Invest NW Would Help Rich Families Make Local Impact Investments
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responsible economies. Investments in this area would focus on economic development through entrepreneurship and job-creation. Things like micro-finance and seed-stage venture capital investing would go here. “We are actually looking at an investment opportunity in a technology incubator,” Albahary says, declining to identify it. This category would also include investments in enterprises owned by women, minorities, or Native Americans.
Another theme is equitable communities, which could include investments that increase access to capital for businesses in rural or underserved areas. Green real estate and sustainable building environments also fit under this heading, Albahary says.
Invest NW’s sustainable environments category might include investments aimed at promoting sustainable land management, local agriculture, climate change mitigation and adaptation, and water quality improvements.
Beyond that, Invest NW is leaving the door wide open.
“We’re hoping this is a call to action for investors and strategies in the Pacific Northwest to come to us,” he says.
Albahary expects most of the investment strategies to take the form of funds in which investors can participate as limited partners—much the way they would with a venture capital fund. But he is also open to direct investments in individual companies. For example, Invest NW is looking at a Seattle-based housing investment strategy that would be considered a direct investment.
Meanwhile, Canopy will aim to educate managers of emerging impact investment opportunities so they can pass muster with institutional investors.
“A lot of the strategies are being developed because of the impact they can generate, and there’s been less of a focus by those managers on creating an infrastructure that is institutionally ready,” Albahary says.
That might mean establishing a code of ethics, documenting policies and procedures, or ensuring dual signatories on all cash movements.
“If you do those things then you’ll stand up against a rigorous operational due diligence process, which means the other more traditional firms of the world may actually provide you capital,” he says.
Another major question for impact investments of all kinds, local or otherwise, is how to objectively measure and communicate the non-financial outcomes—the impacts that investors are looking for. Albahary says this is something “the entire industry struggles with,” and that common standards for reporting don’t exist yet.
Threshold Group developed a scoring framework that it applies to both investors and investment opportunities to evaluate mission, potential financial returns, and risks. It uses that to match opportunities with investors.
An impact investment’s goals have to be identified at the outset, as part of the due diligence process. Investment managers need to create metrics that can be reported back to investors, he says.
“Then it’s incumbent upon us during our monitoring of that strategy to inquire and hold the manager accountable for what they professed the outcomes to be,” Albahary says.
Canopy will also undertake proprietary research to better understand the structural barriers preventing private foundations, individuals, and state governments to invest together, Muska says.
While Threshold has been working with clients on mission-related investments since at least 2010, Invest NW is a new effort.
Albahary says there’s growing interest as investors focus on strategies related to issues like climate change. (Indeed, Canopy is an outgrowth of research Muska was doing on behalf of three family foundations on fossil fuels divestment.)
“I also think it’s a reflection of the interest of the millennial investor, being much more aware of being philanthropic in a way where they can align their portfolios with their mission and values,” Albahary says.
If Invest NW/Canopy proves successful here, Threshold Group plans to replicate it elsewhere in the country. That’s important to DeVore, who sees Cascadian Capitalism as the region’s next export product.
“To me it’s inspiring that Canopy is a Northwest project, that’s funded by two Northwest family foundations,” he says. “But they’re explicitly designing it to model this behavior of economic development investing, with the thought of exporting from the Northwest onto a national and global scale.”