Unlike many other impact investment organizations, which focus on catalyzing the demand for capital by developing entrepreneurs, the GIIN’s positioning has an explicit focus on the supply of capital—catalyzing resources to go into impact investing. I encourage the GIIN to think more expansively about catalyzing the development of human capital as a part of that supply.
The GIIN is already doing a good bit of this. In an informal survey of peers at other organizations when thinking through this piece, nine out of ten said the most valuable contribution of the GIIN to impact investing is the “GIIN job board.” We get great, qualified candidates through the GIIN job board, and many other firms say the same thing.
But incentive alignment among asset owners, investors, and entrepreneurs is difficult, and we are not quite there today. Impact investment organizations often find it difficult to recruit and retain the most talented people compared to other sectors where compensation structures are wildly skewed. When we don’t get this right, we can see high turnover among impact investment organization leadership, and the continuity required to build truly great, long-term organizations is compromised.
One major risk in impact investing is how organizational workforce practices limit the quality of teams that impact investment organizations can build. I hear a common theme that people ought to be willing to work at a significant discount in exchange for greater meaning in their life. And I can tell you by looking at salaries in the impact investing world, and our own organization, that it’s clear that money is not the primary motivator for what people do.
Significant student debt prevents many from pursuing a position that will unlock their potential. Tweet This Quote
Impact-focused nonprofits and startups often are able to secure superior talent to much better-funded corporations due to incredibly talented people pursuing jobs with a sense of purpose, even at lower pay. Unfortunately, being able to work for an organization with impact excludes many talented folks who, due to personal circumstances, have resource requirements. In recruiting talent for our own organization, we’ve consistently seen that people strongly desire a job with meaning but unfortunately, due to personal circumstances, significant student debt prevents many from pursuing a position that will unlock their potential. This strongly limits the diversity of the impact investing world.
This is a massive problem for the workforce. If we don’t focus on human capital, we run the risk of the impact investment world excluding a large number of talented professionals due to personal circumstances—excluding people from under-represented socioeconomic classes who may have significant obligations to family or children, or massive student debt. Fortunately, people supportive of impact investing can innovate in ways that close opportunity gaps and create better, more inclusive approaches to human capital.
The impact investing industry can innovate in human capital as well as financial capital. One idea we’ve developed this year at Village Capital, in conjunction with Freada Kapor Klein and Mitch Kapor, is a student loan repayment pool as an employer benefit. We are developing a pool that will help all our employees with student debt. It will cover the cost of servicing their student loans so that they do not have to face a tradeoff of working at a job with meaning and the pragmatic financial concerns of their personal situation.
As Freada and Mitch say: “Impact investors seek to close gaps of access and opportunity; we can’t do that without having our employees and entrepreneurs come from the communities we are trying to serve. Their insights and their lived experience are essential in creating successful businesses.”
The impact investing industry can innovate in human capital as well as financial capital. Tweet This Quote
GIIN 2.0 would innovate in human capital among investors. Innovations such as student loan repayment as an employer benefit could support the career development of impact investment professionals. Impact investing may be a top career option for MBAs, but students in my impact investing class at the University of Virginia ask me where the jobs are and, if they have families to support or student loan debt, how they can make a job work. I see a market mismatch that the GIIN could play a real role in rectifying through, for example, sponsoring job fairs from Mumbai to New York City.
The GIIN also should look at support for emerging fund managers as a key human capital contributor to the ecosystem. My co-founder, Victoria Fram, and I have been designing the next iteration of Village Capital’s investment vehicle over the past year, and we recently announced a $2.6 million capacity support contribution from USAID’s PACE program, set up to support intermediaries in the impact investing sector, to help resource what will be the first global seed-stage impact investing fund. While the team is not making exorbitant salaries, by any means, the team is compensated reasonably in a way that will sustain management through the life of our investment work. We have had amazing mentors and anchor investors, but very little formal ecosystem support in building a fund that we hope can dramatically accelerate the popular acceptance of impact investing.
USAID’s PACE program is novel in that unlike marketplace initiatives that support entrepreneurs (e.g. accelerator programs) or investors (e.g. GIIN), PACE is primarily targeted at intermediary support. The GIIN’s annual survey cites “lack of investable opportunities” as the largest barrier to impact investing, and a targeted working group, curated group, or similar capacity development fund for emerging fund managers would help terrific asset-deployers interface better with asset owners. We’ve been lucky to work with other great partners worldwide such as the Hitachi Foundation and Potencia Ventures, both of whom have developed significant expertise in human capital and workforce practices, to advance the human capital development of our investees as well as our own organization.
One idea that came out of this week’s Clinton Global Initiative was along the lines of ANDE (Aspen Network of Development Entrepreneurs) Capacity Development Fund that builds organizational capacity to move forward support for small and growing businesses. We often think of “entrepreneur as innovator”—but fund managers are entrepreneurs too, and a GIIN/ANDE (or both!) capacity development fund to support fund managers who are innovating new structures could be catalytic. I bet the right GIIN leaders would support such a pool.
We’ve written quite a bit about the “Forgotten Human Capital Gap” and this extends to fund managers and leaders as well as entrepreneurs and asset holders. Whether impact investing is an “approach,” “asset class,” or “industry,” in the end, it’s just a collection of people working together—that’s all it is.
This is the final post of a five-part series that focuses on leadership and the growing impact investing landscape.