well as rating agencies and market researchers. So far, there are few programs that consider the specific needs of these important eco-system players (see for example the legal training courses on social entrepreneurship and impact investing provided by the TrustLaw Connect Program of the Thomson Reuters Foundation).

In addition, policy makers, regional and local government officers as well as development agencies could take a leading role in shaping the policy environment, as outcome buyer or as catalyst and (co-) investor. Interest in government about using finance for entrepreneurial ideas that tackle social challenges is increasing. Nevertheless, due to the lack of tailor-made opportunities and a limited budget for education and events for government officials, reform champions in the government hierarchies find it challenging to explore opportunities in the social impact investment field and get their superiors to buy in. It is therefore not surprising that government policies often fall behind the dynamics driven by market players and civil society organizations. The Impact Investing Policy Collaborative initiated by the Rockefeller Foundation in 2011 was an attempt to build a global research based, peer learning format involving and targeting policy makers, academics and practitioners and from around the world, but was suspended in 2015.

Demand is strong for hands-on learning formats grounded in research and experiences as well as action oriented formats such as site visits, real world investment simulation. In our experience, both newcomers and experienced players appreciate the opportunities for peer learning and sharing of experiences with people from diverse backgrounds. Where learning formats tend to be top down or where they follow the training providers’ specific school of thought, there is little room for applied learning, out of the box thinking and appreciation of diversity of approaches – which all essential ingredients to the quality of learning in this emerging field.

Online formats such as webinars have become more frequent. Mass open online courses (MOOCs) still treat this subject as part of other courses syllables on social entrepreneurship or philanthropy. While expensive, MOOCs have the advantage that they are highly scalable globally and allow to reach learners outside the main social investment hotspots, such as those in rural areas or emerging countries or those players that would simply not be attracted by the prospects of sitting in a “classroom”.

Research suggests that blended learning, i.e. combining online and on-site formats facilitating personal interaction such as piloted by the Social Finance Academy developed by Roots of Impact have the potential to achieve scale AND achieve better outcomes.

The costs of impact investing education or attendance at one of the main industry events such as SOCAP are still prohibitively expensive or they are reserved for members and selected participants thus excluding many less known philanthropic and social investors, small fund managers or government officials. The BEECK Study found: “The price points of most trainings are currently too high to be accessible to a wide range of professionals.”

On the other hand, quality training is expensive to provide and most training providers, event conveners or providers of other learning and research initiatives hardly break even without subsidization of curriculum development, coverage of trainer and speaker expenses or scholarships. Some of the most promising formats in terms of outreach, scalability and effectiveness such as blended learning and collaborative learning arrangements require considerable upfront investment to maintain such offerings accessible and affordable. The BEECK Study concludes that for the field to mature it needs:

• Investment in educational infrastructure with a variety of learning options from executive education to technical assistance and peer learning formats.
• Investment in keeping offerings affordable by supporting participation and formats targeting non-profit organization, government officials and intermediaries.
• Investments in research to inform curricula development and feed into other learning and support formats that help the field to progress.

Anja–Nadine König is founder and Director of Social Impact Markets and Lead, Finance for Change at the Impact Hub Berlin.

Finance for Change is a leadership program in social finance and impact investing that promotes the innovative use of finance to address the big societal challenges of our times. The F4C Bootcamp, is a two-day practical learning experience on social finance and impact investing. It is an invitation to investors and intermediaries from the private, social and public sector to acquire practical skills, to explore new opportunities in impact oriented investing and social finance and to exchange experience with peers from Germany and other countries around the world. The next F4C Bootcamp will take place at the Impact Hub in Berlin on 2 and 3 December 2016. More information and registration on www.finance-for-change.net

Reposted from Social Impact Markets.