This interview with Elise Zhao was originally published on Phenix Capital’s Faces of Impact.
How did you get into impact investing?
I feel lucky to have learned about the social impact world through an impact investing class I took in college and other class opportunities to provide pro-bono consulting to non-profits. I began to wonder how organizations financially managed to serve low-income communities and social causes that were deemed “uninvestable” by traditional investors, simply because addressing societal challenges isn’t considered a profit-maximizing venture. Accounting for the injustices that COVID only highlighted, I personally reflected on how I wanted to use the tools and privilege that I attained through my family’s sacrifices to support my education. I wanted to pay it forward to help break down systemic barriers to learning beyond high school. My experience motivated me to become a part of the impact investing world, which prioritizes positive impact over sheer return on investment, and work to expand the reach of this tight-knit circle.
Can you share an example of an impact investment you are excited about?
At Lumina Impact Ventures, I work alongside my Lumina Foundation colleagues to accelerate efforts that make opportunities for learning beyond high school available to all. Improving student participation and success often takes more than traditional financial aid—the biggest levers can include providing resources such as child care and transportation. More than ever, these social determinants of student success require proven, innovative solutions. Our blended grant and impact investment into Coastal Enterprises, a Community Development Financial Institution based in Maine, will expand its Child Care Business Lab nationwide to provide training and financing to help start more home- and center-based child care. This collaboration increases and improves childcare options for student parents in a new way.
How do you see philanthropies and impact investors working together?
As more philanthropies become impact investors, they are uniquely equipped to challenge traditional notions of financial risk. By using concessionary capital—funds offered at terms more favorable than in the market—philanthropic organizations provide cushion dollars for finance-first impact investors. This padding encourages such investors to help fund evidence-based solutions. In turn, impact investors’ operational expertise helps investees grow sustainably. As organizations designed to use wealth to contribute to the public good, philanthropies can—and should—push the boundaries of what types of investing feel comfortable. By embracing the most innovative of theories of change, proving the scalability of creative solutions, leveraging funder and researcher networks, and broadly sharing what they learn, philanthropies and impact investors will collaborate to make impact investing the norm rather than the exception.
What do you think is missing in the industry?
We must throw open the doors to impact investing to welcome more people of color, people from all socioeconomic backgrounds, and those early in their careers. Rather than inviting the select few with investment experience at top firms or degrees from elite universities, we must expand the definition of an impact investor. Just as impact investors seek to foster diversity, equity, inclusion, and accessibility in their respective focus areas, I would love to see that effort applied to the industry itself.
Do you have any recommendations for impact investors and fund managers starting their impact journey?
For folks looking to start their impact investing careers, I would say seek opportunities to engage—whether by finding webinars, reading on Impact Alpha, or following people you admire on LinkedIn. And for those already in the field but just beginning—so this advice is really for me!—please keep challenging yourself. Push the status quo of what it means to be a responsible financial steward in this political, cultural, and global climate.
Final question: What are the most used (and abused) clichés in impact investing that bother you?
That impact investing exists simply as a way to virtue signal. While there is a fine line between investing toward beneficial causes and saviorism, I believe that impact investors—particularly those who commit to tracking their impact goals and understanding the communities they are serving—do generate positive social change. Though it can’t solve all of society’s systemic challenges, impact investing can draw interest—and much-needed capital—to causes that have needed attention for decades.
This Q&A was originally published on Phenix Capital’s Faces of Impact.