Impact Investing- Changing the Charitable Landscape | by Aimee Minnich

Krista Petty interviews Aimee Minnich of Impact Foundation

SATtalks is excited to have Aimee Minnich serving as co-host with Tom Bassford for a special pre-event; An Evening with Bob Lupton and Don Larson on October 18, 7-8:30 PM at Indian Creek Community Church in Olathe, KS. Aimee is also a presenter during SATtalks Oct. 19 & 20. Aimee is CIO, General Counsel and Co-Founder of  Impact Foundation. Krista Petty chatted with Aimee about her work, her connection to both Don and Bob, and the value of impact investing.

Tell us about Impact Foundation and the kind of donor and investor you work with?

Aimee: Impact Foundation was created to help donors, who are stewarding charitable capital, invest in businesses that are transforming lives and communities as well as making a profit. We are a nonprofit, donor-advised fund. We help people invest in businesses like Don Larson’s Sunshine Nuts, as well as others.

Our core customer is a guy like David, who in the 90s started a technology company. He coded it from scratch and had maybe 25 employees. David sold the company in 2006 and when he did so, he was wrestling with the question “how much is enough?” in terms of a financial finish line. David realized he was going to end up with way more than he needed for his own family and lifestyle. So, he set aside a private foundation to give money away.

David enjoyed doing that for a while but eventually he realized the need for something different.  He read books like Toxic Charity and When Helping Hurts and came to understand that perhaps charity alone can’t address some of our biggest systemic social issues. Because he is a business guy, he gets excited about the places where business can impact people’s lives. Through investments, David saw he had an opportunity to influence a new generation of entrepreneurs. So, he wanted to invest his private foundation in businesses. Even though the tax code provides a way for that, it’s not super easy to do so with an existing foundation. We helped him invest in a couple of things, one being PhotoUp—a photo processing business in the Philippines. In addition to providing employment, PhotoUp provides evangelism, discipleship and life skills for their employees.

Can you give another example of this type of impact investing?

Aimee: Yes, VerdantFrontiers is a holding company in Ethiopia. Their big goal is to create jobs and raise the GDP in that African nation. One of their first projects was a beef processing plant. In Ethiopia, they have more cattle per square mile than any other place in the world, but they are really skinny cattle and there is no market for them. What VerdantFrontiers decided to do was actually bridge the gap between the Ethiopian cattle and the markets in the middle east that buy a lot of products. So, they opened a beef processing plant. They are buying the Ethiopian cattle, fattening them up, butchering them and selling them to the middle east. A donor/investor wanted to invest his private foundation along with his personal capital in that business. But like I said, that is not easy to do. This person made a grant to us and we did that for him. As that business is financially successful and starts to pay off its shareholders, we will take the money back into his impact account and it will be available for him to either re-grant or re-invest as he chooses. It won’t go back to him personally. It will stay charitable, but he can decide what to do with it next. The donor/investor basically gets to use the same dollar twice to have an impact.

What kind of progress has been made in this endeavor of impact investing so far?

Aimee: In 20 months, we’ve invested $33M in 40 companies, across 12 impact causes. We have about nine different industry verticals with pretty broad categorizations. Our major categories of investments right now are: agriculture, clean energy, software service, manufacturing, real estate, senior housing, low income housing, and healthcare.

Beyond the financial capital and investment, are there other things the Impact Foundation is doing to help these businesses thrive?

Aimee: For the most part, we are investing in pretty large-scale businesses with entrepreneurs who have significantly more experience in what they are doing than we do. Occasionally, we play a board role. When we do so, we look to connect that particular business with someone who is an industry expert. So, the answer to your question is both yes and no. We are not doing start-ups or highly needy businesses. We do have a partner who is playing that role with some of the businesses he is sourcing for investments. For instance, this partner connected Don Larson with QVC, giving Sunshine Nuts an additional sales outlet.

How does a company connect to the Impact Foundation?

