Jessica Matthews, Managing Director, Cambridge Associates
Please give us a bit of background on yourself, and how your organization plays a leadership role in the impact investing space.
I am Managing Director and Global Head of the Mission-Related Investing (MRI) Practice at Cambridge Associates. My role is multi-faceted in that I spend a lot of my time helping our clients develop and implement their impact investing programs, while also leading the firm’s efforts to expand our resources and identify new MRI investment opportunities. I also liaise with the many important field-building organizations we have partnered with.
Cambridge Associates has been partnering with investors to create portfolios that integrate their social and environmental goals with their investment objectives for decades. We more formally launched a dedicated Mission-Related Investing practice in 2008 to help clients implement their impact investing programs. We assist in all aspects of creating and implementing an impact investing strategy, from helping define investment and mission priorities; to walking through the best governance models for individual programs; to evaluating managers and constructing impact-oriented portfolios; to measuring the effectiveness of those portfolios in terms of both financial and social returns. At a firm-wide level, we are encouraging all of the managers we meet with to incorporate environmental, social and governance (ESG) analysis into their investment process.
What is your approach toward adopting MRI principles?
Once clients decide to include MRI in their investment strategy, we encourage them to define the overall context for their impact investments – articulating what they want to achieve with their impact investing program, and what their key priorities and principles might be. For example, understanding clients’ motivations and purpose for incorporating impact investments, as well as their key themes and geographies of focus, are important guideposts to establish and then translate into sound investment policy.
From there, an effective impact investing program is one that accounts for the investor’s unique needs and includes managers that can add value. We are regularly meeting with managers across themes and asset classes, and will discuss appropriate opportunities with clients that align with their established priorities. There are no short-cuts or ‘one-size-fits-all’ solutions to developing successful impact investing programs – we strongly believe in closely partnering with our clients to develop portfolios and programs customized to meet their unique objectives. Experience teaches us that incorporating distinct impact objectives can enhance organizational outcomes, learnings and reach.
Finally, our approach is independent and completely aligned with clients’ interests; we do not offer off-the-shelf products or receive any compensation from investment managers that would influence our recommendations of those managers.
Is the adoption of impact investing and MRI a hindrance on an organization such as yours and to institutional investors in general?
Up until the last decade or so, investors typically viewed their philanthropic activities as separate from their investment program. However, that view has evolved significantly, and we now have frequent MRI discussions with foundations and families who embrace the notion that the investment portfolio can further their mission priorities. Through partnership with many of these leading impact investors, and through the expansion of our dedicated MRI Practice, our expertise in MRI continues to expand dramatically.
This evolution of thought and practice has been informed and solidified for a variety of reasons. First, we’ve helped clients understand that impact investing goes well beyond the screening out of certain companies, which has long been associated with ‘social investing.’ Rather, we encourage clients to view impact and mission-related investing as a broader palette of option from which they can choose – not just screening out undesired investments, but also incorporating environmental, social and governance (ESG) principles into a portfolio, to proactively investing toward solutions to some of the world’s most significant problems.
We also encourage clients to look past commonly held misconceptions about impact investing – if done prudently, impact investing does not equate to lowered return expectations. This view is reflected in our research, including reports on climate risk and opportunities, the value of ESG data, an impact investment performance benchmark we developed with the Global Impact Investing Network (GIIN) and client surveys that focus on MRI ambitions and expectations.
In short, investors should not think of MRI as a hindrance. Investors should evaluate risks and opportunities across their entire portfolio and establish strong policy and guideposts today, which will help them arrive at better decisions tomorrow.
What will you be discussing at The Economist’s Impact Investing event in New York on February 15?
At this event, I’ll be discussing the challenges to measuring the “impact” of impact investments, why we believe a “one-size-fits-all” approach to evaluating impact-oriented managers is insufficient, and the approach we have taken to reporting on impact outcomes for our clients.
To learn more about the Impact Investing event, click here.