Fran Seegull describes how to accelerate impact investing
Fran Seegull is president of the U.S. Impact Investing Alliance, which works to increase awareness of impact investing in the United States; foster the deployment of impact capital across asset classes globally; and partner with stakeholders, including government, to build the impact investing ecosystem. Seegull also serves as the executive director of the Tipping Point Fund on Impact Investing, a donor collaborative focused on scaling the field with impact integrity.
Previously, Seegull was the chief investment officer and managing director of ImpactAssets, where she headed investment management for The Giving Fund — now a $3 billion impact investing donor-advised fund. She has a bachelor's degree in economics from Barnard College and an MBA from Harvard University. She serves on the investment committee of Align Impact and the advisory boards of SOCAP and the CASE i3 Initiative at Duke University. Seegull joins many others in reimagining capitalism in the future.
What’s your background in leading the nation’s premier field-building organization committed to accelerating impact investing?
My journey into impact investing began nearly 25 years ago at Harvard Business School. I was working in family philanthropy as a program officer for the Peter Norton Foundation (established after the success of the Norton AntiVirus program), and we were making grants in very innovative, creative ways, especially for the time.
Eventually, I started thinking about how the endowment was invested and whether it was consciously or unconsciously invested at cross purposes to the foundation's mission. That’s what led me to business school: my desire to explore how the financial capital markets and for-profit business models could create positive and measurable social, economic and environmental impact alongside financial returns.
At the time, Harvard Business School was rooted in the Milton Friedman model of neoliberalism, where the purpose of a corporation was understood to be about maximizing shareholder value. I believed this view was fallacious because it failed to account for businesses' negative and positive externalities.
Since graduating from Harvard, I've been running, consulting or investing for impact through mission-driven businesses and/or funds. I also serve as executive director of the Tipping Point Fund on Impact Investing (TPF), a donor collaborative and sister organization to the U.S. Impact Investment Alliance. The two organizations share a mission of growing the impact investing field with integrity. Whereas the Alliance employs public policy advocacy, investor engagement and field building, the TPF utilizes grantmaking to move the dial.
How did you, Darren Walker and others come together to launch the Alliance, and what did you imagine was necessary to accelerate the evolution of this field?
We believed there was a need to build and fortify the field and practice of impact investing and to advocate for supportive policies in Washington, D.C. This was the early fall of 2016, and I had the conviction that impact investing would have broad bipartisan appeal. We also knew that the success of the impact investing movement wasn’t just about getting more capital to flow to impact but that we also needed public policy advocacy, impact data metrics and measurement tools, and strong research to do so with impact integrity.
The Alliance was envisioned as an organization that could take on key field-building responsibilities. Like any other industry, public policy work is critical to ensure the laws and regulations allow for and incentivize the desired practices.
The Alliance is the co-lead with B Lab for the Coalition on Inclusive Economic Growth, which convenes 60-plus impact-oriented businesses and investor organizations devoted to coordinating public and private action. What are your top policy priorities currently?
In 2021, we co-authored a coalition policy docket offering recommendations for federal policymakers on two topics and approaches: One, a bottom-up focus on community investing; and two, a top-down transition to stakeholder capitalism.
Our bottom-up approach to community investing includes a suite of incentives to support the revitalization of communities of color, rural and indigenous communities. Through collaboration with community-focused organizations and community leaders, we work to share expertise and create the tools necessary to help facilitate the flow of impact capital.
Top-down, we view the need for public policy around transitioning from shareholder primacy to stakeholder capitalism. Elements such as the future fiduciary duty, the ESG corporate disclosure agenda and asset manager accountability fall in that area of capital market reforms.
Impact investors generally think of total return as financial return plus or minus social and environmental returns. How do you prove that alpha is created through impact investing, and does that formula resonate with you?
This is a special moment in time. Still, there is a common misconception that impact investing necessitates a financial trade-off.
There are many examples where you can have your cake and eat it, too. If you believe the world is changing — whether it’s from climate change, growing public health issues, refugee and human rights crises, or other issues — a whole range of social, economic, demographic and environmental forces are not only redefining what it means to manage risk but also creating new investment opportunities to help solve our most significant global challenges. There are absolutely ways to create a premium to financial return through impact investing.
We are also looking more closely at beta risk. Research shows that beta drives 75% to 95% of all portfolio returns. Moving beyond modern portfolio theory ponders the impacts of business and investment decisions on entire systems, like society and our planet. We’re starting to focus more on inequality as a systemic risk, understanding that we may need a different set of tools and frameworks than those used to consider environmental factors.
One of the banners that critics have gone after is ESG: environment, social and governance. Do you feel that debate has either accelerated or decelerated this movement?
Some people think of ESG as a product. We think of it as an investment process whereby investors and fiduciaries look at environmental, social and governance factors to see which ones are useful or financially material and then take them into account.
Unfortunately, we’re seeing the politicization of ESG and the rise of anti-ESG and anti-diversity, equity and inclusion (DEI) movements in the United States. It’s important to remember that these politicized attacks against ESG are fundamentally different from good-faith critiques related to the need for better transparency, accountability and higher bars for impact.
But despite these critiques, transparency on a range of ESG factors is coming to the market. Corporate disclosures of certain financially material ESG factors like climate risk will soon be mandated in the United States via SEC rulemakings and state-level legislation. The European Union goes a step further by using double materiality, whereby companies consider not just financially material factors to their business but also the impact on stakeholders.
Whether you like ESG or not, disclosure is finally happening after long-standing calls from investors for better transparency. Even if the SEC rules are challenged or delayed, many U.S. companies will be subject to the EU standard because they are suppliers to global companies. The EU regulation will be the tide that lifts all global boats, we believe, for asset managers and corporations alike.
Please provide us a view into your vision for the future of impact investing, what your hopes and aspirations are for the field, and when you will know we’re there.
When we first launched the Alliance, Darren and I boldly declared that “the future of investing is impact investing.” The Alliance is the U.S. representative to the Global Steering Group for Impact Investment, founded by Sir Ronald Cohen. Now, such entities in 35 countries worldwide seek to accelerate the field of impact investing.
I am excited for the years to come to see the global regulatory agenda come into sharper focus. Various governmental agencies and private sector standard-setters are working on how to get to a north star where total return is based on financial return as well as impact. The ultimate success of this field would be manifesting a more equitable, sustainable economy by finding a way to reliably price externalities and value all stakeholders.