Aimee: There are two different ways businesses connect with us typically. My co-founder, Jeff Johns, and I spent a bulk of our careers helping donors and generous families give money away as charitable gifts. It was that work they drew us into this in the first place. We got our start at Impact Foundation by helping friends who needed a streamlined way to do this kind of investing. All of our earlier investments were what we call donor initiated. The donor came to us and said, “This is what I want to invest in can you make it happen.” We would then match the request to our charitable purpose and if it fit, then we would go ahead and do it. That is the primary way we have gotten started in doing this.

We also have a partner named David Simms, who is sourcing investment opportunities. For about 30 years he was a volunteer, board member and executive chair with Opportunity International. He realized that the data on micro loans was showing that while they can have a great impact on an individual or family, micro loans are not moving the needle on GDP or any of the sustainable development goals from the UN. What we need is job creation. He set about to find great companies that were creating jobs in the developing world and bring those opportunities to investors, trying to find funding for small and medium enterprises.

Those are two ways we connect to companies, but the short version is that if you have money, people who want money will find you.

I know you are familiar with Robert Lupton and his work.  How has he influenced your thinking on impact investing?

Aimee: I got to travel with Bob in February of this year. We went to Nicaragua and Honduras and that was a lot of fun. Bob asks really disruptive questions, which is one of his great gifts. I have watched how his questioning has changed some of our donors’ thinking on what they want to invest in.

Really? How so?

Aimee: Well, there is this great debate in impact investing that goes something like this: “Is it ok and is it real impact investing to take concessionary returns?” meaning non-market rate, risk-adjusted returns. Most people who are proponents of impact investing would say: “Absolutely, you should not have to take concessionary returns. This whole thing will work if investors will make as much as they would make in any other market.”

And that is true to an extent.

What that argument misses is two things. First, it is not a binary choice. The choice is not between charity or investing. There are things in the middle. There are things that look more like charity, where there is a return of capital, rather than a return on capital. For instance, I can make a grant to an organization and have ‘x’ amount of impact but have zero percent return investment; or I can make an investment to the same organization and have the same amount of impact, and just get my capital back, allowing me to re-invest.

Second, if you look at global poverty, it isn’t going to work if we keep doing the same thing we’ve always done. Hedonistic capitalism just isn’t going to work. We are here where we are because there wasn’t anybody willing to sacrifice their 30% IRR to jumpstart a new market or help somebody access capital that wouldn’t otherwise be able to access it. The binary choice between charity and 100% whole-hearted capitalistic investment won’t work. If it were going to work, it would have done so already. Somebody, somewhere has to sacrifice some returns. That is one of the roles impact investing can play.

Bob Lupton, in a very non-confrontational way, asked the right questions of some people to get them thinking about this and they have actually changed the way they are deploying capital. Instead of going after only risk-adjusted market rate returns, they are actually looking to be part of the layer that de-risks the investment or de-risks a country, to be able to bring in other investors.

Sorry, that’s a long way to answer that question!

It might be long, but it’s also a deeper way to answer. I think those that are interested and trying to wrap their head and heart around impact investing need to see the complexity of investing for social change and long-term returns, rather than short-term.  

Aimee: Yes. Steve Garber likes to say, “You ask a different set of questions if you are looking to make money for 100 years than if you are just looking at the next quarter’s returns.” I think that is really a great way to describe how business people are beginning to think about this, secular or not.

So, tell me about this event you are helping cohost where Bob and Don Larson are going to be together and sharing wisdom. What gets you excited about this?

Aimee: Bob and Don’s paths wouldn’t normally cross. Bob has lived in the center of Atlanta for 40 years and Don, who lives in Africa, was an executive for Hershey before Sunshine Nuts. Anytime I get to spend more time with them is a good thing and if that means I help co-host, then I will!

Krista Petty serves Community Connector for Simon Solutions Inc. with an extensive background in research and resource development for faith-based social change. She hosts a monthly webinar on community collaboration and transformation called Transform Tuesdays.