Article originally posted here by Eventide

by Finny Kuruvilla

The following are excerpts taken from Eventide’s Annual Shareholder’s Letter dated June 30, 2020:

If someone would have predicted at the New Year that during 2020, all professional sporting events would be canceled, restaurants would be closed, Seattle would have an autonomous “country” inside of it, large portions of Minneapolis would be looted while millions would be calling for the police to be defunded, public schools across the country would stop, and the market cap of Zoom would surpass American Airlines, Delta, Southwest, and United—combined, you would have thought that person to be insane. Surreal is too weak a word to describe the last few months of 2020. Most of us have grown so accustomed to the wildly improbable that we can hardly appreciate how abnormal our world has become.

What is an investor to do? As is often the case, investing and the events on the news teach the same lessons from different perspectives. An important lesson is that proclivities to sound bites and reductionism are costly, even deadly, tendencies. When we see people on both sides of the contemporary race debate (or rant, as the case may be), it is painfully obvious that very few have even read a well written book on the subject and certainly not one from the other side’s perspective. Mark Twain said it well, “In religion and politics people’s beliefs and convictions are in almost every case gotten at second-hand, and without examination, from authorities who have not themselves examined the questions at issue but have taken them at second-hand from other non-examiners, whose opinions about them were not worth a brass farthing.” If we could encourage deep examination (which best comes from books, not from the news or social media), much of the current rancor might be converted into constructive value creation, not demagoguery or demonization.

The investing world right now is subject to similar sound bites rooted in fear or snap judgments—“P/E ratios are high! COVID-19 is winning!” This has caused many to make unwise choices and miss the ninth best quarter in the history of the S&P 500. It has caused investors to miss opportunity because of fear. We do not mean to equate financial losses with the loss of lives or dignity, but the underlying thinking processes are the same in finance and politics. Investors need to rise above the groupthink and ponder deeply the basis of their decisions. On the valuation side, P/E ratios are notoriously obscurant, and those who rely on them may miss profound drivers of the market such as cost-of-capital, return on capital, and the equity risk premium. On the values side, reductionism may relegate investors to a shallow greed no better than the vapid political proclamations that dominate the media today.

We at Eventide are seeking to enlarge the conversation, inviting market participants to think deeply about what investing represents. Our Business 360® approach is designed to investigate the multiple stakeholders affected by a business, an approach that could not be timelier in a world that is looking at supply chains, employees, and social concerns as never before.

[Reductionism] leads to pernicious consequences in all facets of life. The news today teaches another lesson with direct relevance to finance. That lesson is: it takes courage to see oneself as not merely passive but endowed with abilities to effect change. It is easy to watch the news, shrug one’s shoulders and say, “The West is in moral decline.” There are many people who bemoan and criticize, watching from an armchair as virtues unravel. Similarly, it is easy to be a “passive” investor and allow corporations as they are to shape the future. We at Eventide are here to remind you that investing is ownership and that the owners of a business determine the character of the business. The failings of the media and corporate America are opportunities for investors to right the ship. This takes courage and collaboration in a world trending toward greater passivity and isolation. As we have grown as a firm, we are more excited than ever for our capacity to influence business practice. By partnering with us, you are endeavoring to step outside the status quo and use your investing dollars to labor for a future that is bright

by Steven Doerr

Consult any financial advisor about where to invest your savings, and four considerations will influence their guidance: risk, return, personal circumstances, and taxes. The goal of financial planning is to maximize financial return within the risk paradigm appropriate for the client. With some portion of our income, we can also support charities. Historically, Christians have maintained this binary view of good stewardship: Either we invest to maximize financial return, or we grant to charity to have an impact for the Kingdom.

In the last decade, investors have become increasingly energized by the potential for business to accomplish good and solve the world’s problems. As “impact investing” grows, so too does the debate about how much financial return an investor should seek. Some believe that to target anything less than market-rate returns is unnecessary and reflects weak fundamentals; still, others argue that some of the most attractive opportunities to generate significant impact may not always generate market-rate financial returns.

