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Asset owners discuss challenges in public market impact investing at conference

One of the challenges to adding public market investments to an impact portfolio is the difficulty in measuring those investments' generated impact, said panelists at Big Path Capital's Impact Capitalism Summit on Wednesday.

“One of the things we struggle with in terms of from a public equity portfolio or public debt portfolio is what is the impact actually from that? How do you quantify that? How do you think about that?” said Shuaib Siddiqui, director of impact investing at the $1 billion Surdna Foundation, New York, speaking on a panel titled “How to Build a Diversified Impact Portfolio.”

Some $100 million of the Surdna Foundation's assets are targeted for investments that align with the foundation's social justice goals.

“If we've invested in a fund manager that's focused on a sustainability investment thesis, that's how they're picking their stock, but what is the impact of those companies?” Mr. Siddiqui asked.

Because of this, the foundation's portfolio is “a little bit higher weighted” on the private side “because of the direct impact that some of the investments are actually making that we can quantify and understand,” Mr. Siddiqui said. Private asset classes — especially private equity, private debt and venture capital — are also where the impact investment team is seeing the most opportunity, Mr. Siddiqui said.

Alan Snoddy, managing director at the $13.5 billion Church Pension Fund (Episcopal), New York, agreed that measuring the impact of public market investments is difficult.

“Particularly, on the public side it's really hard to understand sort of what is the impact here, which is why we've done much more on the private side,” said Mr. Snoddy, speaking on the same panel. Debt investments is one area the Church Pension Fund has had success, Mr. Snoddy said.

“I think in microfinance, the traditional debt markets don't really understand how to analyze these investments … because they're not rated you can actually get above risk-adjusted return,” Mr. Snoddy said.

One private asset class the Church Pension Fund has not made investments in has been social responsible investing venture capital. Over the past 20 years, five traditional legacy venture capital managers have generated $2 billion in gains for the pension fund. Finding SRI opportunities in the venture capital space that compete with that has been difficult, Mr. Snoddy said.

Finding sizable, institutional SRI opportunities in general has been a challenge, Mr. Snoddy said. “We're not that big, but we typically want to invest $25 million … to $50 million in an investment, and sometimes that's the size of the fund. We don't want to be the only investor in a fund. We want to be along like-minded investors.”

That being said, the industry is “getting there,” Mr. Snoddy said. “Over the past three or four years there's been an inflection point in the quality of the managers, in the emphasis from the whole overall investment community. I see this as something that will be less of a problem as time passes.”