Over the last year, it feels that philanthropists have become the new target group tasked with a responsibility of ensuring that impact investments continue to scale at the current market pace. My attention to this trend may very well be the result of my own changed interests and focus areas, but it is an interesting conversation and pertinent for the ecosystem to follow given foundation assets alone exceed $1.5 trillion, indicating that they have the means to catalyse change. One area of this conversation that I’ve been especially keen to track is the role of philanthropic money to support riskier projects and initiatives through first-time fund managers.

Although there is a great deal of information and data being shared today validating the growth and momentum of impact investing, I believe there is a further distinction that is more difficult to quantify and analyse – impact-first investments. For me, this topic is most relevant not only because of my interest in supporting a broader range of impactful projects, but also in the context of scaling and accomplishing this mission through investments in first-time fund managers. From the various AVPN sessions that I attended (during the annual conference in June), I sensed that at this point in time there is still not enough appetite in this ecosystem of actors to bear the level of risk that is needed to truly progress impact investing into the mainstream. The level of scale that I envisage to be meaningful will require that we accept losses and embrace mistakes. Most first-time fund managers have struggled to identify the appropriate capital support needed to grow and it appears that many of the asset owners are supporting the same big-name impact funds, who in many cases still place a disproportionately large focus on financial returns.

I have rarely witnessed occasions where a specific engrained way of thinking is challenged openly but during this year’s conference one exception did arise. During one of the panel discussions, ‘Leading the change: Making impact investment matter’, an audience member asked of the panelists (who represented foundations of varying sizes), ‘Why won’t you back first-time female fund managers?’ This is a very valid question even as a gender agnostic one. One panelist ultimately answered by noting that as a foundation, there is a fiduciary duty that individuals serving [the foundation] need to observe and given the published research on the performance of first-time fund managers, whether they be led by male or female, it is apparently still statistically proven that first-time fund managers are deemed to be of higher risk and to have a lower success rate. As a result of these statistics, which most likely don’t consider positive impact as a factor, first-time funds are not appropriate investments for endowment proceeds. The most striking part of this exchange wasn’t this response per se, but rather the implications of this rationale. By no means do I feel that every first-time fund manager should be financially backed, but I do believe that a new model needs to be designed and employed to support a paradigm shift.

We are in a catch-22 scenario – do we support more of the same model type to preserve what we believe we know to be solid and validated or do we go out on a limb to pursue change? I want to believe that we are all mindful that time is of the essence and that the answer should be without hesitation – the time to go out on the limb is now.

Jennifer Louie is Executive Director for Nexus for Development