We believe the key to impact investing is to view opportunities through a more holistic lens than the finance industry has traditionally employed. A one-size-fits-all approach is unrealistic: social and environmental issues are multifaceted and complex, and they sometimes demand a tailored approach.
It is in this context that flexible financial models provide greater opportunity for impact.
Outside of the public markets, financial models should be fluid so they can support scalability; a rigid model might work for an endeavor in its early stages but be problematic as the organization grows. Reynders, McVeigh Capital Management’s impact investing centers on identifying innovators with solutions that address systemic issues and designing financial models based on sound investment fundamentals.
In this way, the capital we deploy goes beyond “supporting a cause” and instead is put to work in replicable, scalable models that are geared for reliable social, environmental, and financial returns. Through this thoughtful, intentional design, the possibilities for impact expand exponentially.
At Reynders, McVeigh, we’ve created a range of vehicles that set the stage for positive impact while also contributing to a fixed-income strategy.
Sunwealth® stands as a prime example of a financial model designed to lift underserved communities, advance the energy transition, and meet fixed-income needs in investment portfolios. A public benefit corporation, Sunwealth is a clean energy investment firm on a mission.
Our team worked with Sunwealth in its early days to construct a model that would support its social goals and improve on the offering to investors. Instead of pursuing growth project by project, we reconfigured the financial opportunity into a pooled investment approach. The Solar Fund aggregated high-performing, community-based projects into pools that help spread risk and stabilize returns.
Founders First Capital Partners was formed to empower businesses led by women, people of color, military veterans, and businesses in low-to-moderate income areas and provide them with the stability they need to grow long term.
The fulcrum of the Founders First financial model is revenue-based financing (RBF), a proven approach that has been used for decades across a variety of sectors. It serves as a blend between bank debt and venture capital, allowing investors to lend money in return for a percentage of revenues until the initial loan amount and repayment cap are paid off. This model importantly allows founders to retain their equity.
WindSail is a leading provider of growth capital to companies advancing energy innovation and sustainability, with a focus on helping emerging companies achieve scale and impact. The firm’s unique investment approach provides companies with flexible financing solutions that facilitate growth while minimizing dilution.
To keep capital working for sustainable businesses around the country and to take fundraising pressure off the WindSail team, Reynders, McVeigh created an evergreen fund structure that gives clients the ability to keep rolling their committed capital into new WindSail loans until they decide that they want the capital returned.
Many investors prefer a structure that provides interest payments quarterly and allows for easy reinvestment, unlike venture and private equity models that provide no regular liquidity and have a typical lifecycle of 8, 10, or 12 years. This type of investment can also dovetail with a public market fixed-income strategy, adding another stream to a more traditional mix of dividends and bonds.
As investment vehicles evolve, there are opportunities to better shape how investments drive impact, how vehicles generate measurable results, and how capital is recycled to extend impact. Building out a range of flexible opportunities provides more paths for investors to participate directly in positive social change without sacrificing financial fundamentals.
To learn more about how flexible financial models work for impact investing, read our latest discussion paper detailing the process from an investor’s perspective.
DISCLOSURE: The views expressed above are subject to change and represent the current, good-faith views of Reynders, McVeigh Capital Management, LLC (“we”) at the time of publication. References to specific impact investments are not intended to be, and should not be interpreted as, solicitations, recommendations, or investment advice. The commentary provided herein is educational in nature. All data is based on current, public information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied on as such. The impact investments identified above (Sunwealth, Founders First, and WindSail) only represent a selection of our current impact investment recommendations on behalf of our advisory clients. While they have been selected to illustrate the views expressed in the commentary, please note that we receive a management fee on the client assets invested in these entities. The reader should not assume that investments in the impact investments, sectors, and/or manners discussed were or will be profitable. Past performance is not an indication of future results. Investment decisions should always be made based on an investor’s specific needs, objectives, goals, time horizon, and risk tolerance. Certain impact investments are private, non-public offerings that are only available to accredited investors (individuals or business entities that are allowed to trade securities that may not be registered with financial authorities due to their income, net worth, asset size, governance status, or professional experience). Sunwealth, Founders First, and WindSail are open to accredited investors only and we may impose an account minimum on participation in these investments. Impact investments that are private, non-public offerings may experience greater volatility than traditional investments in publicly traded securities. Advisory clients should carefully review the pertinent documents for each impact investment for a more detailed discussion of the associated risks. Given the high-risk nature of impact investments, advisory clients should contact their portfolio manager to discuss risks and suitability prior to investing.