 I'm Fran Siegel and I serve as president of the U.S. Impact Investing Alliance, an executive director of the Tipping Point Fund on Impact Investing. And I am thrilled to be here today with three, I don't know if I'm dynamic, but they're definitely dynamic practitioners and they do work on a day-to-day basis catalyzing capital off the sidelines. I think the announcement that we just heard from United Health Group is a perfect example of capital off the sidelines and it takes the vision of a C-suite and a CEO like we just heard from to understand the power that resides on these corporate balance sheets. We saw a lot of money flowing in the wake of George Floyd's murder and the constellation of crises at that time. A lot of money off of corporate treasury balance sheets moving to CDFIs and others. So there are this precedent of corporates understanding that there is impact hiding on their balance sheet. We know that foundations do a lot of mission-related investing. I'm sure we could all agree that they should do more. And I think what distinguishes our panel is just the quality and the caliber of the innovation that is being done to layer capital, think about capital in a very innovative way as a way to draw more capital off balance sheets, illogical perhaps suspects to create impact. We know the SDGs are up in just like three to one handful of years. By most estimates we need trillions of dollars a year in order to meet them. We think humbly that this is one way that we can catalyze more investment capital. So I am thrilled to be joined today by Elaine Martin, who serves as senior vice president of Fidelity Charitable's private donor group. Fidelity Charitable, she'll talk about it in a little bit, but is the largest donor advice fund in the country and is probably the largest grant maker in the country. Bar no, bar soros, bar gates. So it's enormous. We have Jim Sorenson, who is president of the Sorenson Impact Foundation, among many other things. And as you can see, his name is in the Sorenson Impact Institute. This is the man. This is the Sorenson that you've been hearing about. And we're so fortunate to have you on our board and our executive committee. And Tracy Palange, CEO and co-founder and friend of me and many others and the vice chair of the Alliance as social finance. So these are just like bleeding edge innovators and I just feel so fortunate to be alongside them. We heard a lot about catalytic capital earlier in the day. And I don't think I need to run through necessarily all the ways that capital can be catalytic. A lot of times when folks hear of catalytic capital, they immediately think that it's concessionary in returns. And sometimes that is true. But other times, perhaps it's patient. Other times there's like a problem with risk perception and so an unfunded guarantee might do the trick. There are many ways to be catalytic, some of which are concessionary and others of which are not. Maybe investing in a first time fund manager of color who might have a lot of difficulty getting to that. It's not easy for anyone to get to a first close on a first fund. But there are many, many ways to be catalytic and we'll hear the range of them today. If anyone wants to learn more about that, their tide line, the consulting firm tide line has a very interesting and I think pretty exhaustive set of examples and a framework for catalytic capital. So I've been talking too much as a moderator. I want to hear from the panelists. And so I'm wondering if I can ask each of you to speak about your institution. How you come to catalytic capital. So maybe I can start with Tracy. Sure. Well, it's great to be here and to echo Fran's point. Thank you, Jim, for stewarding this community, bolstering us. And we're just talking about this in the green room. There are probably hundreds of people sitting in this room, but somehow you've turned this into a family affair and it's like a family reunion. So for so many of us in the field and so really appreciate your leadership in this space and taking on SoCAP Global. So I co-founded Social Finance 13 years ago and you probably know us as the social impact bond shop. This for some odd reason, despite many years of not really doing that many Sibs, the acronym, we still have that reputation. But to take a step back, Social Finance was founded in the very early days of impact investing. I think the Rockefeller Foundation had just coined the term. And we were very intent on bringing a catalytic capital, wasn't the moniker at the time, but to occupy the space of impact first investing 13 years ago. And to do so in a way that is not just activating private capital but really nudging systems change at the policy level, at the governmental level. And for those who are familiar with the social impact bond, that was very much the intention behind that first tool that we brought to the market. We never thought as impact first capital or catalytic capital as the kind of capital that you deploy but rather a reflection of the kind of approach, the sensibility, a set of intentions that you approach impact investing. So the first question we always ask is what kind of impact do you want to achieve? And therefore, what kind of risk are you willing to pursue in order to achieve that impact? And then with that kind of impact intention and the risk tolerance, what is the right kind of capital to deliver on that? And then you can think about structuring capital. And our sector is so good at lots of technical language. But that usually kind of comes at the bottom. And the social impact bond is exactly what that is. You start with the exact problem that you want to achieve. How are you going to define it? How do you know that you've achieved the impact? And then everything else follows. So while the SIP experiment has not been a rocket ship, and the jury is still out, one would say, our team