He and McVeigh expect that current economic conditions and an incoming generation of more socially-conscious investors will boost interest in impact investing. With fixed income returns generally hovering around 2%, they say social impact investments that earn 4%--such as community development finance institutions--are looking more attractive.
Based on general discussions with the firm's accredited investor clients, Reynders estimates that 60% to 70% of them will likely put money into the Aloe Environment Fund (Aloe III), which has its first close this month. Like other funds from Aloe Private Equity, a global investment group, Aloe III will invest in clean energy projects that bring new technology to existing companies in China, India and other emerging markets in Southeast Asia. The World Bank's International Finance Corp. is providing some funding for Aloe III.
McVeigh says it's a good time for Aloe to be invested in China and India because valuations have come down from their relatively high levels. He and Reynders also have confidence in Aloe's track record and its "boots on the ground approach." They expect private equity-like returns, which can run 15% to 20% annually.
Reynders, McVeigh is also invested in some community development finance institutions, including Boston Community Capital. BCC's Stabilizing Urban Neighborhoods (SUN) initiative, launched in 2009, has prevented the eviction of more than 150 Massachusetts residents by helping them repurchase their foreclosed homes and reduce their average monthly housing payments by more than 40%.
The firm does some impact investing through the Lakota Funds, which help residents of South Dakota's Pine Ridge Indian Reservation; the Carrot Project, which assists small farms with financing solutions; and the Calvert Foundation. It also has impact investments in sustainable timber and is conducting due diligence on retrofitting-related impact investments in the commercial and residential space.
"We use different things to fit different people," says Reynders. "It's not a broad brush."