Everyone having money has recently tried to get into social impact investing. The idea behind this type of investing is that an investment isn’t just intended to score a high financial return; equally or more important, it is supposed to make a significant difference in an area that had been considered un-investable – many of them in social sectors where bringing about change is not exactly easy.
Not surprisingly, most of these efforts have had mixed results; either investors lost money, or the social impact was negligible or nonexistent.
Now, a group of high-profile executives and investors are putting together perhaps the most ambitious social impact fund. Called Rise, the $2 billion fund is being developed by William E. McGlashan Jr., a partner at the private equity firm TPG.
The new fund has an all-star cast of board members, all of whom are investors. Among them are Bono; Jeff Skoll, the first employee of eBay, who now runs Participant Media and is a major philanthropist; Laurene Powell Jobs, the philanthropist investor; Richard Branson; Reid Hoffman, a founder of LinkedIn; Mellody Hobson, president of Ariel Investments; Lynne Benioff, a philanthropist; Mo Ibrahim, perhaps the most influential investor in Africa; and Pierre Omidyar, the founder of eBay.
What is the difference between this fund and many other social impact funds?
From what I understand, one is scale. The corpus could run into a few billions with the star studded celebs putting in their money and also with some pension funds and sovereign wealth funds expected to pour in 9 figure investments.
But perhaps, the more important difference could be the fact that this fund is really trying to measure impact more objectively and in a quantified manner.
The problem with most of these kinds of funds is what Mr. McGlashan calls “greenwashing,” a euphemism for lying, which some in philanthropy feel is rampant among socially conscious investors. Everyone wants to claim some form of success using a shifting mix of metrics aimed at demonstrating how the fund worked.
Mr. McGlashan spent the past year working with Bridgespan Group, a consulting firm, to come up with a rigorous set of metrics with which to measure performance.
Now, it is expected that these objective metrics will allow this fund to monitor and control investments such that both “impact” and financial returns are achieved. At least that is the hope right now. The folks running the fund feel they will know whether they are right in about two years’ time.
The new fund is expected to invest about half of its money domestically in areas like health care, education and clean energy technologies. The other half will be invested in emerging markets in sectors like microlending and other financial services, housing and education.
Bridgespan’s metrics for Rise could become a model for other investment firms if they prove successful.
Source for the article: New York Times. You can get more details from the NY Post article.