has pivoted toward using the same kind of quote, unquote, pay for success principles to apply it in a different arena. And that is over the upscaling arena, job training arena, over the last five years. So we have created another tool called the career impact bond. And we have deployed it in the last three or four years, a little over $200 million in various structures, a structure with Google Alphabet, which was $100 million to upskill 20,000 people who are low-skilled, who typically don't have four-year degrees, to get the skills, to enter the digital economy, and to achieve a billion dollars in wage gains. We also expressed this in, and Jim, you're going to talk about all the amazing bills. We're also thinking about a bunch of sectoral strategies. How do you prepare the next generation of climate workers of the health care workforce? So whether it's the SIP or the KIP and lots of other acronyms, that is kind of the energy and the DNA that we bring to this work. Thank you, Tracy. And we're going to dig in on some case studies in a moment. But it's just great to hear at a very high level the incredibly innovative work that you've done. So Jim, would love to go to you now. Sorenson Impact Foundation does a lot of work around program-related investments through the lens of catalytic capital. And I'm wondering if you can just introduce Sorenson Impact Foundation and how do you think about these tools? Well, thank you, Fran. It's a real honor and pleasure to be on such a distinguished panel and in front of such a great group here at SoCAP. We really appreciate everybody coming. A little bit about me. My background is that of a serial entrepreneur. And very early on, I realized the challenges of a new venture and risk. And often what it took to get something off the ground, it maybe took either patient or angel funding. It could be friends and family. Certainly, it was not what you'd call risk-adjusted market rate investing. But I found success in that. And as part of that success, learned that you could address a social problem, that you could benefit society in a much more scalable, self-sustaining way through a for-profit entity. And that's how I wanted to express my philanthropy. And I looked around and frankly, the philanthropic world to me was great, but it didn't seem to be often scalable and self-sustaining like the business venture that I had. And so I felt like my philosophy for philanthropy was I wanted something where the impact was much greater than the donation. And I found that very early on that this often was in potentially disruptive, innovative, very high risk ideas and opportunities out there, where the market rate capital was not present. And so it took really taking risk. And at that point in time, I don't know that I thought of it necessarily as catalytic. But as I formed the foundation, I found this very interesting, unused tool in the foundation world called program-related investments. A program-related investment is an investment that a foundation can make in a for-profit or it could be a nonprofit entity. And so long as the purpose of the investment was not to make money, you could make that investment and have it considered part of the 5% requirement that you had for grant-making. And to me, the key there was being able to find, again, an innovative, potentially self-sustaining and scalable model for impact. To me, that's how you were going to really move the needle. If you really wanted to move the needle in this intractable world of so many problems that we face, you've got to figure out a better way and you've got to make it so that it's scalable and self-sustaining. That was the beginning. We now make many program-related investments. In fact, SoCAP would be considered a program-related investment. And I have many, many ventures around here that I've invested in that now are really market-rate. But they started small. They needed that catalytic capital. For an entrepreneur, it's often referred to as that gap where they're in the valley of death. They're looking for the next dollar to get them to the stage where they can prove out a model or become investable. We call it the pioneering gap. We look at it a little more positively. But there are so many organizations out there that need this type of capital. And that's what we sought to do. And then we learned that there's really innovative ways to blend this capital with other forms of assistance to leverage in market-rate capital. And we'll talk a little bit more about that. And that's where the real innovation and magic to catalytic capital, I think, really comes into play. But I've talked too much. No, thank you so much. Elaine, can you talk a little bit about how you come to this work as a leader at Fidelity Charitable? And just to level-set for the group, can you just explain what a donor advice fund or a DAF is? I realize many of you probably know, but just in case. And thank you all for inviting me to be part of this conversation. Because I think what you're sharing is exactly where we've built on as part of our strategy at Fidelity Charitable. So as Fran mentioned, we are now the largest grant maker and the largest donor advice fund. Last year alone, we gave away over $11 billion in grants. And what we really frame our workaround is this model of give, grow, and grant. We have over 300,000 donors in our donor community, so who have individual DAFs with us. And each of those donor advice funds has the opportunity to contribute assets, whether they're complex assets, appreciated securities, or cash, into their donor advice fund, receive a tax benefit at that time, and then choose an investment strategy to be able to grow those assets for charitable purpose. And then we help with the due diligence to support the grant making, which annually we hope will grow year over year increasingly. And within the donor advice