THE seven teenagers sit with their feet tucked under tan desks in a classroom in New York City’s Rikers Island jail, taking turns answering “icebreaker” questions they’ve fished from an envelope.

“What’s your favorite thing to do with your time?” asks one young man, the rowdiest of the group. He answers himself: “Reading.”

“Really?” says Joyce Gendler, their peppy 22-year-old instructor, with just a hint of incredulity. “Good.” A few minutes later, she begins to engage them in the day’s activity, making sympathy cards for people who are sick.

The adolescents are part of a new program aimed at building personal responsibility and life skills, with the goal that fewer of them will re-offend. The program is financed by an innovative mechanism called a social impact bond, one of a handful of ways that philanthropy is trying to tap new pools of funding to produce measurable social results. If the program succeeds in significantly reducing recidivism, the “investors” paying its upfront costs — in this case, Goldman Sachs, with backing from Bloomberg Philanthropies — will be repaid by the city with a modest return. If the program falls short, the investors lose their money, sparing taxpayers the costs of the program.

The “social impact bond,” also known as a “pay for success” bond, is the latest — and most discussed — tool in a broader playbook philanthropists are using to blend business and charity to make a bigger difference. Sometimes known as impact investing, these approaches include providing low-interest loans to nonprofits, making equity investments in companies that tackle social problems and investing a portion of a foundation’s endowment in enterprises that produce measurable benefits to society and a financial return.“There’s a recognition that philanthropy and government can’t solve all the social problems,” says Judith Rodin, president of the Rockefeller Foundation, which has spent $40 million since 2009 to develop the field of impact investing. “And then you have investors who maybe didn’t want as bright a line between their charity and philanthropy on one side and their financial investments on another, and they began to look for blended opportunities.”

While many of these opportunities focus on microfinance, farming or other fields in which there is an obvious way to generate revenue, social impact bonds offer something new. They pay back investors through the savings a government could accrue if a preventive program succeeded in its goals of reducing recidivism or keeping children out of foster care, bringing an opportunity for financial returns to a new set of society’s knottiest problems.

The bond concept has drawn interest from many government officials and some nonprofits eager for new financial support. But it has also stirred concerns among people who say the idea is impractical, ignores political realities and risks putting profits ahead of what is best for society.

The bonds were first tried in Britain two years ago, to finance a program for 3,000 prisoners at Her Majesty’s Prison Peterborough. In Britain, 60 percent of prisoners who serve short sentences land back in jail within a year; by helping parolees find housing and other support, the program aims to reduce the recidivism rate by 7.5 percent.

Initial results won’t be available for another two years, but Alisa Helbitz, director of research and communications at Social Finance, in Britain, says anecdotal feedback has been positive. Participation rates are high — the program is optional for prisoners, though organizers are trying to reach as many people as they can — and some local police say they are pleased with the project. The “investors,” in this case, included philanthropies like the Rockefeller Foundation.

Since then, the social impact bond idea has spread at a pace that has surprised some in the slow-moving world of philanthropy.

“There’s been a gold-rush mentality,” says Daniel Stid, a partner with the Bridgespan Group, which provides consulting services to nonprofits.

The federal government and the states of Connecticut, Massachusetts and New York, as well as Cuyahoga County, Ohio, and Fresno, Calif., are introducing or exploring social impact bonds. Most of the programs focus on problems like helping parolees find jobs or housing the chronically homeless, where a preventive approach could produce obvious savings.

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In my recent interview with him, I asked him who was the new change agent in impact investing.  He said, the financial advisor.

NEW CHANGE AGENTS:  FINANCIAL ADVISORS
Ron is familiar with working with financial advisors.  He has done it all his professional life.  And what he knows is that most clients seek  insights  from their financial advisors.  According to Hope Consulting, 27% of high networth individuals seek advice from their financial advisors.  And according to the same report, over 48% of high networth individuals are interested in impact investment opportunities.  Large houses are tuned into this trend and pioneers like Morgan Stanley have launched  impact investment platforms.

Other leading institutions like CalPERS are integrating impact criteria into their asset allocation and leading minds at firms like Imprint Capital are helping other fund managers gain access to this market.

The question is with such significant interest from investors to participate in impact investing, why is the total amount of assets under management in this field still relatively small.  Ron says that it boils down to the empowering financial advisors with know-how.

In his view, financial advisors lack a voice when it comes to impact investment.

FINDING  THEIR VOICE
Ron says that educating financial advisors is essential for substantial capital to flow into this sector.  In an effort to contribute to the general education of financial advisors, Impact Assets launched its The ImpactAssets 50 (IA 50).  It  is an open-source, publicly published database of experienced private debt and equity impact investment fund managers.  In addition to on-line resources, Ron encourages firms to build up their internal know-how and for individual financial advisors to attend conferences like SOCAP and Net Impact to become familiar with the companies and stakeholders  that are emerging in this space.

THE ROAD AHEAD
He recognizes that the field is emergent and that there are heated discussions over how to define impact investing.  When I asked about the narrow pipeline of highly scalable companies operating in the impact sector, he remained optimistic.  He indicated that more mature sectors like micro-credit will be early recipients of the capital flows and that as the capital availability increases household names will tap into it to finance impact projects and it will invite talent that normally goes to traditional companies to start impact focused ventures.

