Charitable foundations want asset managers to start funding the data, measurement tools and frameworks that support the impact investment industry.
Eleven foundations and family offices, including Rockefeller, Ford and the Omidyar Network, recently granted a total of $3.3 million to impact data and measurement organizations via the Tipping Point Fund on Impact Investing, a grant-making organization for the impact investment industry.
“It’s really the duty of the private sector who are using these tools to deploy money to help support it,” said Fran Seegull, executive director of TPF. “We see these announcements coming quite often now of multi-billion dollar funds, fund assets gathering around ESG, climate and impact.”
Ford Foundation president Darren Walker said in a statement to mark the TPF’s launch: “While we are pleased to welcome so many new entrants to this space and to witness the surge in capital invested for impact, there is also a shared obligation to support the field in order to close these critical market gaps.”
Chris Jurgens, a director at the Omidyar Network, the $448 million family office of eBay founder Pierre Omidyar, said: “Our vision is that eventually these organizations transition to more sustainable funding from market participants and major financial sector institutions.”
Seegull added that this feeling was shared by the foundations and family offices that fund the TPF, although she could not speak on their behalf.
“The infrastructure is straining and we don’t want it to break. You really have to fund the rails you ride on. It’s almost like the foundations and families that we work with are subsidizing the creation of a market,” said Seegull.
Some of the organizations TPF has made grants to, such as GIIN, have earned revenue streams including memberships and conference tickets. Members and attendees pay fees to receive some sort of immediate, tangible benefit such as services, information, networking opportunities, said Seegull.
Covering the costs
This quid pro quo funding structure can help an established organization to fund its own basic operations, but typically doesn’t generate enough capital to create long term, public tools and platforms that allow the industry to grow.
For example, GIIN’s membership fees cannot cover the immediate capital expenditure to build the forthcoming IRIS+ database, said Seegull. “But this data can be publicly available, can be used by company employees, company pensioners and communities” – so LPs can see the authenticity in impact investing, develop their own impact strategies and hold investors accountable, added Seegull.
“What we’re asking here is for them to go a step beyond and fund some of the public goods.
“If you are having the benefit of this rising tide and interest and demand for impact investing or ESG funds, then you need to support the infrastructure; this infrastructure doesn’t appear on its own. It is grant subsidized. These are public goods.”
Impact-focused foundations and family offices were ready to incubate the industry and take it from philanthropic endeavors to investments generating competitive returns, said Seegull.
“Rockefeller heavily funded the creation of the market – tens of millions of dollars over a handful of years to catalyze and define and support the birth of a of a movement,” said Seegull.
“The term impact investing was coined at a convening that the Rockefeller Foundation hosted in Italy in 2007-08, and that led to the founding of the Global Impact Investing Network.
“And the Ford Foundation incubated the US Impact Investing Alliance for four years, and then we spun out in early 2021.
“Blue Haven Initiative, in particular, has been very supportive over the last handful of years in building and supporting impact investing infrastructure. And I have found that they’re relatively unique amongst family offices. I think their principals really understand that what allowed them to get into the impact investing field years ago was this infrastructure and investing in this movement building that has been created by larger foundations. And in order to support the next generation of high-net-worth families coming into the field, they almost see it as a duty to support the infrastructure.”
‘Foundations move on’
One of TPF’s goals is for the private markets sector to take over funding for these organizations alongside government regulation. “Some of the thinking that went into the creation of the Tipping Point Fund is that philanthropic priorities change,” said Seegull. “Foundations move on. The role the foundation can play is to come in and see where there are market failures and build something, and then pass it off to the market or pass it off to government.
“But this impact investing infrastructure was getting funded by the same organizations year after year, and that that started to feel unsustainable and incommensurate with the growth of the field.
“Ideally, you hand it off to the private sector or you hand it off to government. And we’re looking for both here.”
TPF makes grants to organizations focused on impact data and measurement and public policy – “public goods that are critical to the continued growth and fidelity of the impact investing market,” according to its website. It was launched in December 2019 with $14.2 million in funding from the Blue Haven Initiative, the David and Lucile Packard Foundation, the Ford Foundation, the John D and Catherine T MacArthur Foundation, the Meyer Memorial Trust, the Omidyar Network, the Phillips Foundation, the Rockefeller Brothers Fund, the Rockefeller Foundation, the Surdna Foundation and the Visa Foundation.
This article first appeared in affiliate publication New Private Markets