This series is an abridged and revised version of a 5-part series originally published on GoodGeneration.org between Jan 15-23 , 2012.
Impact investing is the latest hot topic in the do-good community around the world. At its core, the idea of actually “investing” in social-purpose organizations and achieve both “social and environmental” and “financial” returns for money, as a complement to philanthropy, gets people excited. Whether you think it’s just repackaging of old ideas or a legitimate paradigm shift, this “field” has undeniably gotten significant attention in the last five years.
The key benefits, if impact investing can deliver on its promise, are clear: (1) shift mindsets to finally expand the definition of “return” to be more inclusive beyond simple financial metrics, a significant step towards a happy triple-bottom line world will be made, (2) open the floodgates of capital worldwide to help do-good organizations find diverse funding streams through all stages (but especially growth stages) of their development, (3) support philanthropic and development money flow as current main funding sources, and (4) raise standards of quality, transparency and accountability for impact as these new investors demand more rigor and effectiveness from their investees in a measurable way.
So now, how do you get a job in this field? Not many people seem to talk about this. Looking forward to SOCAP 2012, why don’t we talk about this then?
Hence, I propose the following 6-step checklist to help you guide your decision and find a way to evaluate who you’re dealing with before heading straight into a job or even career in this still very young field. Let’s start with the first two items today.
Impact Investing Career Checklist
- Identify the opportunities (Part 1)
- Assess your potential role (Part 1)
- Understand who runs the show (Part 2)
- Define target organizations they fund (Part 2)
- Clarify their return expectations (Part 3)
- Know yourself (Part 3)
1) Identify the opportunities
Assess your level of relevant work experience
Hint: By and large, you should be experienced! Impact investing is harder than “normal” investing, so arguably few students out of school can be very good at this (compared to conventional banking where you just have to crunch numbers) compared to slightly more seasoned professionals. Relevant work experience includes investment banking, private equity, international development, and management consulting.
Decide if you want to be an investor or advisor
Investors include venture capital/PE-like funds (like Acumen Fund), specialized institutional investors (like Calvert), government development arms (like UK’s CDC Group or Germany’s DEG) or engaged foundations (like Omidyar Network). Advisors include consulting firms (like FSG), capacity-building foundations (like Rockefeller Foundation) and associations/standardization bodies (like GIIN).
2) Assess your potential role
Investor group roles
Within the first group, the common roles for younger professionals in VC/PE funds are investment/portfolio manager or analyst positions. These roles are about screening and evaluating investment opportunities, writing memos to internal committees for approval, and come up with term sheets, models, etc. during transactions. Additionally, a significant part of the job deals with lending management support to portfolio companies, either with respect to achieving their missions or in terms of improving processes, strategy and general organizational capacity. Also, depending on the size and region-focus of a fund, this role also may entail representing the organization at various conferences and events throughout the year. Depending on the resources and sophistication of a fund, another role that you may find is the impact assessment officer, a role more described in the original version of this post.
Program officers play a similar role as portfolio managers and analysts for engaged foundations, but are also tasked to engage in knowledge-piece creation, e.g., reports, case studies, as well as network-building functions that entail managing foundations’ multiple external partner relations, including other impact investors that the foundation may be funding broadly (e.g., Omidyar Network invests in Acumen Fund). While VC/PE-like impact investment funds and national development finance institutions in general will expect their portfolio managers to be more fluent with equity or debt deal structuring and execution, foundations still do heavily rely mostly on grants, which requires a different skillset. Thus, people with grantwriting or with experience evaluating grants in previous nonprofit jobs tend to gravitate towards these positions as well. However, perhaps more so with foundations, the background of program officers can vary more widely than investment managers and analysts, who usually have corporate or advisory firm profiles. Or, in the case of “hybrid” groups like Omidyar Network, people should have all of the above skill sets.
Advisor group roles
Impact investing consulting firms essentially mirror the structure found in traditional management consultancies, with partners, engagement managers, associates and analysts. Note that most “do-good” consultancies, while remaining generalist in approach, are launching or already have some internal practice group dedicated to advise impact investors. But again, comparing with traditional for-profit consultancies, except for the focus area being different, these positions deal with everything from writing proposals to conducting analytical work, writing reports, making recommendations to clients and developing sets of tools that can be shared or sold sold via workshops and trainings. One notable difference in do-good consultancies is that junior people are more likely to be expected to participate more in creating knowledge pieces, case studies, etc. to help their consultancies establish or maintain industry thought leadership.
Capacity-building foundation roles are similar to engaged foundations discussed above, with a shift in focus away from investing in and managing social organizations themselves, but instead funding either impact investment funds themselves or rather cross-sector reaching publications and reports that seek to generate more available data and help define what characterizes impact investing as an industry or asset-class.
Lastly, associations, networks and standardization bodies have probably the least defined and commonly understood roles. Flexibility to take on multiple tasks is required but in general, the work at companies like GIIN is related to creating, populating and updating data sets about things like impact measurement methods, lists of organizations in the entire impact investment eco-system and producing education pieces for general public and wanna-be impact investors.
In truth, the R&R required by companies across all of these types starts to get really blurry, with several camps eager to have a defining say on what terminology and approaches the industry should use. We will later see that few impact investors in reality are perfectly clear on such things, especially about how to best segment the types of companies to focus on.
More on this next time in Part 2 of this series.