Other options for those looking for impact investing include The Last Mile, sponsored by NPX, an organization based in San Francisco that says it wants to transform the way impact investing is financed in the nonprofit sector.
The Last Mile is a work project for prisoners. It is funded through a combination of investments and donations. The investors will receive a return on their money through the donations if the project is deemed successful, based on the number of hours inmates at San Quentin State Prison work. So far, the Last Mile has raised $800,000 from 11 investors and $900,000 from 16 donors.
Investors could earn returns of up to 12.5%, according to Catarina Schwab and Lindsay Beck, co-founders and co-CEOs of NPX. “We have analyzed the components that yield success for prison projects and feel positive about the Last Mile,” Beck says.
“When we get the first project accomplished, it will be easier to do the next,” adds Schwab, who says the pair hope investors will reinvest their returns. “There are not enough [investment opportunities] out there right now for this type of work.”
Some areas of the country, such as San Francisco, seem to lead in innovation in many industries, including impact investing, according to Megan Fielding, senior director of the Responsible Investing Group at Nuveen, a global investment manager. “I have conversations with clients across the board, but I am based in San Francisco,” Fielding says. “Outside of key areas like this, many advisors do not believe clients have an interest in sustainable or impact investing. Millennials are the most interested, but advisors say that generation does not have much money. Advisors may be waiting for the large transfer of wealth or for this generation to reach their peak earning years.”
In the last year, Nuveen has added new ESG and low-carbon focused products, but it has been involved in responsible investing since the anti-apartheid movement in the 1970s.
Jensen Investment Management in Lake Oswego, Ore., also has been involved in sustainable investing for years and focuses on long-term profitability, says Kevin Walkush, a portfolio manager at the firm. “Clients are increasingly seeking out sustainable investing,” says Walkush. “To us, ESG is business as usual.”
Jensen has found that looking for portfolio companies with strong ESG performance—those that prevent pollution and eliminate waste, for example—will also give investors good bottom lines. He cites Apple and 3M as two major companies that have led the way on renewable energy and investing in the community and, as a result, have been very profitable.
“As we show advisors in real numbers that companies can make a profit and still adhere to sustainable principles, the gap between investors’ interests and their actions will close,” agrees Jessica Ground from Schroders.
“Investors have showed us they are willing to stay in these investments for two years or more,” Ground adds. “Companies that are managing environmental risks well will benefit from reducing risks.”