Ron sees a $120 billion impact investment marketplace. To tap into his brain, you will have to chase him down on a plane, train or automobile for he is perpetually on the road helping financial advisors learn that they can do both good and well

Now that impacting investing has achieved buzz phrase status, the next step for financial advisors and their clients is to understand what the heck it’s all about and how it can fit into a portfolio.

These and other topics related to this emerging corner of the investing universe were part of the conversation Sunday among advisors, money managers and thought leaders during a full-day impact investing workshop that kicked off the third annual Innovative Alternative Strategies conference in Denver. The conference is hosted by Financial Advisor and Private Wealth magazines.

In a nutshell, impact investing is about doing good while generating some type of financial return. Impact investments can run the gamut from setting up health care clinics in Third World nations to finding ways to provide affordable housing to lower income people in the U.S. to providing clean water supplies in an increasingly water-starved world. Investment amounts can range from pocket change contributions from individuals via the crowd funding movement, to funds open only to accredited investors that invest in social or environmental projects or in companies plying the space.

Financial returns can vary from low single digits to as much as 20% or more, depending on the type of investment—debt, equity or cash—and how it’s structured. As for measuring the social impact returns on these investments, well, that’s still a work in progress.

But the point is, said several speakers, there’s a growing movement—particularly among younger people—to do good, have a positive impact on the planet, and to align their investments, or at least a portion of them, to those goals. It’s a slow-brewing, bottoms-up sea change in thought that could potentially re-orient not only the way individuals view their investments, but how companies conduct business as they start to account for the social and environmental impacts of their operations.

And for advisors, engaging in the impact investing space can add value to their practice by helping provide solutions for clients interested in this area. It also can be a differentiator when it comes to attracting new assets—particularly among the Gen X and Y crowds as they accumulate assets and seek financial planning help.

“Impact investing is a way to bring in the next generation [of clients],” said Ron Cordes, co-chairman of Genworth Financial Wealth Management and co-founder of ImpactAssets, which was created as a go-to resource for financial advisors interested in impact investments. He noted that one of big trends he’s seen among college-age people he’s worked with is an interest in social entrepreneurship and an interest in tackling global poverty.

Cordes said that advisors need to qualify their clients upfront because impact investing isn’t for everyone. “The conversation I have is ‘if I can show you a way to take 3% to 5% of your portfolio and invest that in a way that’s consistent with the things that are important to you, and we can earn competitive financial returns, is that something you’re interested in?’

“My experience is that people want to do impact investing, but they want to be convinced they’re real investments,” Cordes continued. “I think the industry is evolving to the point where there are more viable products with track records where you can say to a client ‘this investment has a high likelihood of giving you a reasonable financial return, in addition to a social return.’”

Cordes hosted a panel session with two fund managers—Gil Crawford, CEO and CIO at MicroVest, and Gerhard Pries, president of Sarona Asset Management Inc.—who manage products in the impact investing space. The flagship product at MicroVest, which specializes in microfinance opportunities in developing nations, is its Short Duration Fund, a vehicle aimed at the fixed-income part of a portfolio and that has a targeted return rate of a little more than 3%.

“People are attracted by the prospect of having a fixed-income piece in frontier economies, as well as by the demonstrated lack of correlation [with traditional asset classes] that microfinance has had over the past 10 years,” Crawford said.

MicroVest nets 125 basis points for every dollar invested in its Short Duration Fund. The investment minimum is $500,000.

Sarona, which among other things manages private-equity funds-of-funds in frontier and emerging markets with a focus on companies in the small to mid markets, charges a “1 and 10” fee structure. These funds are limited to accredited investors.

Pries said Sarona invests in two types of companies—those that produce products and services that are inherently impactful (i.e., are engaged in such areas as health care, microfinance banks, affordable housing), and those that don’t make things that are directly impactful but which are infused with progressive values at the core of their businesses. He noted that’s manifested in how they treat their employees, or their policies toward women and minorities.

“We haven’t yet figured out how to measure these things and report back to investors,” Pries said. But he added his experience shows that companies that infuse these values into their corporate DNA typically do much better when it comes time to execute their exit strategies.

“The world is moving toward stronger values expectations within the business community,” Pries said. “Companies at the forefront of that are getting premiums when they sell their businesses.”

And for Sarona, that means higher returns on their portfolio companies. Pries said Sarona aims to build portfolios that exceed 20% internal rate of return on a gross basis.

But as Cordis noted, both MicroVest and Sarona’s products are aimed at the high-net-worth investors. Going forward, the challenge for the impact investing industry is to develop products that are within reach of the mass affluent. In that vein, he said ImpactAssets plans to roll out impact-oriented debt products with $25,000 investing minimums, as well as products dealing with microfinance and other areas in the impact space.