fund model, I think we can see each of those 300,000 people as also having an opportunity to be impact investors. That's sort of the mindset they're already in, because they're thinking about an investment that they're making into the donor advice fund. And rather than thinking of themselves only as philanthropists or only as donors, they also see themselves as investors. And so we have a lot of different entry points where people can actually participate as an impact investor, whether it's through investments in pools. So every one of our donors has the ability to choose one of our 24 pools, five of which are dedicated impact pools, or there are other entry points which we'll talk more about. Great. I realize I need to find myself someone who looks at me like I look at my three panelists. I just like, I just love what these three do. And it just makes me warm and fuzzy. And so I'm looking at them in a loving way. And I'm like, oh my god, what's happening? OK. We need to look at you in a different way today. No, no. So I'd love to dig in on a case study. And we've talked a little bit in preparation about what you would lift up, but up to you what you ultimately decide. But Jim, maybe I can start with you and you can share an example of a catalytic investment, a program related investment that you've made through the foundation where you think that the approach to catalytic capital was particularly catalytic. I couldn't tell myself. Well, boy, there are so many examples. It's hard to pick one. But the one that I can think of where we were able to bring in different players. And I think of the different plots of capital out there as part of the toolbox, so to speak, for impact investing. So you have grants that really are important. There are some things that only grants can help out with. Then you have quite often concessionary capital that will take a haircut on the return. And then you have problems that are big enough that you need market rate. You need to engage the traditional capital markets. One of the funds that we have stood up in the sorts and impact group is a fund known as Catalyst. It's an impact real estate fund. And we take a very deliberate process in assessing what the needs are in the communities, a very data-driven approach, whether it be affordability, whether it be economic development, whether it be access to services. We like the social determinants of health in terms of the different factors that we look at. And then we score the projects that we potentially invest in according to how well they meet the needs of the assessment that we did. And then we use that, essentially, framework for measuring over time the impact and the actual performance of the investment. One of the things that we look at is really the community involvement. 25% of the value of the investments that we make in Catalyst are essentially concessionary. And they consist quite often from governments, from philanthropy, from it could be those that would be willing to take a lower rate of return and market rate investors. And one such project is in Minneapolis. It's in a Somali neighborhood. It's a neighborhood that has really this combination of meeting the needs of this community. So there is health care, there is low-income elderly housing, and there is low-income housing all in this project. And as you look at the different sources of value that came to play to make this work in order to leverage in market rate capital, we had tax increment funding from the local entity. For those of you that know what that is, that's where the government entity will give up future tax flows to be put into the project. We had a couple of grants. And then we had some CRA, lower rate, and then market rate. And when you're able to bring all of that together, we were able to do something that was really meaningful that otherwise would not have been possible in that situation. And that really is the power to, I think, financial innovation and bringing in different groups that have their own objectives. One may be philanthropic. Another may be willing to take a concession in order to meet affordability goals or requirements for like a CRA bank would need to do it. And then others would be market rate investors that like impact, but they need to get a market rate return and to be able to bring them together in that way. I think you can really move the needle on a lot of these projects that otherwise might not be possible. And Jim is talking about blended finance. I'm not sure that you use the term. And for those of us that have done blended finance deals, you know that's really the agony and the ecstasy of blended finance. We all see the potential to do the kinds of complex transactions that the Catalyst Fund does. Some of us have the skill set to draw on those various capital sources, including but not limited to government, which can be very difficult to navigate. The transaction costs, structuring. I see Laurie Spangler here. She does that work in emerging markets. It could be really difficult. And so it's great to hear about a fund that is doing this work that's being successful. And on the other hand, we see the need to simplify some of these structures, demystify some of the tranches that come in so that we can do more of this work. Thank you so much. Thank you. That was Andy McMahon, by the way. Thank you. Alayna, I'd love to go to you and then to Tracy to talk about recoverable grants. And I think it's worth talking about what those are in a deaf milieu and what you see as the potential for them. Yeah, absolutely. So for us, we've been experimenting in the impact space in the donor advisory fund for about 10 years now. And we started out really slowly. And where we, however, we're now at $2.5 billion in assets under management that are impact focused on the private side with debt instruments or in private equity or in venture