This post is part of our ongoing impact career advice column. In this edition, impact investing expert R. Paul Herman fields a question from our network.
How to Move Your Expertise Across Sectors to Impact Investing
I am transitioning from traditional philanthropy into the impact investing space. My experience includes organizational analysis, financial review, and evaluation of outcomes for nonprofit organizations. I do not have a finance degree but feel like my skills are valuable to impact investing. Do I need a finance degree? And how can I communicate the value that my experience brings? -Cindy
Dear Cindy,
Your experience and expertise in the traditional philanthropy field is highly valuable, especially if you can demonstrate measurable results and leadership in the community across multiple sectors (foundations, academic universities, and media) within an ecosystem of stakeholders (grantees, donors, board members, program officers, students, faculty, and citizen outreach).
Understanding and engaging stakeholders is essential to the success of impact investing. So, as you explore opportunities, you can certainly lead with your strength in this discipline. Impact investing integrates human, social, and environmental goals, which require mapping the landscape of customers, employees, suppliers, investors, community, environment, and more.
Superior investing requires assessing future risk. Be prepared to describe in great detail – preferably showing a spreadsheet model you built then (or a new one you build now) – how the outcomes of your work linked to the financials (without revealing confidentiality). Impact investors need to model the future as well as interpret the past. Convey how you did this in your program evaluations of foundation grants, as well as how to resource outreach in the community.
To build deeper technical skills in finance and accounting, start by reading up on Investopedia and learning from Khan Academy’s videos on finance. You can convey high credibility by knowing the ins and outs of the three core financial statements: income statement, balance sheet, and cash flow statement. Developing your fluency in finance can enhance the number and quality of opportunities in impact investing. When you travel in Latin America, you get further when you know Spanish – it’s the same with fluency in finance.
In organizational analysis, you likely have seen what has worked and what has not. Distill those lessons into a short list of themes. Write a feature about them and post it on your LinkedIn profile. Show your knowledge externally, preferably by highlighting specific case studies (with or without names).
As you study where you can add the most value in impact investing, envision where your skills and expertise can fit by studying the portfolios of impact investors. At HIP, we value these three skills: analytic rigor, collaborative entrepreneurship, and compassionate systems thinking.
Also, imagine what your role would be in the investment process by looking at the investees of venture firms, like DBL Investors, to cross-sector impact investors, like Omidyar.com, to Program Related Investments listed at Mission Investors Exchange. Roles include...
- Discovering opportunities
- Modeling how they could succeed
- Deciding to invest or not
- Measuring the impact, income, risk, and return potential
- Accelerating their progress
- Engaging stakeholders.
I wish you success on your journey to build a better world via impact investing. -Paul of HIP
Want some advice? Ask our experts a question.
About R. Paul Herman
An internationally recognized expert in impact investing, Paul invented the “HIP = Human Impact + Profit” ratings system in 2004. HIP Ratings show that portfolios and companies can realize lower risk, enhanced returns, and profit potential -- and build a better world -- by focusing on the root-cause drivers of value creation. Paul’s financial expertise began with his Wharton School finance degree and corporate advising at McKinsey & Co. Paul is an adjunct professor teaching MBAs at Thammasat Business School in Bangkok, Thailand, and a visiting lecturer for MBAs, including the Presidio MBA Graduate School in San Francisco. Read more about him here.
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