As wealth grows, so do mission-related investments

Researchers in Bethesda, Md., have spent eight years developing a handheld device to quickly assess potential brain trauma in injured U.S. soldiers and athletes with concussions.
Jean Case and her husband, Steve, who co-founded AOL Inc., invested in BrainScope Co., the device’s developer, through their family office in 2008. The billionaire couple say they are using some of their fortune to help ease some of society’s ills while hopefully making a profit. They committed in June to spend $50 million in the coming years on mission-driven investments.
“A new generation of investors is emerging that wants more than just a financial return,” Jean Case, 54, said in an interview. “Billions more will go into it.”
With private wealth at a record, rich investors such as the Cases, members of the Pritzker family and Pierre Omidyar are increasingly looking for ways to put their money to work and do good. It’s an investing niche previously limited to a sprinkling of mutual funds that avoided stocks such as tobacco and gun manufacturers. The number of money managers offering impact-investing products has surged 155 percent in the past five years.
Impact investing is still a fraction of the record $152 trillion that the world’s richest had at their disposal last year, according to the Boston Consulting Group. It represents less than 1 percent of that pool, or an estimated $46 billion, according to a May report by JPMorgan Chase & Co.
The impact-investing market may reach $1 trillion by 2020, according to a 2010 joint report by JPMorgan and the Rockefeller Foundation. The investments are a needed addition in tackling social and environmental challenges in tight fiscal times, said Judith Rodin, president of the Rockefeller Foundation and co-author of “The Power of Impact Investing.” “There’s not enough capital in the world to solve the big problems with just philanthropy,” she said.
Fund managers raised $2.8 billion for impact investments in 2013, and the target this year is $4.5 billion, according to the May JPMorgan survey of 125 such investors. Pension funds and insurance companies were the largest source of capital followed by family offices and wealthy individuals, according to the study.
“Families and foundations are now putting capital behind it at a scale that matters,” said Adam Wolfensohn, managing director at New York-based Wolfensohn Fund Management and son of a former president of the World Bank, James Wolfensohn.
Adam Wolfensohn manages his family office’s impact-investment strategies, and his firm also runs a $250 million impact-oriented fund for investors. It’s invested in renewable energy and companies such as Ujjivan Financial Services, which lends to poor women in India.
Investing for both social and financial returns has been around for decades. The first U.S.-based socially responsible mutual fund started in 1952, according to researcher Morningstar Inc. The funds number 181 today and hold about $81 billion, Morningstar data show. Their returns have trailed the Standard & Poor’s 500 Index over the past 10 years through August, gaining 6.6 percent on average, compared with the S&P 500’s 8.4 percent annualized return.
The phrase “impact investing” was coined in 2007, according to the Rockefeller Foundation. Proponents say it differs from socially responsible investing because people seek companies they think will make them money and improve society, rather than shun certain ones. The causes that impact investors have backed range from a water project in Africa to a venture-capital fund with stakes in companies such as electric-carmaker Tesla Motors Inc. Many venture capitalists and money managers have invested for decades in startups or companies that aim to solve world problems but without the label, said Katherine Lintz, CEO of Matter Family Office.
“Our concern is this marketing hype of everyone wanting impact in the name of their funds,” said Lintz, whose firm manages $2.7 billion for families. “The social impact should be looked at after the investment hits on all cylinders.”
The demand for investments with an impact has helped push the number of money managers with mission-related investment products to 421 in 2013 from 165 in 2008, according to data compiled by Cambridge Associates, which provides consulting services to family offices and private foundations. Banks including UBS AG, Goldman Sachs and Bank of America Corp. now offer social-impact bonds that finance programs to improve education, prison rates or the environment.
At BrainScope scientists, including Leslie Prichep of New York University School of Medicine, are using a database of brainwave recordings to create algorithms that would quickly spot abnormalities in brain functions, said Michael Singer, the company’s president and CEO.
An initial focus is detection of traumatic brain injuries in U.S. soldiers. The company plans to give the military a prototype, smartphone-based system in the next few months, Singer said in an interview. The device, which isn’t approved by the U.S. Food and Drug Administration for commercial use, aims to noninvasively assess if someone has a brain injury that could need treatment.
“There’s a tremendous amount of economic opportunity,” Singer said. “You can really help the world and you can do really well.” •

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