What is our role as “faith driven” investors? Should we think about the issue of financial return differently than those who are not faith motivated? Scripture is clear that we have a responsibility to use our resources to provide for our needs, support the local church, and assist others in crisis; the focus of this paper is how to steward the “remainder.” Jesus consistently taught that the world’s ways are not aligned with those of His Kingdom. If we approach investing for Kingdom impact using the world’s paradigm (or the traditional paradigm) for what makes a good investment, we are at risk of making the wrong decisions. Perhaps faith-driven investors should assess and select businesses which are able to be financially sustainable, and then, prioritize them based on their potential for wholistic Kingdom impact.

Brief Recap of Impact Investing

“Impact investing” refers to “investments made with the intention to generate positive, measurable social and environmental impact alongside a financial return.”[1]

The three largest global asset managers, BlackRock, Vanguard, and State Street—which combined manage over $15 trillion in global assets, equivalent to more than three-quarters of U.S. GDP—are now not only developing “impact investment” products but also have declared their intentionality to support the impact investing ecosystem.[2],[3]

Two investor segments are influential decision makers in this trend: 1) Female investors are nearly twice as likely as males to consider positive impact along with financial return, and 2) 67% of millennials place a high value on making an impact.[4]

The 2020 GIIN survey estimates that more than $715 billion has now been deployed into direct impact investments. The International Finance Corporation put the estimate even higher at $2.1 trillion.[5]

Recently and in parallel, Christians have begun to think about the potential for business to change the world and further the Kingdom. Books like Toxic Charity, When Helping Hurts, and numerous others have informed the faith driven community about when “giving” is the best option and when other alternatives might be more effective at achieving the defined objectives.[6],[7] Very importantly, it has become increasingly evident that business can further the Kingdom in ways that charity cannot.

“Faith-driven investors” also seek a Kingdom impact alongside financial returns.

Return Expectations

Typically, impact investing implies private equity (PE) and private debt (PD). Market-rate return expectations for PE range from 16% in developed markets to 18% in emerging markets and for PD from 8% -11%.[8] Investments that can generate these types of returns tend to be concentrated in certain industries conducive to high growth / rapid scaling, like information technology, and frequently include the objective to exit after 4-6 years.

There are many high financial return investment opportunities in the faith driven space. However, for investors, it is also important to recognize that the financial return we require from a business is, in effect, “the price” we are charging for our investment dollars. One friend takes this dynamic into consideration as he makes investments. In one instance, he was able to reduce the interest rate on his loan by 3%, enabling the business to productively employ more marginalized women—the primary reason for his investment in the first place. It made me wonder, how much more Kingdom impact could faith-driven investors have if they required less financial return?

Previously, a CEF colleague wrote a white paper and applied the biblical concept of “gleaning” to the question of financial return. “Investment gleaning” allows some of one’s personal financial return to provide the marginalized with access to the means of provision created by God.[9]

Many investors are planning to reinvest the financial returns into another impact investment. If this is the intent, it is really worth reflecting on the long-term Kingdom impact that an approach of primarily seeking the highest financial return projects will ultimately accomplish?

When crafting a portfolio, one option might be to invest to maximize financial returns with some potential for Kingdom impact. A second option might be to select investments with the highest potential for Kingdom impact, which are financially profitable / sustainable (or the entity will cease to exist).

Assuming all the investments reach their potential, then what is the result? As an investor, which portfolio would be the best? Which would you want to own? The answer to that question would depend on which portfolio best achieves the objectives of the investor. We know that God is the Owner of everything, and He has entrusted us with the responsibility to “invest” and steward His stuff. Therefore, the key question is: What are the Owner’s objectives?

Scripture is pretty clear that God has two primary objectives for His followers:

1. Great Commission: Go and make disciples of all the nations.[10]

2. Great Commandment: Love God, and love your neighbor as yourself.[11]

How might these objectives factor into an impact portfolio?

Great Commission – Most of the “least reached” reside in parts of the world where traditional missionaries are not welcome. One Christian entrepreneur commented: “If I want to spend significant time with locals [in a Muslim community], my choices are to join the army, go to prison, or start a business.” Companies operating in these places need capital from patient, aligned investors.

