For my third and final blog of the series, I want to talk about 100% impact investing—an approach we feel is particularly innovative and could lead to more and better philanthropy in the UK.
Impact investing is a form of socially responsible investing, where investments into companies, funds or organisations seek a social or environmental return as well a financial one. 100% impact investors go one step further, committing their entire asset base to achieving varying degrees of social impact.
Charly and Lisa Kleissner, through their KL Felicitas Foundation, are a prime example of 100% impact investors. The foundation has constructed its portfolio to seek a social or environmental and financial return across all of its asset classes (cash, bonds, equity, hedge funds and real assets), demonstrating that this is an achievable and successful strategy others could replicate.
As well as making their own assets work for maximum social impact, the Kleissners’ are driving the 100% impact investing movement through promoting their approach, and educating and empowering other investors. They created the 100% Impact Network, a peer network of around 40 family offices, high-net worth individuals and foundations that have committed all their assets to positive social or environmental impact.
The KL Felicitas Foundation’s dedication to transparency also helps to promote impact investing. By publishing its investment strategy and information on its portfolio’s performance, the foundation has demonstrated that impact investments can perform at, or better than, industry-standard financial benchmarks. The leadership that Lisa and Charly demonstrate in encouraging others to follow suit is admirable and likely to be transformative.
The UK is a recognised leader in social investment, but we would like to see a higher proportion of accumulated wealth being put to better use. There is no legal requirement for a particular percentage of a foundation’s assets to be distributed as grants each year (compared to the US’s 5% rule). Of £17.5bn of private giving last year, £1.4bn (or 8%) was contributed by the top 100 family foundations; of all funders, these are most likely to participate in social investment.
If this group allocated just 10% of its overall assets (£33.8bn) to seek a social return, an extra £3.4bn would be working to contribute to social impact. Although a crude calculation, this shows that much could be achieved by making existing funds work harder—illustrating the huge potential of 100% impact investing.
We have since worked with the KL Felicitas Foundation to review the social and environmental impact created by their investments. Read the report here, which includes useful lessons and tools for other foundations, individual investors, investment advisors and philanthropists.