Impact Investing: Where Are the Deals?

Market Overview and Definition

• Impact investing is defined as investment in companies or organizations with the intention of producing positive social/environmental impact alongside a financial return.
• The Global Impact Investing Network (GIIN) represents over 200 organizations across 32 countries, highlighting the field's global and diverse nature.
• The market is characterized by a tension between a high volume of consumer/entrepreneurial interest and a slower growth rate in actual capital deployment, particularly in North American growth and control investments.
• A key market gap identified is the lack of a secondary market for growth and control investments; the current landscape is dominated by venture and early-stage investments.

Institutional Strategy and Asset Allocation

• TIAA Global Asset Management has rebranded to serve retirement needs for educators and healthcare workers, with impact investing established as the fourth pillar of their responsible investment program.
• TIAA refreshes its strategy every few years, focusing on three deep sectors: affordable housing, inclusive finance, and community/economic development, primarily within private markets and real estate.
• TIAA allocates $150–$200 million annually, executing 8–10 deals, prioritizing quality General Partners (GPs) with documentation compatible with established insurance company approval processes.
• The Global Impact Initiative (led by Giles Perez) advises Australasian institutional clients, leveraging Australia's position as the world's third or fourth largest retirement savings market.
• The Global Impact Initiative is launching the world's first actively managed impact strategy focused on women and girls, with a portfolio split of 75% developed markets and 25% emerging markets (initially).
• Bain Capital (Deval Patrick) is building an impact strategy driven by LP demand, focusing on sustainability, health/wellness, and community building to scale companies beyond the early stage.
• Bain Capital has received over 100 unsolicited opportunities since launching their proprietary resourcing, with a dozen currently under deep diligence.
• Inherent Group (Tony) utilizes family office capital with no fixed tenor to focus on health, wellness, education, and environment, targeting companies with market caps between $1 billion and $3 billion.
• Inherent Group avoids passive ESG screens (negative/positive) in favor of active engagement with mid-market companies to drive sustainability improvements.
• California State Treasurer (John) manages a $2.3 trillion economy and oversees CalPERS ($280B+) and CalSTRS ($180B+), viewing impact investing as essential for optimizing financial returns and societal benefits.

Deal Flow, Sourcing, and Scaling Challenges

• Institutional investors report difficulty finding deals that align with their specific, established investment committees and approval processes, particularly for non-standard structures.
• Fund managers are often advised to engage with investors before designing products to ensure alignment with institutional due diligence requirements.
• TIAA leverages its existing expertise as a major real estate investor to deepen its affordable housing impact strategy rather than creating a separate impact silo.
• Inherent Group creates synergy between its for-profit and not-for-profit sides by using the same analysts/program officers to source transactions and provide operational support.
• John notes that the municipal green bond market faces standardization and certification challenges, prompting a white paper and national gathering to create a centralized platform.
• John also chairs California's Tax Credit Allocation Committee (TCAC), rewriting rules to improve returns for affordable housing developers and moving billions of dollars into community banks for local partnerships.
• Deval Patrick highlights the need for "strategic blueprint" approaches that grow both financial and impact multiples simultaneously, rather than just financial engineering.

Future Trends and Demographics

• Millennials are projected to inherit approximately $40 trillion over the next 30–50 years and represent a guaranteed buyer demographic for impact investing.
• Women are identified as a massive, growing user group for impact investing, particularly as they take control of household finances and investment portfolios.
• The industry sees a trend toward "regenerative capital," with potential for philanthropic funds to move into the middle ground between pure charity and market-rate returns.
• There is a critical need to harmonize terminology and measurement standards (e.g., IRIS) to prevent market dilution and facilitate capital flow.
• Tony predicts a shift where social outcomes become the primary focus for investors after initial capital deployment secures market-rate returns.

Q&A: Measurement, Definitions, and Policy

• IRIS (Impact Reporting and Investment Standards) is a GIIN-domiciled program creating a common language for measuring social, environmental, and financial performance.
• James Gifford (Harvard/Tao) questions the measurement of shareholder engagement; TIAA uses third-party assessments (UN PRI, Asset Owner Disclosure Project) to evaluate engagement credibility.
• John describes CalPERS/CalSTRS engagement tactics targeting board diversity, adding LGBT representation and climate expertise to corporate recruitment criteria.
• Giles observes that retail investors are shifting from "negative screening" to "positive impact" as their primary affinity for the sector.
• Tax Incentives: John and Giles confirm tax incentives are necessary, citing Australian social housing projects where government participation reduces long-term social benefit expenditures, justifying tax concessions.
• California Policy: John lobbied to maintain a $100 million sales tax exclusion (increased to $350 million proposed) to support alternative energy and water manufacturing, noting that deep affordable housing projects rely heavily on federal and state tax support.

Specific Investor Questions and Responses

• Small Ticket Investors ($30–$50M): Panelists suggest international investors with large funds can make introductions, but acknowledge a systemic gap in channels for smaller ticket sizes.
• B-Corp/PPM Questions: Recommendations include leveraging networks like the GIIN for standardization and connecting with intermediaries who can aggregate smaller deals for institutional consideration.
• Measurement Advice: Investors are advised to avoid inventing unique measures; instead, they should use common usage metrics and focus on a few material factors to avoid turning companies into reporting agencies.
• Product vs. Policy: The consensus is that while product performance attracts capital, policy frameworks (like CRA money in the US) significantly impact market dynamics and must be addressed to compete with subsidized capital.