Great Commandment – One of the best ways to love your neighbor as yourself is to provide them with good jobs, products, and services that can enhance their quality of life. What most people need are Jesus and a job. There are many excellent businesses with potential to have amazing impact directed right at the Great Commission / Great Commandment objectives. However, although these businesses are profitable and sustainable, they are unlikely to deliver PE / PD market-rate returns to investors.

Would a more biblically-aligned approach be to construct a portfolio by first screening for businesses that meet a base level financial return threshold, and then, rank them according to the potential for Kingdom impact, rather than starting with a traditional filter of “market-rate return projects”?

Is Planning for Spiritual Impact a Good Idea?

If we are going to invest for Kingdom impact, we need to carefully assess an investment’s likelihood of producing those results. No one invests in a business without a compelling business plan, and the best investors are skilled at evaluating the potential for an attractive financial return.

What is less common is for the business to develop a Kingdom Impact Plan including clear objectives and prayerful and thoughtful plans for intentional spiritual impact.

You may ask, does it make sense to have a plan for Kingdom impact similar to a financial plan? Some might contend that it is not our place to “plan” for what only God can do. In fact, is it possible, that having a Kingdom Impact Plan could even inhibit the work of the Holy Spirit?

Scripture seems to suggest otherwise. God has a plan, and Psalm 33:11 says, “The plans of the Lord stand forever, the purposes of His heart from generation to generation.” God has even revealed His “big picture plan” to restore His Kingdom starting in Genesis. First, He divided up the world into various “ethnic groups” at the tower of babel.[12]Then, He promised Abraham that all “ethnic groups” would be blessed through his seed; finally, we see this promise fulfilled in Revelation where John observes some from every tribe, tongue, people, and “ethnic group” worshiping God.[13],[14] Jesus had a strategy for his time on earth—as part of the big picture plan. His primary approach was to focus and invest into the lives of just twelve and then to entrust them to do the same. We can read about the plan Paul executed, under the guidance of the Holy Spirit, for church multiplication throughout the book of Acts.

It is also true that Jesus’ daily execution was “flexible,” and throughout the gospels, we see Jesus regularly “checking in” with the Father for daily, and even moment-by-moment, updates. Paul did the same, seeking specific guidance from the Holy Spirit along the way. Perhaps the best approach for our businesses is to prayerfully develop thoughtful Kingdom Impact Plans and then, hold them loosely, while consistently “checking in” with the Father the way Jesus did.

Investor Due Diligence Questions About Kingdom Impact

Basic questions to reflect on:

1. Has the entrepreneur taken time to prayerfully consider how God might uniquely use the organization to accomplish His will?

2. Does the organization have a Kingdom Impact Plan or equivalent?

3. Does the Plan have sufficient detail that can be implemented and measured?

Kingdom Impact Plan

Practically speaking, redemptive enterprises range in the thoroughness and details of the way they plan to engage the world. Some plans are as simple as “the CEO is a Christian,” and others consist of a comprehensive Kingdom Impact Plan or similar name. There are many excellent books, curriculums, and tools to assist entrepreneurs and organizations to walk thru the process of developing a plan for Kingdom impact—a few are listed in the endnotes.

Kingdom impact consists of providing for peoples’ social, emotional, and community needs as well as nourishing their souls with the Word and love of God.

Some of the key components or process steps for an entrepreneur / organization to consider are:

Identity of the Entrepreneur – Who am I, and what is my purpose? Your identity and worth rest entirely in Christ, but why has God created you specifically? A valuable exercise is to develop a Life Purpose Statement which can enable you to set direction as well as help you get your bearings in confusing times.

Context – What is the local context that the business is operating in? How might the external political, cultural, economic, demographic, and spiritual influences of the context influence the company? This can be particularly important to reflect on for businesses that are operating in cultures and foreign geographies, such as what some refer to as B4T / BAM.

