This summer I began my journey into impact investing by researching a racial equity investing strategy for Tiedemann Advisors. I share here my motivation to pursue impact investing, a brief primer on the evolution of the field, and outline my research methodology. I spent the last eight years managing the financial and contractual aspects of clinical trials at the Bixby Center for Global Reproductive Health at UCSF. Overseeing these programs underscored for me the complex links between race, economic opportunity, and health. After negotiating and managing several dozen studies in the US, in Africa, and in the Middle East, I wanted to explore alternative methods to government and philanthropic funding to finance social impact at scale. How can we unlock different sources of capital to address pressing social challenges? For instance, foundations allocate 5% of their endowment towards grant-making each year. The other 95% is invested to preserve and grow capital for future philanthropy. These investments might be counter to the stated mission of the foundation. For example, an organization whose grant-making centers around women’s reproductive rights might be invested in companies that refuse to cover birth control for employees, and a foundation committed to environmental conservation might hold investments in fossil fuels. What if an organization’s investments could earn a financial return and align with its mission? Asking these questions led me to discover the burgeoning field of impact investing. Originating from a 2007 Rockefeller Foundation meeting, “impact investing” is defined as investments made with the intention of achieving both financial return and social and/or environmental impact. Over the past decade, the field has grown to an estimated $228 billion in impact assets under management, according to the 2018 Annual Impact Investor Survey by the Global Impact Investing Network. Impact investors range from individuals to development finance institutions, foundations, pensions, and banks. Investments can be made across asset classes and with a range of financial returns. My previous experience negotiating and administering contracts and grants fell on the concessionary side of the spectrum (i.e. 0% return on investment). To gain a market-rate perspective I joined the impact investing team at Tiedemann Advisors in San Francisco as an intern before beginning my MBA studies at the Haas School of Business. Tiedemann is a Registered Investment Advisor that works in partnership with families, foundations, and endowments to meet their financial goals and achieve their desired impact. Tiedemann recently merged with Threshold Group, an investment advisory firm with over a decade of experience making impact investments in themes including environmental sustainability, financial wellness, affordable housing, education, and gender equity. The firm seeks to identify market-rate financial returns as well as catalytic social and environmental impact, truly sitting at the intersection of the two. My project involved researching a racial equity investing strategy, expanding on the existing gender equity theme and offering it more intersectional depth. Racial equity can be defined as just and fair inclusion into society where success is not determined by race or origin. The project grew out of Tiedemann’s internal Diversity, Equity, and Inclusion initiative and from client interest in investments with an equity and inclusion focus. I had landed in the deep end of both finance and social justice. I set a baseline for myself by taking Harvard Implicit Bias tests and making a commitment to refresh my own blind spots. I read everything I could get my hands on regarding impact investing and racial justice. Morgan Simon’s Transform Finance principles served as a guide for my research, interactions, and strategy development: Engage communities in design, governance, and ownership Add more value than you extract Fairly balance risk and return between investors, entrepreneurs, and communities In every conversation I made an effort to connect authentically, to acknowledge the limitations of my perspective and the complexity of lived experience, and to build two-way partnerships. My research took place in three stages: landscape research towards a theory of change; an investment product survey; and identification of appropriate impact metrics. I began by performing landscape research and engaging with communities, philanthropists, and academics in the field of racial equity. My goal was to formulate a Theory of Change for how private impact capital could shift racial disparities, ultimately focusing on the racial wealth gap, access to capital, and workplace equity. In the United States, White households have a median net worth 13 times that of Black households and 10 times that of Latino households. Racial disparities also exist in homeownership, education, health, and justice. These disparities persist across generations, resulting from systemic inequalities in economic, political, and cultural policies and practices. In the second stage of my research, I surveyed investment products currently on the market. I searched across asset classes and identified solutions in public equities, fixed income, private debt, private equity, and venture capital. I connected with fund managers working with a racial equity focus to understand their investment theses, how they structured their funds, and how they measured their impact. Alongside financial return, impact investors measure social and/or environmental impact. I researched which metrics were best-suited to measure change for a racial equity strategy focused on eliminating the racial wealth gap. In early July, the City of Oakland released the Equity Indicators Report, an extensive data-driven approach to quantifying the city’s racial disparities. Oakland ranked 33.5 out of a possible 100 points, highlighting the need for a combined effort involving government, philanthropy, and private capital. I presented my findings to the Tiedemann Investment Team, during which I argued for an intersectional approach to gender and racial equity. We have a long way to go in addressing racial inequities in America, and both public and private sectors will need to be involved. My research contributed to building a framework for how private investment capital might be deployed to make a difference. Disclaimer: Tiedemann is a Registered Investment Adviser with the Securities and Exchange Commission. Tiedemann makes no representation as to the performance metrics of any third-party organizations. Certain information has been provided by and/or is based on third-party sources and, although believed to be reliable, has not been independently verified and Tiedemann is not responsible for third-party errors. Katharine Hawthorne is a Berkeley Haas MBA candidate focusing on finance and impact investing. Before coming to Berkeley, she developed a racial equity investing strategy for Tiedemann Advisors and worked as a financial manager for global health programs at UCSF.