—Jeff Schlegel

“Individuals…are becoming increasingly aware of how they can connect their ‘passions with their portfolios.’” — Ron Cordes, co-chairman, Genworth Financial Wealth Management[1]

The International Association for Impact Assessment (IAIA), an international network of 1,600 researchers, policy analysts, government administrators and corporate planners from more than 120 countries, announced it is now accepting nominations for its 2012 awards honoring achievements in the area of impact assessment (IA), the winners to be recognized at IAIA’s 32nd annual conference.

IAIA defines impact assessment as, simply, “the process of identifying the future consequences of a current or proposed action.” IAIA looks to “advance the state of the art and science of impact assessment in applications ranging from local to global to develop international and local capability to anticipate, plan and manage the consequences of development to enhance the quality of life for all.”[2]

IMPACT ASSESSMENTS FOR IMPACT INVESTING

Done properly, IA is a rigorous, fact- and science-based, non-partisan research process that evaluates an action’s potential effects, both desired and unintended, and thus provides a good analysis tool for impact investing, what New York Times columnist Paul Sullivan calls an “emerging hybrid of philanthropy and private equity.”[3]

Impact investing is more proactive than socially responsible investing (SRI). While an SRI-motivated investor may simply avoid supporting industries and companies that are deemed anathema to their core philosophies — animal welfare advocates may avoid investing in the meat industry, for example — an impact investor actively seeks out financial returns for investments that are involved with solutions to many of the world’s most pressing problems. Thus, impact investment funds are found supporting such ventures as microfinance programs to help poor people become independent business owners or technologies that help provide vaccinations in poverty-stricken regions.

An impact investor is much more engaged in topical issues and how sustainable finance can be a fundamental part of the solution. And this engagement requires more time researching the issues, the challenges and the various companies that are driving the projects, industries and technologies that are currently making or have the potential to make a positive difference.

GROWING PAINS NOW, BUT A BIG FUTURE

In an interview last month on Forbes.com with World Affairs Commentary founder Rahim Kanani, Ron. D. Cordes, the co-chairman of Genworth Financial Wealth Management, which lists $22 billion assets under management (AUM), acknowledged the shortcomings of the nascent sector of impact investing, admitting that “it’s been a difficult process to locate investment managers and funds focused on impact and evaluate them with respect to their ability to actually deliver that impact.”[4]

In 2006, after selling AssetMark Investment Services, a company he co-founded, to Genworth Financial, he and his wife Marty started the Cordes Foundation, which provides grants to promote international impact investment and social entrepreneurship. He said that his approach to impact investing in his family foundation led to the creation of ImpactAssets Giving Fund, a Donor Advised Fund (DAF) incubated by the Calvert Foundation that administers USD 60 million AUM with a USD 1 billion goal, and is the only DAF that is, as Cordes said, “specifically designed to embrace impact investing.” The fund invests in fair trade, sustainable timber, microfinance and renewable energy in the developing world.

IMPACT INVESTING: WHERE PASSIONS MEET PORTFOLIOS

“Like any new investment category, it will take time for investors and the advisors who serve them to embrace this new opportunity,” Cordes said. “But I’m quite confident that a strong groundswell of interests exists from individuals and family foundations who are becoming increasingly aware of how they can connect their ‘passions with their portfolios.’”[5]

According to several forecasts, his confidence is well-founded. While the current impact investment market stands at around USD 50 billion today, a 2009 report by the Monitor Institute said the market could expand to USD 500 billion over the next decade, which would amount to 1 percent of global AUM. “A market that size would create an important supplement to philanthropy, nearly doubling the amount given away in the US alone today,” the report states.[6]

CREATING THE TOOLS OF THE IMPACT TRADE

“If we’re really going to catalyze meaningful capital,” said Cordes, “we have to create tools, vehicles and products to better connect investors with impact investment opportunities.” Impact investors should look for companies and investment vehicles that have intergrated IA into their planning. “Funding an impact assessment system should be considered the R&D cost-equivalent of building a smart, effective investment product and organization,” writes Irene Kao on What’s Possible, the blog of The Tides, an online social change platform.[7]

The IAIA awards provide an excellent research tool into IA best practices, as they honor individual, corporate and institutional leaders in the realm of IA and how its approach and principles help support sustainable development, social justice and human and environmental health.

The awards include the Global Environment Award, given to a leading individual or institution for making a significant global IA contribution; the Corporate Initiative Award, given to a private or public sector company for a specific project that has made a notable contribution to responsible development practice through the application of IA; the Institutional Award, given to a national or international organization for outstanding IA contribution; the Individual Award, a mid-career honor that recognizes personal contributions to IA on an international level; and the Regional Award, given to a person or organization for making a substantial IA contribution in the region of the annual conference.

So many eyes will be on what’s happening in the IA sector in the region of Porto, Portugal, which is the location of IAIA’s 32nd annual conference, taking place from May 27 through June 1. Non-members are welcome to make nominations, which are due on October 15.

Reporting on the New York stock market’s massive losses this week, the New York Times cited “persistent uncertainty.”[8] That is one thing that impact investment — thanks to the responsible use of impact assessment — tries hard to avoid.

Written by: John Converse Townsend on 12/20/11

Editor’s note: This post was written by Marina Kim, Director, Ashoka U

The Cordes Foundation’s search for impact led it to partner with the Ashoka U program to co-develop the Ashoka U – Cordes Innovation Award for recognizing the most innovative approaches to social entrepreneurship education. The first year of “Ashoka U – Cordes Innovation Awards” were launched in February 2011.

