By Jerilyn Klein Bier
Faith-based investors laid the groundwork for impact investing long before this moniker was coined several years ago. In the 1960s, they began to pioneer community investment institutions that provide low-interest financing to low-income borrowers. Today, their efforts to generate social impact while capturing some financial return extend worldwide. They're also trying to figure out their future role in this evolving sector.
Mark Regier, director of stewardship investing at Everence, a faith-based investment firm in Goshen, Ind. that advises the Praxis mutual funds, observed some excitement but also confusion when he initiated a conversation about impact investing at the summer meeting of the Interfaith Center on Corporate Responsibility. ICCR members include nearly 300 faith-based institutional investors whose combined portfolios are worth an estimated $100 billion.
"I think the emergence of the impact investing language and the more sophisticated options that have come with it will mean more attention to the space," says Regier says, whose firm was founded in 1945 by the Mennonite Church. "And this means there will be scale." He hopes it will enable Everence to expand its impact investments.
But faith-based investors like Everence-whose top priority with impact investing is to help the poor and disadvantaged, followed by security (i.e. making sure the original investment comes back) and then financial return-plan to cautiously tread the expanding turf.
"How can we find products for our portfolio that do what we want them to do but also have a social impact?" Regier asks. "And how do we sort out what investments have a social impact and which ones are just putting on a light green coat of paint?"
For its part, Everence will continue to invest in enterprises that that not only lend money to the poor and disadvantaged, but also offer mentoring programs that help these recipients build credit history and increase self-sufficiency. "We want to help the economic cycle go around; we don't just want to prop up the middle organization," Regier says.
Everence is also sticking to debt and won't invest in private equity, although the latter has become a major focus in the rapidly expanding impact investing market. "If you're going to do private equity, you have to be ready to lose money," Regier says.
He notes that debt is a better match for the investment firm's risk appetite, expertise and structure.
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