Vision and Strategy – What is the purpose of the organization? What problem are we trying to solve or need are we trying to meet? How can the purpose of the organization best be articulated in the Mission / Vision and Values, which reflect the unique purpose that God has called the organization to fulfill? The values set the framework for the company’s culture. The culture of an organization is not only one of the key determinates of success, but more importantly, living out the values is the greatest opportunity to be salt and light and reflect the reason for the hope that is in us.

Relationships – Transformation and discipleship happen through relationships. Relationships can include employees, customers, community, vendors, and authorities. How can the values that have been identified practically be “incarnated” in the way the company interfaces with its stakeholders?

Business Policies and Processes – How can the spiritual vision and values be translated into specific policies and processes? What does “faith” look like in the company policies in the context of the culture and key relationship areas.

The Entrepreneur and the Business’ Spiritual Life – The entrepreneur and the business each have distinct spiritual lives. What spiritual disciplines do you find important? How do you plan to grow in your relationship with God and to “abide in Him,” keeping in mind that He is your source of direction and energy, and “Apart from Him you can do nothing?”[15]

And the Master replied, “Well done, good and faithful Impact Investor!”

Kingdom Impact Plan Resources

• https://ibecventures.com / videos

• https://www.transformationalsme.org / Archives

• https://www.leadershipinstituteforentreprenuers.com/courses/Identity Driven Entrepreneurship (IDE)

• https://praxislabs.org/resources#playbooks “The Redemptive Business”

• “A High Impact Live” by Peter Ochs

• https://businesasmission.com/library

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[1] https://thegiin.org/impact-investing/need-to-know

[2] https://www.blackrock.com “6 questions about impact investing investment funds”

[3] https://www.statestreet.com “Aim Higher: Helping Investors Move from Ambition to Action”

[4] https://thegiin.org/publication/ “2020 Annual Impact Investor Survey”

[5] https://thegiin.org/publication/ “2020 Annual Impact Investor Survey”

[6] “Toxic Charity” by Robert Lupton

[7] “When Helping Hurts” by Brian Fickert and Steve Corbett

[8] https://thegiin.org/publication  “Impact Investing Decision-Making: Insights on Financial Performance”

[9] “The Biblical Concept of Gleaning and Its Implications for Faith Driven Investing” by Aimee Minnich

[10] Mathew 28:19

[11] Mathew 22:36-39

[12] Genesis 11:9

[13] Genesis 12:3

[14] Revelation 7:9-10

[15] John 15:5

Article originally hosted and shared with permission by The Christian Economic Forum, a global network of leaders who join together to collaborate and introduce strategic ideas for the spread of God’s economic principles and the goodness of Jesus Christ. This article was from a collection of White Papers compiled for attendees of the CEF’s Global Event.

by Stella Tai

The foundation of my work as an impact investing professional is my faith. It is the “why” that inspired and guided me on this path. I have that in common with tens of thousands of others around the globe who are working, both as individuals and organizations, for positive change. Here are some ways that “why” makes a profound difference. 

“Why” Drives the Work 

Consider community development financial institutions (CDFIs). The work they do isn’t particularly different from other banking or financial services providers, but the reason why these nonprofits provide this capital and how they distribute that capital in underserved communities is.

They focus on providing fair financing to borrowers whom mainstream finance wouldn’t traditionally reach. In this way, CDFIs use the tools of finance – such as banking services and providing capital and small loans to business owners – to help address poverty in underserved and underrepresented communities. 

“Why” Drives Investment Selection 

For many faith-based investors, the goal isn’t merely to generate financial returns but instead to strive to make a real-world impact, motivated by a sense of responsibility to love one’s neighbor as yourself. Their faith instills a duty to use their resources – be it capital, influence, or expertise – to uplift those who are marginalized, underserved, and economically disenfranchised. 

“Why” Puts the Focus on Community 

To love our neighbors as ourselves, we need to know our neighbors. Community development investing (CDI) helps address needs that may otherwise go unmet – to recognize and respond to those often left on the margins. Microfinance, neighborhood redevelopment, low-income housing, and disaster recovery investing can demonstrate that we see and can respond to the needs of our neighbors.