Finalists include the Brigham Young University On Campus Internship Class, which engages up to 12 student teams each semester to work with social entrepreneurs, and the Transformative Action Institute’s curriculum, which provides training in critical qualities such as resilience, creativity, and social and emotional intelligence for thousands of students at more than 20 campuses in 40 countries.

With the Cordes Foundation’s leadership, this initiative will expand by supporting other colleges and universities to adapt award-winning programs that help accelerate growth in the field of social entrepreneurship. Recently, Changemakers talked to Ron Cordes, who is the co-founder (along with his wife Marty) of the Cordes Foundation, about his vision for the Ashoka U – Cordes Innovation Award.

Cordes serves as a regent of the University of the Pacific and chairman of the advisory board for the university’s Global Center for Social Entrepreneurship. He has a long track record in the investment industry, speaking and writing extensively about the field of impact investing, and he chairs the executive committee for ImpactAssets, a new initiative to catalyze capital for impact investments.

Changemakers: How long have you been involved in social entrepreneurship education?

Cordes: I was introduced to social entrepreneurship through the newly-formed Global Center for Social Entrepreneurship at the University of the Pacific (UOP), where I joined as a founding partner. It was hard not to notice the social conscience of the Gen Y/millennial generation, and students at UOP had an amazing passion and desire to change the world.

In partnership with the Center’s director Jerry Hildebrand, we saw a huge opportunity to channel this energy and to equip students to be effective change agents—both while in college and after they graduate. At UOP, the team initially focused on experiential opportunities for students to engage with social enterprises, both locally and globally.

The Center has operated a summer ambassador program for the last six years. More recently, they added a curriculum and certificate program in social entrepreneurship.

Changemakers: Why are you partnering with Ashoka U to take the Innovation Awards to the next level?

Cordes: Through my work at UOP, I began to recognize that the social enterprise phenomenon was occurring at dozens of colleges and universities across the U.S., but there was no coordination among the campuses to share best practices in this emerging field. When Ashoka stepped into a leadership role with the creation of Ashoka U, it seemed like the ideal vehicle to create a new collaborative platform.

So we became an early supporter of the Ashoka U Exchange, and have been proud to support the conference to bring together leaders in social entrepreneurship education in 2010, 2011, and now again in 2012. When I attended the first summit in 2010, I was overwhelmed by the incredible interest and energy from students, faculty, and administration to advance social enterprise at their institutions, and by how valuable it was to bring people together to move the field forward collectively.

At UOP, we think of the Global Center for Social Entrepreneurship as a social enterprise, and we are committed to applying the same level of innovation, and focus on results, with respect to our programs as social entrepreneurs who are doing work on the ground to solve social problems. This is why the Innovation Award is so resonant; it reflects the great work that is being done at the university level, and the promise of innovators in higher education as the drivers of high-impact programs.

Changemakers: What do you think the world will look like if all campuses have strong, thriving social entrepreneurship programs?

Cordes: The world is coming to recognize that we are not going to be able to solve our biggest and most important problems using the same solutions that have been tried over the past hundred years.  We are going to rely on this next generation of leadership to propel us forward—and that next generation is now being equipped at colleges and universities around the country, and around the world.

It could be truly groundbreaking for thousands of young leaders to be inspired and equipped to find new ways to connect the social enterprise space in higher education, to move forward with new innovative initiatives.

Gregory Cho’c, a Mayan who earned his education while managing a popular general store in Punta Gorda, and now spearheads the defense of indigenous rights to resources in Belize.

Marie St. Fleur, the first Haitian-American elected to state office in the U.S. and a former Assistant Attorney General who now directs Boston’s prominent neighborhood economic development initiatives and academic intervention programs.
Taddy Blecher, who has pioneered the free tertiary education movement in South Africa by opening six free-access higher education institutions, involving celebrities like Richard Branson, and already reaching over 600,000 students.
Raja Moubarak, who with his French designer wife, transforms architectural salvage into art and furniture for western retail, employing the war disabled and funding schools & clinics in Beirut.
// CORDES FELLOWSHIPS
Like all Opportunity Collaboration Delegates, Cordes Fellows are high-impact, innovative, entrepreneurial for-profit and nonprofit organization executives with a demonstrated commitment to economic justice and poverty alleviation. These catalytic leaders evidence pragmatic vision, passionate tenacity, multi-sectoral thinking, adaptive leadership skills, non-ideological activism and a strong ethical grounding in their actions and accomplishments.Page 2 of 3

// OPPORTUNITY COLLABORATION
The Opportunity Collaboration is a problem-solving, strategic retreat for nonprofit leaders, for-profit social entrepreneurs, grant-makers and social investors. On World Poverty Day in Ixtapa, Mexico, Delegates leverage resources, share innovations, enlist allies, build coalitions and create force multipliers in poverty alleviation. October 14-19, 2012. 86% sold out. To apply now visit www.opportunitycollaboration.net

