The Colorado Impact Report was conceived to shine a light on some of the field-leading work being done, and innovation on display, in the great state of Colorado. We have a thriving impact investing ecosystem in Colorado, which we expect to continue to grow and develop. We hope that our experience can provide lessons and encouragement to investors and entrepreneurs in other geographies.
Part of what makes impact investing successful in Colorado is an active and thoughtful base of families, foundations, nonprofits, asset managers, and advisors who are committed to the health and well-being of the broader community. Place-based impact investing can play a critical role in addressing issues overlooked (or underfunded) by governments and in providing capital for ventures that strictly for-profit investors would find unappealing.
Effective Planning Is Key
Investors are well served by making thoughtful decisions at the outset of their investment planning process about what they hope to accomplish with their impact strategies. They should have clear expectations about the financial and social impacts their investments are intended to deliver. The expected financial return and impact metrics by which the success of the investment will be judged should be agreed upon by all concerned prior to any investment being made.
Additionally, investors should determine the role of their impact investments in a portfolio context. Are these investments a part of their core investment portfolio, a bridge between other investments and philanthropy, or a means to leverage their philanthropy? These are often difficult questions to answer, but identifying preferences on these issues will lead to certain other key decisions, such as whether direct placements are appropriate as opposed to engaging a fund manager or some other kind of intermediary, and which dollar or portfolio-percentage amounts are appropriate for various projects or themes. Investment mistakes and bad experiences can often be avoided by simply aligning the expectations of all participants early in a project or engagement.
As the Colorado Impact Report illustrates, Colorado’s impact investors are taking steps to create an investment landscape that connects for-profit investments with intended social and environmental impacts. They have been testing pilot programs, providing seed capital to various investment ideas and concepts, and supporting creative initiatives that blend social entrepreneurship with venture capital style equity and microfinance resources.
Another key to Colorado’s impact investing success is our strong spirit of innovation and entrepreneurship, combined with our deep commitment to environmental and social sustainability. There are numerous initiatives under way, and a wide variety of new projects breaking ground, only a handful of which are we able to highlight in this report. Investors now have numerous impact investment options. These days, when people say they can’t find good impact investments, we say they may not be looking carefully enough or have not yet clearly defined what they’re after.
For relative newcomers to the space, and even for established players, it’s often beneficial to enlist active intermediaries who can build bridges between thoughtful investors and enterprising social business opportunities. Colorado’s network of intermediaries includes impact asset management firms that can help to diversify and manage portfolios of holdings, platform builders that can source and promote individual businesses to angel investors, and organized groups of investors who can leverage one another’s assets and expertise to achieve economies of scale in the areas of due diligence, deal structuring and management.
In addition, Colorado’s impact community receives support from government agencies, academic institutions, experienced media professionals, an open-minded and engaged philanthropic community, and several community development finance institutions (CDFIs). These participants are effective and critical elements of our overall environment of success for social entrepreneurship.
There are numerous connections among the players in Colorado’s impact investing community. That’s clear just from reading this report, which provides examples of how some asset owners are approaching constructing and implementing their impact strategies, how the platform builders and other intermediaries are delivering pathways for asset owners to place their capital, and how others are creating investable solutions. The ongoing cooperation between these players is another important piece of what works well in Colorado.
While this report is by no means exhaustive, we hope that these examples of work being done by the various players in our ecosystem will serve as inspiration to others who have not yet found their entry point to the space, in Colorado and beyond.
We hope that we’ve been able to show aspiring participants in the field of impact investing some ways to get involved, or deepen their involvement, by sharing the examples of the modern-day pioneers in Colorado that we’ve had the privilege to highlight in this report. Communities, entrepreneurs, and the financial players who serve them can all benefit from greater cooperation, greater mutual under-standing, and a greater willingness to use all the tools available to them to solve our greatest societal challenges.
The Cornerstone Capital Investment Advisory (CCIA) division of Cornerstone Capital Group provides investment advisory services to families, family offices, endowments and foundations that wish to align their investment activities with sustainable principles.
Phil Kirshman, CFA, CFP®, is Chief Investment Officer of Cornerstone Capital Investment Advisory. Phil directs Cornerstone’s investment policy planning, strategic asset allocation, investment implementation and portfolio reporting processes. He also serves on the board of the Calvert Foundation; has served on the Advisory Council to the City of Denver Office of Sustainability; and served as a board member of US SIF: The Forum for Sustainable and Responsible Investment.