The Financial Crisis: Maybe Not a Watershed Moment for ‘Mission Investing’

The question of just how much the financial crisis has opened mainstream investors’ eyes to the potential of investments that combine both financial and social returns has permeated discussions at the conference.

“I just had this feeling that people with fiduciary responsibilities, asset owners would kind of step back and say, ‘Let me get this straight. My microfinance bond gave me 7 percent, but I just lost 30 percent of my portfolio with traditional assets,’” Jed Emerson, a managing director of Uhuru Capital Management, in New York, told conference participants.

But, he said, in the conversations that he has had with institutional investors over the last six to nine months, it hasn’t seemed like the critical evaluation of traditional investing approaches he expected has taken place.

“I was struck by how fast these folks just ran right back to the same wealth advisers, to the same strategies,” he said. “‘We’re going to go right back in to the main funds that just lost us 30 percent, because, well, there’s got to be an upside around here somewhere.’”

In at least one case, the strong performance of Goodwell Investments, a for-profit company that invests in microfinance institutions, actually worked against it, said Wim van der Beek, the company’s founding partner.

Mr. van der Beek said that a trustee of a pension fund that had already invested in Goodwell told him that the pension fund had been planning to invest more with the company but that the poor performance of other investments in its portfolio meant that it was now “overweighted” in that area so the pension fund couldn’t make the additional investment.

Other speakers saw reason for cautious optimism.

Amit Bouri, head of the new Global Impact Investing Network, said that even at the worst point of the downturn, Responsibility, a company in Switzerland that raises money from very wealthy individuals to invest in microfinance, was raising roughly $20-million of new capital every month.

“I don’t want to paint too rosy a picture,” said Mr. Bouri, “but it’s an important sign that there is still continued interest in this space.”

The amount of money under management by RSF Social Finance, a nonprofit organization that raises money from individual investors that it then lends or invests in social enterprises, rose by 10 percent in 2008, according to Don Shaffer, the group’s chief executive.

For the people who found the organization, it represented a “refuge from the traditional capital markets,” said Mr. Shaffer. But, he said, given the losses in mainstream markets, he would have expected more investors to show interest in his organization.

“We’ve moved from a shock and paralysis period to an inertia period,” said Mr. Shaffer. “It’s still very sluggish.”