// 2012 CORDES FELLOWS
Mayyada Abu Jaber, CEO, Jordan Career Education Foundation (Amman, Jordan)
Deborah Ahenkorah, Founder & Executive Director, The Golden Baobab (Accra, Ghana)
Shahinaz Ahmed, CEO, Education For Employment Foundation (Cairo, Egypt)
Juan Alducin, Country Director, CHOICE Humanitarian (Irapuato, Mexico)
Tutu Alicante Leon, Executive Director, EG Justice (Washington, DC)
Julius Kwadzo Ameku, Executive Director, FYSSO Ghana (Sogakofe, Ghana)
Hany Amin, Founder & President, Better World Foundation (Cairo, Egypt)
Alejandra Ancheita, Executive Director, ProDESC (Mexico City, Mexico)
Semhar Araia, Founder & Executive Director, Diaspora African Women’s Network (Minneapolis, MN)
Christina Araiza, Program Director, Esperanca (Phoenix, AZ)
Mark Arnoldy, Executive Director, Nyaya Health (Nepal & Boston, MA)
Sadiqa Basiri, Executive Director, Oruj Learning Center (Kabul, Afghanistan)
Rafael Betancourt, Principal, Havanada Consulting (La Habana, Cuba)
Gregory Biniowsky, Fund Coordinator, Canadian International Development Agency (Havana, Cuba)
Taddy Blecher, CEO, Community Individual Development Association (Johannesburg, South Africa)
Dina Buchbinder Auron, Director, United Nations Youth Association in Mexico (Mexico City, Mexico)
Gregory Ch’oc, Executive Director, SATIIM (Punta Gorda, Belize)
Emma Clippinger, Founder & Executive Director, Gardens for Health Int’l (Rwanda & Cambridge, MA)
Christine Condo, Managing Director, Rwanda Economic Development Initiative (Kigal, Rwanda)
Lisa Craig, Manager, Peel Community Legal Services (Mandurah, Australia)
Jason DaSilva, Founder, When I Walk Inc (Brooklyn, NY)
Nathaniel Dunigan, Founder, Aidchild (Uganda & San Diego, CA)
Alissa Everett, Executive Director, Care Through Action (New York, NY)
Scot Frank, CEO, One Earth Designs (Kowloon Bay, Hong Kong)
Heather Franzese, Director, Good World Solutions (Oakland, CA)
Marga Fripp, Founder and President, Empowered Women International (Alexandria, VA)
Mulugeta Gebru, Executive Director, Jerusalem Children & Community Development Org (Addis Ababa, Ethiopia)
Eric Glustrom, President, Educate! (Uganda & Boulder, CO)
Allison Hoffman, Managing Director, Pari Project (Phnom Penh, Cambodia)
Nancy Hughes, President & Founder, StoveTeam International (Eugene, OR)
Nnaemeka Ikegwuonu, Executive Director, Smallholders Foundation (Owerri, Niegeria)
Lucina Jimenez Lopez, Director General, Consorcio International Arte y Escuela (Mexico City, Mexico)
Diane Johnson-McCarthy, President, Mmapeu Management Consulting (Oakland, CA)
Irene Kagoya, Leadership Program Coordinator, Akilah Institute for Women (Kigal, Rwanda)
T. Jackson Kaguri, Executive Director, Nyaka AIDS Orphans Project (Uganda & East Lansing, MI)
Wanjiru Kamau, President & CEO, African Immigrant & Refugee Foundation (Washington, DC)
Joan Kariuki, Executive Director, Youth Alive! Kenya (Nairobi, Kenya)
Nikita Ketkar, Founder and CEO, Masoom (Mumbai, India)
Nunu Kidane, Director, Priority Africa Network (Oakland, CA)
Yanina Kowszyk, Executive Director, Forum Empresa (Santiago de Chile, Chile)
Armando Laborde, Director, Ashoka Mexico and Central America (Mexico City, Mexico)
Gerd Ladstaetter, CEO, African Briquet Factory PLC (Addis Ababa, Ethiopia)
Leonie Lange, Founder & Midwife, Casa Lucero (Urubamba, Peru)
Solome Lemma, Executive Director, Africans in the Diaspora (Brooklyn, NY)
continues on next page…
At a glance:
? 57% women
? 18% African
? 16% Latin American
? 15% North American
? 12% Asian
? 9% Middle Eastern
? 5% European
? 1% AustralianPage 3 of 3
Thien-Nhien Luong, Executive Director, Friends of Hue Foundation (Vietnam & San Jose, CA)
Leila Makarechi, COO & VP of Programs, Microclinic International (San Francisco, CA)
Aila Malik, Associate Director, FLY: Fresh Lifelines for Youth (Milpitas, CA)
Angel Mario Martinez Garcia, Director, Progreso (Amsterdam, Netherlands)
Daniel Ekow Mensah, Executive Director, HealthKeepers Network (Accra, Ghana)
Katie Meyler, Founder, More Than Me (Bernardsville, NJ)
Sarah Mintz, Director of Community, Ashoka Changemakers (Washington, DC)
Raja Moubarak, Co-Founder, 2B DESIGN (Monteverde, Lebanon)
Ashley Murray, Founder & CEO, Waste Enterprisers (Accra, Ghana)
Chingwell Mutombu, Executive Director, First Step Initiative (Golden Valley, MN)
Natasha Myles, CEO & Founder, LIFT Investments (Brooklyn, NY)
LanVy Nguyen, Founder, Fashion4Freedom (Ho Chi Minh City, Vietnam)
Kennedy Odede, President & CEO, Shining Hope for Communities (Kenya & Middletown, CT)
Angela Patton, Executive Director, Camp Diva (North Chesterfield, VA)
Deborah Plotkin, Executive Director, U-TOUCH (San Diego, CA)
Korvi Rakshand, Founder, JAAGO Foundation (Dhaka, Bangladesh)
Anushka Ratnayake, CEO, myAgro (San Francisco, CA)
Teju Ravilochan, CEO, Unreasonable Institute (Boulder, CO)
Audra Renyi, Executive Director, World Wide Hearing (Montreal, Canada)
Gerald Richards, Chief Executive Officer, 826 National (San Francisco, CA)
Arlene Samen, CEO, One Heart World-Wide (San Francisco, CA)
Deval Sanghavi, Co-CEO & Co-Founder, Dasra (Mumbai, India)
Ronak Shah, Programme Coordinator, Climate Change & Drinking Water / Sanitation, Seva Mandir (India)
Sadhana Shrestha, President, Tewa (Lalitpur, Nepal)
Claudia Vanessa Siliezar Turcios, Coordinator, GOJoven, (La Ceiba, Honduras)
Maria Springer, Executive Director, LivelyHoods (Venice, CA)
Marie St. Fleur, Chief of Advocacy & Strategic Investment, City of Boston (Boston, MA)
Dan Sutera, Executive Director, Impact Network (Brooklyn, NY)
Prakash Tyagi, Executive Director, GRAVIS (Jodhpur, India)
Richard Webb, President & Founder, ProWorld Service Corps (New York, NY)
Britt Yamamoto, Executive Director, iLEAP (Seattle, WA)
Jose Zaglul, President, EARTH University (San Jose, Costa Rica)

