Capital today does not generally flow in a way that is motivated by impact. There is some progress, but not enough. Impact investments, while steadily growing in assets under management, still represent a sliver of the broader capital markets. And within the asset management industry, capital is concentrated – with firms owned by women and people of color controlling under 2% of total U.S. assets under management – despite studies showing that funds managed by diverse teams actually perform better.
So where do we go from here? How do we change policies and practices to be more inclusive and impactful?
At this year’s Confluence Philanthropy Practitioners Gathering, I had the opportunity to participate on a panel where we grappled with these questions and explored how asset owners and allocators can move from being gatekeepers to gate-breakers.
During our time together, Ian Fuller, Co-Founder and CEO at Westfuller Advisors, Humaira Faiz, Director of Investments at Pivotal Ventures, Jason Henning, Head of Investor Relations at Illumen Capital, and I offered some reflections and calls to action.
Here are some key takeaways:
- Greater openness leads to better outcomes. Funders can be hard to reach by design. But if we adopt more transparent and accessible practices, we can move beyond closed networks and build more trusted relationships with a wider range of partners. At WES, we bring this commitment to life through a core team value of ‘starting with a yes’ mindset and actively reviewing an open call for ideas on our website.
- It’s time to upgrade our due diligence processes. Underrepresented asset managers are sometimes eliminated from consideration based on industry standards for due diligence that reinforce existing social inequities. Frameworks like Due Diligence 2.0, stewarded by our partners at Rhia Ventures, offer more inclusive, equally robust alternatives.
- For more inclusive decision-making, invite more people to the table. Through models like participatory investing, we can help ensure that historically underserved communities can have a meaningful voice and impact throughout the capital allocation process.
Of course, these are only a few gate-breaking approaches asset allocators and owners could consider. Ultimately, by having greater curiosity and intentionality around 'the how' of investing, we can improve outcomes across the investment lifecycle. No practice or policy is set in stone. And by demonstrating new methods, questioning assumptions, and continuing to learn from one another, we can build more inclusive and impactful flows of capital.