Upon impact, with Justin Conway

One of impact investment’s veterans gives the state of the sector

Calvert Impact Capital's investors range from financial institutions to faith-based organizations to individuals. Pictures of money, Flickr
21 November 2019

Jennifer Pryce, president and CEO of Calvert Impact Capital will speak at the Global Landscapes Forum Luxembourg 2019 on 30 November. Apply to attend or join online.

From outfitting Washington D.C. with green roofs and permeable pavement to catch rainfall and reduce flooding, to developing forest resilience bonds to combat California’s forest fires, to devoting years to the patient creation of the first-ever ‘blue bond’ in the Seychelles that has been instrumental for marine life and ocean conservation, Calvert Impact Capital has had its hand in creating answers to many of the world’s most headline-topping climate problems. That hand, more specifically, has been reaching into pockets to help draw out money to finance these solutions.

Founded in 1988, Calvert Impact Capital is widely known as an impact investing pioneer. While the sector is quickly expanding now in step with the global climate consciousness, it was then just a speck of stardust in the midst of Wall Street’s acquisitive heyday, with Calvert Impact Capital’s investments in poverty alleviation and land-use projects rare outliers in the finance universe. Now, with three decades of experience to its name, Calvert Impact Capital is a stalwart of a still-nascent field, which Justin Conway, vice president of investment partnerships, here explains.

Courtesy of Justin Conway.

You’ve been at Calvert Impact Capital for more than 13 years now. How have you seen the impact investment sector change in that time?

Impact investing and conservation finance has been around for a while, but it’s only been 10 or so years that more people are really working on it, and this space has grown quite a bit, both in terms of the breadth of things people call impact investing and of manager track records. The environmental side has really come into play.

We were one of the first investors in affordable housing, community development microfinance, sustainable agriculture, clean energy access programs and  women’s empowerment. Now there are more players at the table, which is exciting because we need them to help solve our challenges. At the end of the day, it’s more about building a movement. Money is a way that we can have impact and channel it to do good, but we’ve got to change hearts and minds too.

What is competition like in the sector?

I would say that it’s not cutthroat in any way. It’s really collaborative, meaning we talk consistently with all kinds of close peers that are doing similar things. We’ve helped develop a lot of our competition, and we’re happy to share from our experience, because we need more folks like us doing this to get more investment and capital going where it’s needed. One of the nice things about being a nonprofit is that if I point someone to another firm that ultimately gets the dollars, it’s still serving our mission.

Impact investing branches further down into different issues, such as energy or social equity. How does the environmental branch relate to others?

So renewable energy is a clear sector and has clear impact metrics. We have a theory of change for it. Environmental sustainability is much broader. There’s the environmental impact bond of course, and the forest resiliency bond or the blue bond. They all fall in that sector, but often require quite a bit more time and structuring to make all the pieces work.

But if you ask investors, financial advisors or asset managers, they would say their clients want the environmental beyond the social things. People are harder. Sure, let’s do poverty alleviation or something that helps people in my local community, but the overall consciousness is that people are really looking into the environment because it affects everyone and the urgency around it. For our investors, it’s their number-one issue. So I think the interest is driving all of us to figure out how to create more investable opportunities.

However, the investor appetite is generally shorter term. Some environmental deals need 10-plus years to produce financial returns, as you’re planting trees or doing some other kind of sustainable land-use. Those returns might not kick in for many years, because you need time to grow. It’s a different risk profile.

How are you managing risks in this space?

A lot of conservation investments are what we call blended finance. A developmental financial institution or foundation’s capital will provide some first-loss protection or guarantee so that investors from institutions more concerned about risk are attracted. Again, that’s where the structuring piece is really important. We often talk about it as the unsexy plumbing we have to do. We know we have great projects, but then how do we line all this up from a risk-return perspective to really get the private capital in? There are a lot of players now that are quite sophisticated along these lines, but we hope we can accelerate it.

How can investors be sure that their money is really having an impact, and greenwashing is avoided?

It seems like every big firm has been launching new initiatives and products, but many are not very impactful.  Calvert Impact Capital is one of the initial signatories to the IFC-led Operating Principles for Impact Management, focused on how you create your strategy, make investments, exit investments and manage your impact all the way through the investment lifecycle. Within a year of signing the principles, signatories commit to having a third-party assessment of how they’re managing their impacts according to the principles. We hope this is something that drives transparency and rigor in the impact investment field.

There are also a number of impact assessment and firms moving into the space. Investors want to know, right, if a group is doing what they’re saying or just showing pretty pictures.

What’s the runway for impact investing to become more mainstream?

One of the things speeding the change is younger generations. We’re seeing that millennials don’t want to wait until they have all the family money, for the big wealth transfer to happen – they’re saying they want change now. The baby boomers that have the money are concerned about their legacy, which translates to their investment portfolios.

Banks and asset managers are still trying to figure this out. They need to keep their clients, and as their clients become younger and have more interest in these issues, they need to have productive solutions that can keep folks. When it affects their bottom line, firms pay more attention to these issues.


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