This post was written by first year MBA student Ian Cain.  Ian reflects on a recent visit from Ron D. Cordes, co-chairman of Genworth Financial Wealth Management and founder ofImpactAssets.  Cordes came to Fuqua as part of the CASE i3 speaker series on impact investing.

It was in 2004, on his 45^th birthday, when Ron D. Cordes decided that by the time he turned 50 he would be on a different path. He had run AssetMark, the company he founded, since soon after his graduation from the University of California at Berkeley.  By 2006, Ron and his partners sold AssetMark to Genworth Financial Management, and he used the proceeds to start a family foundation that would be dedicated to social enterprise and impact investing.

On January 26, 2012, we had the pleasure of hearing Ron tell us his story about the lessons he has learned in “infrastructure building” in the investment services business and how he plans to apply this expertise to impact investing.

Ron’s new venture –ImpactAssets – is a non-profit financial services company that aims to aggregate and deploy capital in sustainable social enterprises. The goals of ImpactAssets are to:

• Leverage investments to earn a return and create positive social and environmental impact
• Increase the amount of capital flowing to high impact social and environmental enterprises
• Speed the adoption of impact investing by investors, philanthropists and their wealth advisors

This is a bold initiative that is providing a “circle of capital” around these social and environmental enterprises to help them solve the major problems of the world.  During his speech, Ron drew this image to illustrate his point:

On the investment capital side of the equation, Ron has already moved the needle by developing a public database (ImpactAssets 50) that identifies experienced private debt and equity impact investment fund managers.  He is also launching debt and equity products that will soon be available to the masses through financial advisors. Now Ron seeks to understand and tap the human capital side of the equation. How can we promote our best and brightest to seek social enterprise?

Unfortunately, it’s rare that someone who has been as successful in the private sector as Ron Cordes decides to put their full energy, capital and resources into solving social issues. But Ron is doing just that – and expanding that group by providing economic opportunities to hundreds or even thousands of people who are seeking ways to make a difference.

His theory?  Countless people have a financial advisor, but few have access to the type of social impact investment products like those that Ron and ImpactAssets are creating. Think about it: your long-term investments like your 401K or IRA accounts are invested in a basket of products that may or not be making money for you, but that capital is certainly not being put to work.  If you had the chance to put your money to work solving a social issue – while generating a return – would you pass up that opportunity?

Ron is building an infrastructure for impact investing similar to the one he helped build in financial services. ImpactAssets aims to be the resource to engage financial advisors to offer impact investing products to their clients.

As Ron said, “where the goal of AssetMark was to beat competitors, ImpactAssets is mercilessly focused on doing the best for the world.” How can you be the best for the world?

Interested to learn more?  Watch Ron’s entire talk here:

Ron Cordes spent more than 25 years in the traditional investing world. He co-founded and in 2006 sold AssetMark Investment Services to Genworth Financial where he serves of co-chairman of the  $24 billion asset management firm. However, it wasn’t until Cordes started a philanthropic family foundation that he faced his largest investing challenge: determining how to put a chunk of his foundation’s endowment into impact investments.  “That was the most difficult process of my investment career.  I had no idea where to put the money,” Cordes said while speaking on a panel about the role of private capital at last week’s Global Philanthropy Forum in Washington D.C.

