We use cookies in order to save your preferences so we can provide a feature-rich, personalized website experience. We also use functionality from third-party vendors who may add additional cookies of their own (e.g. Analytics, Maps, Chat, etc). Read more about cookies in our Privacy Policy and Terms of Service. If you do not accept our use of Cookies, please do not use the website.

• Solutions to Scaling Capital for Investment Opportunities

June 25 2018
June 25 2018

Confluence Philanthropy’s Advisors Forum is a two-day convening focused on accelerating the field currently known as impact investing. The event is geared for our Advisor Members and prospective members, who share the understanding that all investments have impact. Our collective goal is to ensure that all investments consider social and environmental outcomes and that these considerations be mainstream. We know that such practice does not denigrate financial return and that, over time, attention to these criteria strengthens performance.

Prior to the event, planning committee members* were asked to select what they saw as the greatest current challenge to the industry. Collectively, they voiced that perceived barriers to deal flow constrain capital. Over the course of the event’s first afternoon we launched into a discussion with an onstage panel led by Sandy Urie of Cambridge Associates: Behind Closed Doors: What Investors and Managers Really Think About Deal Flow.

Following the panel discussion, Geoffrey Eisenberg, Principal, The Ecosystem Integrity Fund, and Liz Michaels, Chief of Staff, Head of ESG Practice, Aperio Group co-facilitated two break-out groups to delve deeper into the deal flow divide. Geoff led a group focused in private equity, and Liz in public equity. Each group surfaced capital constraints and potential mitigatory measures.

The private equity breakout group identified eight challenges to scaling capital in their sector.

Challenge #1: The term ‘impact’ is jargon. At best, it confuses clients and at worst, it becomes an excuse for inaction. More time is spent trying to define impact than actually investing.

  • Recommendation: Use the language of Wall Street. Avoid terms such as “impact” and “sustainability” whenever possible. Focus on fiduciary duty, risk, and return in terms of financial goals and environmental or social outcomes.

  • Recommendation: As an industry, communication, storytelling, and branding needs to improve. Highlight success stories far and wide.

  • Recommendation: Work to transform finance from within by bringing the practices, products, and successes to the traditional finance and investment conference circuit rather than talking on the fringe of the industry.

Challenge #2: Since there is no clear agreement about what “impact” means, there is no unified data set to detail, defend, or even clearly articulate when impact has been achieved. This makes it very hard to set standards, and especially hard to track impact performance of private and small-cap companies.

  • Recommendation: Build better social and environmental return indices and research repositories for both public and privately-held companies. Is there a way to foster more generally held agreement about key outcome criteria?

  • Recommendation: Develop the concept of an ‘inverse prospectus’ to help managers better understand investors’ financial goals and generally hoped-for environmental or social outcomes. Issue RFPs for asset managers that clearly state these objectives so that they can design aligned product.

Challenge #3: Impact Investors can be “artisanal” when building an investment thesis or portfolio.

  • Recommendation: Consultants must guide clients to think more about systemic issues and “intersectionality.” Remind clients that the perfect should not be the enemy of the good.

Challenge #4: The cost and amount of time required for proper due diligence is high. This requires that firms maintain high minimums, which means fewer investors have access to good services and investments.

  • Recommendation: Investors and Advisors might consider sharing due diligence with peers in order to save time and money while accelerating capital deployment.

  • Recommendation: Simplify deal structure and avoid bifurcation of impact and traditional investing diligence.

Challenge #5: Every stakeholder – from asset owners, to consultants, to asset managers – underestimates and understates the time needed and effort required to commit to build and/or evaluate an impact product/portfolio.

  • Recommendation: Be honest about how much time this typically takes.

  • Recommendation: Be honest when a client’s ideas are not truly investable and move on.

Challenge #6: Consultants often try to build a firewall between asset managers and clients, even when managers have the best expertise to offer and clients are interested in getting more involved in deal sourcing.

  • Recommendation: Consultants – Let fund managers help to educate asset owners.

  • Recommendation: Asset owners – When picking an advisor, request referrals from fund managers you believe in. They know more about advisors’ processes and expertise than any other stakeholder in the industry.

Challenge #7: Investors are averse to funds-of-funds because of high fees. But aggregators like these are important because they provide valuable data on ESG returns.

  • Recommendation: Identify models whereby a third party would be willing to subsidize these fees.

  • Question: Are there other ways to collect this valuable data?


The public equities breakout group discussed five major challenges to scaling capital in their sector.

Challenge #1: Advisors need to help clients narrow in on the types of social and environmental outcomes they want to achieve. For example, one public equity may have a strong environmental record, but not act as a responsible employer.

  • Recommendation: Consultants and advisors need to first help their clients understand that no company is going to be perfect. Then, focus, decide how to define success within a large broad universe, and clearly state that in their investment policy statement.

Challenge #2: Investors expect one piece of their portfolio to achieve every kind of impact.

  • Recommendation: Partner through organizations like Confluence to educate investors about how portfolio allocation and performance works.

  • Recommendation: Demonstrate how to transition a portfolio in incremental steps to help create a sense of action.

Challenge #3: There is a higher cost to specialization. Often there are structural impediments for clients with accounts less than $25 million to access products.

  • Recommendation: Create mechanisms for smaller accounts to pool funds together to reduce costs.

Challenge #4: Clients do not speak the same language as investment advisors and managers. Miscommunication is a big challenge. It can be tough to really understand a family’s vision, and even tougher to communicate to them what investments can realistically do.

  • Recommendation: Help clients understand what they already own and communicate the impact of their current portfolio. Incrementally optimize.

  • Recommendation: Confluence can provide guidance and share resources Advisors can use as tools to bridge the communication divide.

  • Recommendation: Start with actionable opportunities.

Challenge #5: Connecting clients to the Advisor who is right for them, and not one just seeking sales.

  • Recommendation: Encourage clients to hire a consultant to help facilitate their search process so that they can achieve their institutional goals and family vision.

Taking these recommendations into consideration, Confluence will do our best to integrate these ideas as we further develop our advisor program. Stay tuned!

If you are interested in volunteering to serve on the Planning Committee for the 2019 Advisors Forum please contact Hannah Erickson, Advisor Senior Program Manager.

Advisor Forum Planning Committee*

  • Geeta Aiyer, President, Boston Common Asset Management

  • Geoff Eisenberg, Principal, Ecosystem Integrity Fund

  • Peter Knight, Retired Partner, Generation Investment Management

  • Dana Lanza, CEO, Confluence Philanthropy

  • Liz Michaels, Chief of Staff and Director of ESG/SRI, Aperio Group

  • Sandy Urie, Chairman Emeritus, Cambridge Associates


Leave a Comment

Email Help Tip
Characters Remaining: 5000