Host: Doing good and making money. The combination is a win-win, and for many not-for-profit organizations today, achieving both is a goal that’s increasingly important. Enter impact investing, which is distinctly different from other socially responsible strategies. Welcome back to the Truist Nonprofit Insights Podcast Series! So glad that you could join us. On today’s episode, Elizabeth Cabell Jennings, managing director of Foundations & Endowment Specialties for Truist Bank, spoke with her associate and friend, Teri Lovelace, founder and former president of Virginia-based LOCUS Impact Investing, about how organizations can balance social impact with financial return.
Elizabeth Jennings: Hey, Teri, thank you so much for joining us today. Can you tell us a little bit about the difference between negative screens, ESG investments—which is a term we hear a lot—and then impact investments? Sometimes the terminology can get in the way of understanding what's going on.
Teri Lovelace: Thank you, Elizabeth. It's great to have the chance to talk with you today, you are so right, the terminology between ESG, socially responsible investing, and impact investing can be problematic for non-profit investors who are trying to look at greater impact in places they care about. I like to think of both ESG and negative screens as a framework that evaluates risk and return in more of the traditional, financial sense. And then your negative screens are the stocks or the companies that you really don't want to have in your portfolio.
But when you talk about impact investing, it's really about using capital to effect positive change while also generating financial returns. So it's doing good and making money. Philanthropic endowments are uniquely positioned to consider both the social well-being and impact as well as the financial returns over the lifetime of the organization and into perpetuity. And you know, Elizabeth, you and I have worked on some projects together in the past and that foundation really cared about a geographic focus and was interested in how they could leverage more of their tools for their charitable purpose. At LOCUS, we are working with non-profit philanthropies across the country, and we are really seeing a trend with philanthropies who are looking at their endowments and saying, "How can I do more? How can I have greater impact with my endowment just like I'm having great impact in my grant-making activities?”
Jennings: That’s a really interesting example, and this family foundation where I'm involved in has made a social impact investment that's specific to one place, to one state. And when we think of that investment, we really think of it as a hybrid between an investment on one hand, and, on the other hand, as a form of the grant. And can you talk a little bit about the dynamics that you've seen elsewhere in that balance between investment and grant?
Lovelace: Great question. You always find when a foundation is looking to make impact investments locally that they need to identify where are the investable opportunities that are aligned with their mission. And once they have identified those opportunities, those usually come from senior staff at the foundation or the program side of the foundation, because they're working in the communities, knowing what the gaps in investments are, and where investment opportunities could really move the needle, in economic opportunities, toward residents.
Jennings: And Teri, can you tell me a little bit about how you work with other advisors? So do you partner, for example, with traditional investment advisors where they may help evaluate the economic impact of an investment? And then you come in and you analyze and speak to the social impact? How do you tie those two sides of the equation together?
Lovelace: There's a balance. You would never want to put everything into impact investments, but boards and staff are looking at ways to carve out and bring more of that very powerful tool called their endowments into investments that are really more aligned with the charitable nature of the institution. You have a bit of a dynamic where you are looking at both the social impact and the financial return, so you need both sides of the shop. You need your program team that's really focused on impact, and you need your investment committee that's looking at the investment from a financial return. Historically, it's never been a part of what the endowments have done, the endowments have always been to maximize return. And what you're finding now is you can earn a financial return and do good, if the boards and staff will really look at possible investments.
Host: We hope that you enjoyed today’s podcast. Elizabeth and Teri did a great job of explaining impact investing and why it’s important to identify investment opportunities that can make a positive change while generating returns, and how working with an advisor may help you find the right balance. For more information, please speak with your Truist relationship manager or advisor or visit us online at Truist.com and search for impact investing.
This podcast was brought to you by the Truist Foundations and Endowments Specialty Practice, which has more than a century of experience working with not-for-profit organizations delivering comprehensive investment advisory, administration, planned giving, and trust and fiduciary services to over 700 not-for-profit organizations.
The general information being offered is to be considered educational in nature. The opinions offered are those of Teri Lovelace, President of LOCUS Impact Investing, and are not to be attributed to Truist. Truist makes no guarantee that the information provided or opinions given will meet the objectives or the particular needs of any specific person who may receive this commentary.
Statements made during this presentation are based on Truist’s beliefs and assumptions made by information currently available to management. Past performance is no guarantee of future results, neither diversification nor asset allocation ensures a profit or guarantees against a loss, and this podcast is not intended to be advice for any particular foundation or endowment. Foundations & Endowments should discuss the strategies in this presentation with their Truist advisor.
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