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Aggregating Impact: A Funder’s Guide to Mission Investment Intermediaries

Source/Author(s): 
Sarah Cooch and Mark Kramer, FSG Social Impact Advisors
Publication date: 
November, 2007

This 48-page research paper on financial intermediaries as employed by mission investors, conducted by FSG Social Impact Advisors and funded by the Surdna Foundation, provides foundations with an understanding of current trends in the use of mission investment intermediaries by U.S. foundations; the range of intermediaries currently available in the areas of economic development, housing, and the environment – as well as the existing gaps in coverage; key considerations about how and when to invest through intermediaries; and opportunities for funders to advance their own missions by creating new intermediaries or new funds at existing intermediaries.

Mission investment intermediaries offer a number of advantages for mission investors, such as ease of investment, reduced risk, lower transaction costs, specialized expertise, performance reporting, and an expanded deal flow. Often, they also provide their investees with technical assistance or access to additional sources of capital. Yet many funders are unaware of the wide range of mission investment intermediaries that are available and of the advantages they can offer. Of the 1,030 intermediaries FSG investigated, 78% focus on economic development, 56% on housing and 9% on the environment.

This work is important for foundations who identify lack of internal staff capacity as an impediment to mission investing, since intermediaries offer an effective way to overcome this barrier. The paper describes how investing through intermediaries works, discusses advantages and challenges of using intermediaries, identifies investment intermediary opportunities, and proposes that “foundations can proactively help to develop new intermediaries by providing leadership and investment capital.” The report concludes that intermediaries’ “skills, relationships, technical assistance, and ability to assemble complex financing packages enable [them] to add value that funders can rarely achieve through direct mission investing.” A database of 1,030 intermediaries accompanies in both PDF and searchable Excel formats is also attached .