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July 15, 2011
ImpactAssets Seeks to Administer $1 Billion in Impact Investing Assets
    by Robert Kropp

Ten years after developing the Giving Fund for the Calvert Foundation, Tim Freundlich talks with SocialFunds.com about the nonprofit's efforts to catalyze investment for environmental, social, and financial impact.


It's been ten years since Tim Freundlich helped establish the Giving Fund for the Calvert Foundation. Since its inception, the donor advised fund has provided philanthropists with opportunities to integrate environmental, social, and corporate governance (ESG) criteria without having to set up private foundations.

While he retains the title of Special Consultant to the Foundation, Freundlich is now President of ImpactAssets, a nonprofit financial services company created to catalyze investment capital for environmental, social, and financial impact.

"I moved over from the Foundation to form the new entity last year," Freundlich told SocialFunds.com. "We're at meaningful early-stage scale already, and it's built from the ground up to be 100% impact investing. We have exposure to 50 or 60 socially responsible mutual funds, we've reconstituted the donor advice fund platform, and we already have 480 accounts with $60 million in assets."

The long-term goal of ImpactAssets, according to Freundlich, is to administer $1 billion in assets within the next five years.

"We're sort of backwards from the normal asset base, with 55% in alternative assets like impact-based private debt and equity that are not traded publicly," Freundlich continued. "We're open to all comers, but really want to work with wealth management advisory firms. We plan to be innovative around social and environmental funding opportunities."

Freundlich disagreed with a recent definition of impact investing as an alternative asset class unto itself, which is found in a report authored by J.P. Morgan Global Research in collaboration with the Rockefeller Foundation. That definition, Freundlich observed, "Is not exact enough for those of us in the deep trenches of managing these investment platforms."

Asked if the formation of ImpactAssets represents an evolution of the work of the Foundation or an entirely new direction, Freundlich answered, "Totally an evolution. During my time at the Foundation I prototyped the Giving Fund, and we realized the time was right for taking this to a broader level. The DNA of the Foundation is strongly in ImpactAssets, as our founding board has significant overlap with Calvert Foundation's board. But ImpactAssets is a fully separate, uncontrolled entity. We have a great shared history and shared strategic value in the future."

A service provided by ImpactAssets is the ImpactAssets 50, a list of private debt and equity impact investment fund managers that integrate social and environmental considerations as well as financial returns. To be included in the IA50, fund managers must have at least three years experience in impact investing, manage at least $5 million in assets, and commit to ESG considerations in their portfolios.

"The IA50 is an important signal of how we want to interface with investors and private debt and equity fund managers," Freundlich said. "We want to look across the whole landscape globally of investment and help translate and present it to broader markets. In effect, simplify and demystify for investors and their financial advisors who don't have a lot of information."

"What's really important about the IA50 is that we're trying to create a manageable set of credible managers across a broad array of categories in the private debt and equity space," he continued. "It's not a selection of top funds, but a selection of top fund managers."

Freundlich mentioned the ImpactBase service of the Global Impact Investing Network (GIIN) as a another service for investors seeking to provide investors with a mechanism for finding information needed for impact investing. However, "ImpactBase works at the fund level, and you have be a registered and accredited to get the information," Freundlich said. "We expect that people who come in through IA50 may end up at ImpactBase and then hire a consultant to do due diligence."

"We're not trying to do due diligence for people," he continued. "We're trying to simplify what can be a very messy Wild West into something people can start a conversation with their financial advisors about."

The aforementioned J.P. Morgan report, which sought to differentiate between impact and sustainable investing by stating that traditional socially responsible investing (SRI) "generally seeks to minimize negative impact rather than proactively create positive social or environmental benefit," raised some hackles in the sustainable investment community. Writing in the Huffington Post, Amy Domini, the founder and CEO of Domini Social Investments, stated, "Please, 'high impact investors' who are so eager to distance yourselves from us socially responsible investors, don't just presume that you are doing more than we all have for the last 30+ years."

"If you want to have a high social impact in the world, join us," she continued.

Freundlich sought to defuse any furor over terminology, saying of impact investing, "It's about capturing the zeitgeist of the moment. There's a significant set of new actors who are interested in changing their behavior and aligning high-impact, passion-driven investing. There's a high correlation between impact investing and direct venture investing. It's more about motivation than an exact definition."

Describing the future goals of ImpactAssets, Freundlich said, "On a fundamental level, ImpactAssets is focused on how we take this distribution platform and build on it. It's further evidence that we have Calvert DNA in us. What has Calvert Investments done better than anybody? They've gotten massive third-party distribution, more investors, and a bigger brand to help society talk about this stuff over the last 30 years."

"Commitment to distribution is easier said than done, and what is missing is in the middle," Freundlich concluded. "There's a lot of investor appetite, and a lot of great fund managers in the impact investing space. What's missing is enough connective tissue. ImpactAssets seeks to build a distribution apparatus at scale, and when we do we'll get wealth managers and their clients enough product to make this part of their portfolios."

 

 
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