Family foundations like The Cordes Foundation are often considered the low-hanging fruit of impact investing: their mission-driven philosophies combined with their perceived nimbleness make them ideal candidates to become first movers and concept-provers. However, Cordes and his co-panelists illustrated the barriers that exist even for them when trying to put their money towards companies that create positive impacts.

Leisel Pritzker Simmons, vice president and director of Program Development for the IDP Foundation (and part of the Pritzker family of the Hyatt Hotels fortune) spoke about her own challenges in attempting to enter the impact investing arena. The IDP Foundation made a grant to fund low-cost private schools in Ghana. The success of the grant then catalyzed subsequent microfinance investment in the schools.  But when Pritzker Simmons wanted to invest some of her assets into the schools as well, she was told by her financial advisor that her foundation was not set up to do so, and that investing this way would not be a wise move anyway.  What was a successful grant turned into an ongoing and frustrating attempt to expand the impact using investment dollars.

Financial advisors, according to Cordes, are key to unlocking the capital held by foundation endowments and individuals.  “To catalyze investors, you need to catalyze financial advisors,” he said during the panel discussion.  However, the lack of successful track record of successful impact investment deals listed by the Global Impact Investing Network as the number one barrier to impact investing can make financial advisors as wary about the sector as big institutional investors.  A lack of knowledge and resources compounds this issue.

An infrastructure needs to be developed that gives foundations and individuals the ability and knowledge to place their dollars into impact companies. During his own experience trying to place a portion of The Cordes Foundation’s endowment into impact investing, Cordes said he brought in a team of MBA students to seek out the best fund managers in the field, and came up empty. Ultimately he did manage to put 20 percent of the Cordes Foundation’s endowment in impact investments, and was surprised to find that in their first year (at the height of the financial crisis) these investments outperformed the more traditionally invested portion of the endowment.

To address issues faced by would-be impact investors, Cordes (Pictured left) partnered with The Calvert Foundation to create ImpactAssets, a non-profit financial fund.  ImpactAssets structures impact investment vehicles appropriate for philanthropists and individuals, and creates resources such as the ImpactAssets 50, a list of experienced fund managers focused on impact. Impact investing also seems to be appearing on the radar of financial advisors, with articles appearing the past 18 months in sources such as The Dow Jones Financial Advisor blog andFinancial Advisor Green.

So, with this growing infrastructure, are foundations and wealthy individuals jumping at the chance to transfer their endowments and investment dollars into impact investments?  At this stage, foundations and high net worth individuals seem cautious but intrigued by impact investing. According to a 2010 study by Hope Consulting, a strategy consulting firm focused on the social sector, 48 percent of wealthy investors were interested in and wanted to learn more about impact investing. Although some Global Philanthropy Forum attendees expressed their hesitation at the heralding of impact investing as “a silver bullet” that could solve all problems, I met many foundation representatives in the crowd interested in the prospect, as well as advisors who were attending the forum on behalf of clients interested in learning more about impact investing.

Annie Chen, a Hong Kong based impact investor and co-panelist with Cordes and Pritzker Simmons, gave perhaps the most useful input of the day to forum attendees contemplating impact investing. “Don’t wait for the perfect investment,” she advised. “There is no perfect investment – impact or not.  But there are investments out there that can create change.”

Ron was recently profiled in Second Act – a publication of Entrepreneur magazine – for the work that he is doing in his “encore” career in the field of impact investing.

Ron D. Cordes spent career No. 1 striving to amass a fortune — and he succeeded. He built AssetMark Investment Services, a firm he co-founded, into a nationwide company with 400 employees and $9 billion in client assets. In 2006 Cordes and two partners sold out to Genworth Financial Wealth Management for $230 million.

Now the 52-year-old entrepreneur is aiming to be equally successful in a new, wholly different career mission: giving money away. Charity sounds easy enough, but Cordes admits he was “a little bit terrified” when he and his wife, Marty, created the nonprofit Cordes Foundation immediately after the Genworth deal. They were wary of squandering the war chest. The challenge, he says, was “trying to figure out, when you’re not the Gates Foundation, and you have several less zeroes on your balance sheet, how you can really have an impact.”

The answer, Cordes decided, lay in a new style of managing wealth — a concept known as impact investing, first pioneered in the 1970s, when it was so rarely practiced that there wasn’t even a name for it. Only recently has the idea begun to catch on among major charitable foundations and a growing number of financial advisors, fund managers and even ordinary investors, in part because a relatively small number of game-changers — Cordes among them — have embraced the concept and set out to change the face of American philanthropy.

Impact investing, like traditional investing, is intended to bring a financial return. Instead of buying the usual types of stocks, bonds and real estate, however, impact investors sink their dollars into companies or organizations known to be accomplishing some social good, such as developing clean energy, making loans to small-business owners in impoverished nations or constructing affordable housing in depressed urban neighborhoods.

