Foundations are finding that impact investing is more than just a nice idea, it’s actually financially prudent. That’s based on hard data from a $10 million foundation who decided to make the move to 100% impact.
Over a seven-year period from 2006- 2012, KL Felicitas (KLF) Foundation moved to 85%+ of assets allocated to impact from 2%. And they still achieved index-competitive, risk-adjusted returns. Why did it work?
Positive impacts generated by an impact portfolio exist in several forms: in addition to producing positive social or environmental benefits, an impact investment strategy can result in advantages. One is impact alpha. That happens when market inefficiencies create opportunity to capitalize on long-term social and environmental trends.
Another is diversification. By investing to improve social and environmental conditions at local, regional and global levels, impact investments can position investors for less- correlated market exposures.
But is the market big enough? The company’s in KLF’s portfolio represent a whopping $37.2 billion in assets. And efforts to size the industry have resulted in estimates ranging from $400 billion to over $1 trillion.
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