This content is from: Corner Office

Children of the Superrich Want to Fix the World’s Problems

Here’s why the next generation’s assets may not be enough to invest in a better world.

Summerly Horning is starting a bank. The new retail operation, Frank, would use modern know-how and fintech to reimagine and reengineer banking to use depositors’ capital for good.

Horning, 38, has the means and background to do it. Prior to founding Frank — to be based in Los Angeles, with brick-and-mortar branches and an online presence — she had helped to launch impact investing firm Tau Investment Management, backed by supporters such as George Soros’ son Alexander Soros. The Hornings own, among other assets, Telluride Ski and Golf Resort in Colorado.

She belongs to a group of young investors — many heir to considerable wealth — and business leaders, some who have made their own fortunes, who want their capital to do good while doing well. Increasingly, such investors are interested in so-called impact investing, putting money into funds, deals, and companies that seek to achieve a positive social outcome as well as turn a profit. But to tackle the large problems that they are ultimately seeking to address, they are going to need much more capital.

New York–based businessman Josh Cohen believes family offices and wealthy individuals are idea leaders. “There needs to be experimentation, and there needs to be participation” in impact investments, he says. “The likely participants at this stage are the family offices, because they don’t have to answer to anyone in terms of being fiduciaries of their capital.”

The term “impact investing” was coined in 2007 at a retreat held by the Rockefeller Foundation, one of a handful of nonprofits that have been at the forefront of the U.S. impact investing movement. Many foundation investment offices, however, remain reluctant to take the plunge, fearing that they will be sacrificing returns.

Thomas Groos, co-founder of social problem–focused venture firm City Light Capital, says there is still a misconception around impact investing that achieving good has to mean giving up returns: “If the mission of the company is the same as the business product of the company, we believe it is actually possible to outperform conventional approaches to business.”

Groos is a member of The ImPact, which his City Light business partner Cohen co-founded in 2013 with Justin Rockefeller. Like Bill Gates and Warren Buffett’s Giving Pledge — a commitment by billionaires to give away at least half of their wealth in their lifetime — The ImPact is both a pledge and a network for high-net-worth individuals and family offices committed to exploring the effects of their investments.

The ImPact is developing a database of members’ deals to better track and analyze their impacts, and provides education and white papers. Last year the group hired Abigail Noble, formerly head of impact investing initiatives at the World Economic Forum, as CEO.

Horning has taken the ImPact pledge, as have Liesel Pritzker Simmons, Jean Case (ex-AOL executive and Case Foundation co-founder), Jim Sorenson (entrepreneur and Sorenson Impact Foundation chair), and Eytan Stibbe (founder of a Swiss impact firm focused on Africa).

Many of the group’s members are relatively young, which should not surprise. Much of the interest around impact investing today is driven by Millennials and the wealth advisers who hope to manage (or continue managing) their inheritances.

These young, rich investors are starting to influence how their family wealth is run. In May the $130 million Rockefeller Family Fund, of which Justin Rockefeller is a board member, announced that it will divest from ExxonMobil, cutting ties with the fossil fuel extractor which has long had close connections with the family fortune. Not all families are amenable to jumping on the impact bandwagon, however. Speaking last month at the High Water Women Investing for Impact Symposium in New York, Horning explained how she had to leave her family office and strike out on her own in order to prove the case for impact to others in her family circle.

The ImPact sees itself as offering a “safe space” for family offices to talk assets and altruism. While the group does publish its white papers and research, and many of its members are public evangelists of impact investing, much else about the group remains private. The ImPact — which wants to be the TED Talks of impact investing — does not disclose its membership’s collective assets, the number of people in its network, or the average deal size in its database.

Jessica Matthews, managing director of Cambridge Associates’ mission-related investing group, says the word is getting out to institutional asset owners. She sees rising interest from foundations in particular as well as some endowments, and the quantity of investable products has climbed significantly in recent years. “We have a lot more things to do due diligence on” than when the group started almost a decade ago, Matthews says. Yet the number of institutional-quality impact funds is still small, especially outside of the private markets. “One of the problems is that there needs to be a cross-pollination of strategy,” she notes.

Groups like The ImPact can help with that, but their own impact will be limited if they do no more than talk among themselves.

This is where Horning stands out. In starting her bank, she is taking on the institutions of financial power, joining the capital markets and investment management system to change them. If she succeeds in regearing those industries, that really would be a revolution. One for more than just the ultrarich.

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