As part of Praxis Mutual Fund’s commitment to our neighbors locally and globally, we invest approximately 1% of our assets under management to support deep-impact community initiatives via Calvert Impact. We seek to align our work – and our investors’ dollars – with Biblical teachings to uplift the downtrodden and support the marginalized. 

“Why” Enriches Our Personal Journeys 

Witnessing the transformative power of faith and investing is a profound experience. In 2022, during a visit to my birth country, Kenya, I saw firsthand the far-reaching effects of community development work. Visiting various impact sites related to Praxis CDI investments, I saw God’s presence in how these CDFIs were able to help communities flourish economically. The objective of these organizations is clear: to create lasting change that allows locals in these communities to be empowered and to rise out of poverty.

Working in the field of faith-driven impact investing is as rewarding as it is challenging. At the core of our mission is a sentiment that echoes Matthew 22:39, where Jesus teaches us to “love your neighbor as yourself.” By marrying faith with action, we can contribute to a future where prosperity and opportunity are not limited to a select few but are accessible to all.

Stella Tai, Stewardship Investing Impact and Analysis Manager

Stella provides primary leadership for the promotion, integration and development of impact investing and reporting. Stella guides the development of financial products that meet the needs of low-to-moderate income communities, helps promote the integration of faith and finances through Everence products and services, and works to grow opportunities for impact investments. Connect with Stella on LinkedIn.

About Praxis Mutual Funds

Founded in 1994, Praxis Mutual Funds® is a leading faith-based, socially responsible family of mutual funds designed to help investors integrate their finances with their values. Praxis is the mutual fund family of Everence Financial®, a comprehensive faith-based financial services organization helping individuals, organizations and congregations.

Consider the fund’s investment objectives, risks, charges and expenses carefully before you invest. The fund’s prospectus and summary prospectus contain this and other information. Call 800-977-2947 or visit praxismutualfunds.com for a prospectus, which you should read carefully before you invest. 

Praxis Mutual Funds are advised by Everence Capital Management and distributed through Foreside Financial Services, LLC, member FINRA. Investment products offered are not FDIC insured, may lose value, and have no bank guarantee.

Mutual fund investing involves risk. Principal loss is possible. The Fund’s investment strategy could cause the fund to sell or avoid securities that may subsequently perform well, and the application of ESG (environmental, social, governance) and/or faith-based screens may cause the fund to lag the performance of its index.

by GenerosityNY | David Metcalf

Listen to David Metcalf’s story of impact investing.

Article originally posted here by Access Ventures

by Access Ventures

The traditional approach to portfolio construction utilizes the modern portfolio theory to optimize for your individual goals. Within the one-pocket mindset, the traditional approach is tilted to reflect your value set. The challenge here is to find an optimal mix of investments that reflect values without causing the portfolio to take undue risk.

Conscious construction of one’s portfolio is difficult, but not impossible. Over time Access Ventures has sought to find efficient solutions to this complexity within each asset class and has sought out like-minded funds and asset managers where we can make mission-aligned investments that achieve above-market financial returns. One of these funds we are invested in is Greenbacker Capital Management. Greenbacker is an investment management firm that focuses on sustainable infrastructure investing. They connect investors looking to back green energy solutions with sustainable infrastructure projects that need funding.

With Earth Day this week, we decided to catch up with Greenbacker to ask them about their work, impact and the future of renewable energy. Here is what they had to say.

How did Greenbacker get started?

Greenbacker began in 2011, when a group of founders came together around a common goal: to create an investment vehicle that would enable ordinary American investors to participate in the burgeoning revolution in renewable energy. A decade of sacrifice, sweat, and toil, resulted in a business with a gross investment value of $1+ billion and 1+ gigawatt of clean power generation capacity. We’ve been fortunate to attract a talented group of people who have played instrumental roles in propelling our growth.

What types of sustainable infrastructure do you invest in? Why the variety?

