By Jerilyn Klein Bier
When Andy Lower joined the Eleos Foundation as executive director in December 2008, the small, private foundation had a balanced portfolio with Vanguard and was making grants to help eradicate extreme poverty in the developing world. But it was looking to take things up a notch.
Lower, a former advisor with a leading philanthropic consulting firm, started to explore how the foundation could make a greater social and financial impact. "We have a moral imperative to make sure our assets are in line with our mission," he says.
Santa Barbara, Calif.-based Eleos, which has a $6 million endowment, now relies on in-house research to make direct "impact first" investments in early-stage social enterprises. These investments seek to optimize social or environmental returns while yielding some financial return.
One of Eleos's investments is Sanergy, a startup that's bringing clean toilets to slums in Kenya through a franchise model. It's improving sanitary conditions, creating jobs and also generating revenues through its waste-to-fertilizer operations.
For its "financial first" investments, or those which seek to optimize financial returns while yielding some social or environmental good, Lower says Eleos consults with Sonen Capital LLC, a San Francisco investment management firm specializing in social and environmental impact.
Sonen brought Lower's foundation into deals with the AWJ Global Sustainable Fund, the Minlam Microfinance Fund and the RSF Social Investment Fund, as well as in notes that invest in Root Capital, a nonprofit social investment fund. Some deals are direct investments; others are as part of a pool of investors.
"Working with Sonen helps us swim further downstream and play with bigger fish," says Lower, adding that it provides Eleos with financial expertise, enables it to partake in some investments it wouldn't be large enough to do solo, and helps it balance its portfolio across different asset classes.
Listening To Clients
Impact investing is gaining attention even among mainstream investors. Nearly one-quarter (23%) of the 1,065 financial advisors surveyed for the Calvert Foundation's recent Gateways for Impact report responded that "impact focused" private debt and equity options are appropriate for many or all of their clients. Like Eleos, more advisors, foundations and family offices are turning to specialists such as Sonen to help them identify opportunities, conduct due diligence and monitor impact.
Dismissing or discouraging a client's interest in impact investing could jeopardize the client-advisor relationship, cautions Raúl Pomares, a senior managing director with Sonen and co-author of Solutions for Impact Investors: From Strategy to Implementation, a book published in 2009 by Rockefeller Philanthropy Advisors.