In theory, the investments generate a return even while they help to address significant problems both at home and abroad.

The Cordes Foundation adopted the strategy because the traditional investment approach just wasn’t accomplishing enough, Cordes says. None of the foundation’s core wealth was helping anyone in need. Only the annual earnings from that wealth — a comparatively puny slice of the pie — was going to worthy causes.

“We were frustrated by the fact that the 5, 6 or 7 percent a year that we gave away was dwarfed by the other 95 percent that was being invested,” he says. “I started looking at that and saying, ‘Why can’t we have a similar impact with the other 95 percent?’”

In 2007, Cordes persuaded his board of directors to shift one-fifth of the foundation’s wealth into impact investments. A good share of it, he says, was parceled out as micro-loans to businesses in developing countries. The cash helped to rev up burgeoning markets, and shopkeepers generally made good on repaying the loans. The strong return from the impact investments bolstered the foundation’s ability to give away other donations, Cordes says.

“That 20 percent,” he says of the impact investments, “actually out-performed everything else in our portfolio.”

The triumph set a clear direction for both the foundation — which doubled its commitment to impact investing — and for Cordes, who has emerged as one of the concept’s most vocal advocates, a self-proclaimed “pro bono evangelist” for the cause. Cordes aims the pitch at more than just charitable institutions. His target is anyone with money to invest, from the managers of giant pension funds to work-a-day wage-earners.

His travel schedule is grueling. He speaks at about 20 conferences and events each year and divides the rest of his time between homes in New York and the San Francisco Bay area. After appearances at Duke and Columbia universities, Cordes traveled to Washington, D.C., last month to address theGlobal Philanthropy Forum, joining a line-up that included former British Prime Minister Tony Blair. Then he flew to Los Angeles for the Milken Institute Global Conference, where he joined an April 30 panel (shown below) on encore careers.

Cordes used the platform to talk about setting goals in a second-act career and explained how he runs his organization like “an R&D laboratory” for impact investing.

“He’s thrown himself into the idea of creating a better world for future generations,” says Marc Freedman, founder and CEO of the baby boomer think tank Civic Ventures, who participated in the same panel.

“He’s the embodiment of someone who’s taken skills from an earlier chapter and is applying them to new ends,” Freedman says. “It’s not really a reinvention of himself but rather a bringing together of earlier expertise and lifelong passions and a desire to accomplish something in the next part of life. He has a kind of clarifying intelligence. He makes everyone around him feel smarter and be smarter — and that’s a wonderful gift.”

Unlike some impact investing boosters, Cordes has the entrepreneurial pedigree to reach and influence people in the upper echelons of finance, says Antony Bugg-Levine, CEO of the New York-based Nonprofit Finance Fund and co-author of the book Impact Investing: Transforming How We Make Money While Making a Difference.

“Because he’s speaking to people who recognize him as a peer, he’s had the ability to open up doors,” Bugg-Levine says. “He has a level of credibility you need to bring these ideas into the mainstream.”

Considering the amount of wealth stashed away in America’s pension funds, stock portfolios, individual 401(k) accounts and real estate holdings, impact investing “is a very, very profound idea,” Bugg-Levine says.

Invested U.S. wealth now totals about $37 trillion, according to Cordes, of which only an “infinitesimal” amount accomplishes any philanthropic purpose. However, that could change. Over the next decade, anywhere from $500 billion to $1 trillion of that capital could shift into impact investing, he says, citing studies by J.P. Morgan and other financial firms.

“We’re trying to open up the big pockets,” Cordes says.

In a survey that Cordes conducted, about half of affluent investors said they liked the idea of investing philanthropically, but very few had even considered the option, mainly because their financial advisors never explained the possibilities, Cordes says. Even those who wanted to make impact investments had a difficult time finding out where to do it.

To try to change that, Cordes and his organization teamed up with the Calvert Social Investment Foundation two years ago to form Impact Assets, a San Francisco-based nonprofit whose main purpose is to connect investors with socially conscious projects in need of investment. Cordes also continues to expand his network of connections through the Clinton Global Initiative (CGI), serving as the point man in a series of high-level meetings and telephone conferences about social and environmental investing, says Katrina Ngo, director of CGI America, a division of the nonprofit that focuses on U.S. economic recovery.

“We’ve always had a full room whenever we’ve convened,” Ngo says. “It’s always a topic people seem interested in.”

“Ron has been incredibly committed and engaged in broadening this market,” says Amit Bouri, director of strategy and development for the Global Impact Investing Network, a New York-based organization that grew out of the work of the Rockefeller Foundation. Since forming in 2009, the network has attracted 48 large member institutions; two of them, the TIAA-CREF pension fund and the Bill & Melinda Gates Foundation, have authorized up to $1 billion apiece in impact investing, Bouri says.

Wonderful developments have been happening at all levels, Cordes notes. Nonprofit organizations such as Kiva enable individuals to make micro-loans as small as $25 throughout the world — and all online.

Building his own financial empire was one thing, but the greater reward is seeing the money make a difference for others, Cordes says.

“What I’ve found is I’ve never had so much fun,” he says. “I would say this is the most meaningful and satisfying thing I’ve ever done.”