Our energy investments consist of 71% solar, 26% wind, 2% battery storage and 1% biomass across 29 states, territories, districts, and provinces. Geographic diversity allows us to offset weather that results in low performance in one region with outperformance in another region. Having a balance in solar and wind helps us diversify seasonally since wind typically outperforms in winter when there is less sun availability.

What does success look like for you? What types of impact metrics are you measuring?

We measure success through growth, stability, and environmental impact.
One of our business goals is the acquisition of assets. We know that the energy needs of the future will require an intense investment in sustainable infrastructure today and we want to be one of the major players involved.

We also want to deliver on our promise to shareholders to provide a stable, reliable source of income. This means creating efficiencies in how we manage the fleet with the expertise of our technical asset management team and making sure we maintain a smooth operation of business across all our departments.

Fighting the climate crisis has always been at the core of our mission. In addition to the direct impact or renewable energy, we’re looking at ways we can be better stewards of the land by planting pollinators at our solar sites, and how we can be better neighbors in the community with programs to provide low-cost or free energy to income-qualified recipients.

How do you work with organizations like Access Ventures to create impact?

Foundations like Access Ventures, who match their investments with their values, are essential to our business model. Investors are increasingly looking for strategies that they can feel good about and that also meet their financial goals. Access Ventures plays a critical role in connecting values-driven investors with opportunities like ours.

Tell us about your Georgia Mountain Community Wind Project. How did this project come about and what makes it special?

Georgia Mountain Wind is a 10-megawatt wind farm on the top of a mountain outside of Burlington, VT. The developer, AllEarth Renewables, was looking to sell the asset. This is a common pattern in our business model. Developers specialize in creating a renewable asset, working out the logistics of the permitting process and putting a Power Purchase Agreement in place with an off-taker. They want to continue developing new projects but have no interest of specialization in the long-term maintenance or operations of the project. So that’s where Greenbacker comes in – to purchase the asset and maintain it as an owner-operator. In the case of Georgia Mountain Community Wind, this collaboration led to a subsequent acquisition of a 5-megawatt wind farm in Massachusetts with the same developer. The other really cool thing about Georgia Mountain Wind is its relationship to a local small business Georgia Mountain Maples which uses the power generated by the farm to run their maple syrup operation.

How did the relationship with Georgia Mountain Maples come about?

Georgia Mountain Maples was already leasing the land for wind turbine use, so it was a relationship we inherited from the developer. Their business and the surrounding community have embraced clean energy and made it a source of local pride. Last summer we worked with the city of Milton, Vermont to have a fireworks display at the site which had a perfect vantage point atop the ridgeline where many residents could see the display.

Greenbacker is celebrating 10 years this year as a firm. What has changed the most in the sustainable infrastructure industry in that time?

Ten years ago, renewable energy was a hard sell. Solar, in particular, was an expensive energy source. But in the last decade, technological advances combined with economies of scale created by global investments, created enormous cost efficiencies. In the last few years, solar and wind reached cost parity with fossil fuels and are now cheaper than coal, oil, and natural gas.

What has changed the most in the world of investing during this time?

There are several trends in investing that a working in our favor:
– More investors are looking for strategies that align with their values.
– Alternative investments are attracting investors who have soured on unpredictable equity markets and low-performing bonds.
– Baby boomers are retiring and looking for uncorrelated, stable income.

What is Greenbacker most excited about when looking into the next 10 years?

We are excited about the electrification of everything. We are rapidly moving toward a world in which electricity is the cheapest, most flexible way of powering things. It’s already the best way to light our homes, and soon it will be the best way to move our vehicles, heat our homes, and power our mass-transit.

We are also really excited about fighting climate change.With the world’s critical need to decrease carbon emissions, renewable energy has emerged as the replacement for traditional fossil fuel power plants—a transition that is accelerating globally.

Anything else you want us to know about?

We are in the midst of a movement in Renewable Energy. A movement that can not and will not be stopped. The good work that we are doing here at Greenbacker is changing the way we both produce and consume electricity for the better, making a difference for our children and our children’s children.

You can learn more about Greenbacker Capital and our full portfolio of managed assets here.

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[ PHOTOS BY OLIVER PARINI ]