Matthew Patsky, CEO of Boston-based Trillium Asset
Management, cant hide his frustration. Patskys
firm, which manages its roughly $1 billion in assets
within a socially responsible framework, allocates about 2.5
percent to impact investing, an area devoted to companies and
projects pursuing a social mission.
But Trilliums clients, which include pension funds,
foundations and endowments, often tell Patsky that they want
closer to 5 percent of their capital in impact investments.
Without any sort of impact investing stock exchange, he
doesnt think this demand can find an outlet.
Its the same problem with almost every instrument
in the impact investing space: There is no market, Patsky
says. There needs to be a clearinghouse for this space
because weve got two big issues that need to be solved.
No. 1 is liquidity. Taking care of that would solve No. 2,
which is pricing.
In other words, can an investor like Patsky be confident of
selling his impact investments when hes ready? And will
he know what those investments are worth? Right now the market
is so fragmented that he and others hesitate to answer yes to
Impact investing could offer between $400 billion and
$1 trillion worth of opportunities in housing, water,
health, education and financial services through 2020,
according to a 2010 report by J.P. Morgan and the New
Yorkbased Rockefeller Foundation. There is a
tremendous amount of interest in this space coming from
institutional investors, family offices, high-net-worth
individuals, private equity firms and pension funds, says
Robert Rubinstein, founder and CEO of TBLI Group, an
Amsterdam-based advisory firm best known for its events
promoting triple-bottom-line investmentsthose with
financial, environmental and social benefits. But they
simply dont have the infrastructure to find the
A few shops have set out to build that infrastructure. In
March 2011, Singapore-based Impact Investment Exchange Asia
(Asia IIX), run by former Morgan Stanley colleagues Robert
Kraybill and Durreen Shahnaz, launched a platform called Impact
Partners. For an annual subscription fee, Impact Partners gives
investors information about social enterprises throughout the
Asia-Pacific region. Chosen for their financial viability and
their social or environmental impact, the enterprises featured
on the platform focus on everything from microfinance to fair
trade to sustainable agriculture.
Kraybill stresses that Impact Partners is not a transaction
platform; its meant to help increase deal flow by making
it easy to source impact investments. But Asia IIX and
Singaporean regulators are discussing plans for Impact
Exchange, a platform that would more closely resemble a
traditional stock exchange.
New Yorkbased Mission Markets, a
sustainability-focused financial services firm, launched the
current version of its Access platform in August. Dedicated to
U.S. enterprises, Access differs from Impact Partners in two
other crucial ways. First, it offers business advisory services
to the companies it lists. Second, it lets clients invest
directly through the platform, but only on primary
capital-raising; that is, investors cant trade with one
another, just with the social enterprises. Although Mission
Markets platform will eventually support secondary market
trading, the current size of the impact investing sector
doesnt warrant it, president and CEO Sam Salman says.
GATE Impact, due to launch publicly early in 2012, will
feature secondary trading as well as capital-raising and
investment listing. A step closer to a typical stock exchange,
New Yorkbased GATE is the only one of the three platforms
registered as an alternative trading system that will allow for
live orders and order matching.
President William Davis is focusing on investorsmostly
big institutionsthat can bring their impact investing
portfolios onto the platform with them. At launch, Davis says,
GATE Impact will list available impact investment deals of
between $500 million and $1 billion. By comparison,
the social enterprises on Asia IIXs Impact Partners
platform have sought to raise a total of about
Davis says GATE Impacts size and its ability to
support a secondary trading market will be crucial to the
success of the entire sector. We hope we can help move
the ball forward by providing a new level of transparency and
efficiency, he explains. Over time, as more
transactions occur and more assets are being listed, you end up
creating a more liquid marketplace.
Trilliums Patsky worries that a handful of groups
developing exchangelike platforms for impact investing could
further fragment an already disjointed market. But Davis and
Mission Markets Salman say their firms work together on
deals that require shared expertise.
Its a nascent asset class, and if one major
player fails, it stigmatizes the whole industry, Salman
notes. Everyone wants this space to get to the point
where its deep enough and liquid enough to be a real
asset class, and anyones success reflects the
industrys growth and maturity.