If you are familiar with Boardwalk Capital, then you know that our firm provides a different type of investment management. We focus on sustainable investing --building investment strategies from what may be called "exemplary corporate citizens".
We think this is pretty important stuff, but to be honest, it's usually just part of the story. To create a full sustainable portfolio, however, one must bring in other asset types such as bonds, commodities, and an array of "specialty" investments -- all with an overarching theme of responsible and profitable investing.
Within the catch-all "specialty" category listed above, one finds what are now called Impact Investments. These are often truly unique enterprises -- companies organized to meet a societal need -- and turn a profit while doing so. This new and remarkable business model was described by JPMorgan as the next big asset class. They called it A One Trillion Dollar Investment Opportunity.
Last week, I had the great pleasure of meeting with three groups of entrepreneurs doing some of this very important work. It became clear to me that the folks at JPMorgan are on to something. Bringing corporate experience and a profit motive to what was previously the work of non-profits is a powerful combination. The real power is that a single investment can create years of impact, thanks to the recycling of profit back into the business. It's like a good deeds perpetual motion machine.
These investments are, of course, not without risk. Portfolio investors can participate at different risk levels some resembling fixed income (less risky) and others that are more like private equity (illiquid and far riskier). Most often these are accessed through pooled vehicles that diversify the risk of any single investment. In all cases, investors can connect with the companies in which they invest, creating a deeper, richer investment experience.
Organizations such as Kiva (kiva.org) have become quite popular with investors by doing just what I described -- connecting people with one another through small loans (often just $25). The power of knowing that your $25 will help a Wilson, a Kenyan farmer purchase livestock or Grace, a Filipino clothing maker buy fabric, has been a powerful draw for investors as an alternative form of philanthropy. Kiva's 98.9% repayment rate keeps them coming back.
While Kiva is among the most well-known entities in an area called "microlending", other organizations are taking this a step further, offering the potential of profits or interest income to the investor while dealing in larger investable sums. Groups such as Gray Ghost Ventures, RSF Social Finance and Village Capital are each trying a different angle on empowering and unleashing entrepreneurs to profitably address some of the world's most vexing problems. Hundreds, if not thousands, like them are operating with little fanfare but with great impact.
Boardwalk Capital's role in this investment segment is threefold:
1. We research and recommend investments to our clients where we see the potential for attractive risk-adjusted returns with a strong societal benefit.
2. We communicate with our clients on both the financial and social impact of these investments, focusing on specific companies and their activities.
3. We take 10% of our fees and direct them to charitable or impact investment activities.
This commitment to communicate with investors reflects our unique sustainable investment approach, and is carried over to other asset types, as well:
Know what you own, how it is doing, and how that investment is providing financial and societal benefits. Impact investments are just one highly visible "grass roots" part of a sustainable and responsible investment portfolio.
B. Scott Sadler, CFA -- President, Boardwalk Capital Management
www.BoardwalkCM.com
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