funds. And what we are seeing is this increase, what we continuously saw was that donors were coming to us and saying, I have a deep commitment to a nonprofit organization. I wanna give them an impact investment alongside the traditional grant I'm giving them. And so that's when we started to try some of these recoverable grants and look at them as bridge funds or as time-bound initiatives. And so for the most part, we now can offer a recoverable grant as low as $25,000 entry point and in some cases as high as $10 million as a recoverable grant that we have made to an organization. And we have done about half a billion dollars in recoverable grants so far in the last five-ish years to either as a model where you can make the grant and it gets returned to you. So I can think of one that I did myself, which was to Partners in Health. It was as part of their strategy to support a tuberculosis program in Peru. We were able to collectively fund together as a group of 30 donors this initiative and within four years it was paid back into our donor advice funds. So that model is actually being replicated in so many areas, not just health and not just real estate, but one of the ones that we commonly are getting engagement around and have been since 2019 is things like the Boston Impact Initiative, which is to support entrepreneurs, black and brown entrepreneurs, and they are building for-profit businesses, funding them and being able to support them. We saw donors giving grants in 2019 recoverable grants that now are giving at the $100,000 or $250,000 level to support that as a cyclical fund. And so this is a really exciting initiative for us to be experimenting with and we've had a really wonderful partnership with Tracy and the team at Social Finance where we've seen this model work really well with their Dreamers Fund and their UP Fund. So I don't know if you were gonna talk about that, but those were two areas where we've been able to push beyond the traditional to see donors give collectively and do that collective learning while also being able to utilize their DAF in a different way. I love the Boston Impact example because it is really a participatory investing entity and it experiments with power sharing and power shifting to community members. And if you're a member and it's a very low investment minimum, you get an equal vote to someone who comes in at a higher minimum amount. And so it just strikes a court, an impact court on so many levels. So I'm glad you lifted that one up. And it was actually founded by a business school colleague Debbie Freese. Yeah, I agree. Yes, so Tracy would love if you would like to talk about your impact first fund of funds, which is very innovative and in some ways was kind of created for family offices and for donor advice funds. Yeah, so whether it's in the PRI context in a private foundation or a recoverable context in donor advice fund, what we've heard over the last decade from the people who have participated in our deals and fund is that we wanna do more of this catalytic investing. We wanna do more of this impact first investing. And we wanna become Jim Sorenson, by the way, if anyone wants to go to Salt Lake City, you should visit Jim's office because there's a whole wall of plaques of all his PRIs on one side, all his MRIs on the other wall. And, but people typically don't know how to think about taking the first step. They're significant bearish to entry. You should look at the team at the Sorenson Impact Foundation. They have tremendous expertise. They source well, they can diligence, both on the impact side and the financing side. They also have the apparatus to continue to manage for that impact over time so that you can actually be accountable to the impact that you seek. And so after talking to a lot of individuals, families who are philanthropic, who are impact investing curious, who are wealthy, they asked us if we would create a one-stop shop to make impact first investing much more accessible, much easier and much more cost efficient. So a couple of months ago, we launched the social impact, a social finance impact first fund, which is structured as an open-ended fund to funds or multi-manager platform. However, you wanna describe it. But the idea is to create a one-stop shop product so that one of Elaine's 300,000 donor advice fund holders can just do a recoverable grant and then access a diversified basket of amazing catalytic managers across asset classes and impact credit and impact real estate and impact cash and even venture and growth equity across different thematic areas. And the idea is to make it very easy for them, the minimum that we've chosen to do is just $100,000 and we've created the plumbing now not only at Fidelity Charitable, but also at the other nationals like Vanguard, community foundations like the Boston Foundation, the faith-based ones like certain Jewish Federation donor advice fund. We're also seeing the same thing with private family foundations. They're impact curious, but they don't have the teams to do a recoverable grant, to do a PRI. Again, it's that easy entry point. But the broader aim is not to just create this product and yes, it would be great to have people experience. The broader theory of change is to accelerate the supply and demand of capital in this catalytic space so that if you have more capital available, there'll be more of the amazing disability fund that we just heard about. There'll be more Boston Impact Capital and we'll just enable entrepreneurs to come up with new models to address these massive challenges ahead of us, new business models. And yes, it's ideas that are too new, too risky, maybe profit constrained. And so the idea is to have this vehicle be able to get lots of these ideas going. The first investment that we just made is one that if I have a quick minute, friend, I just want to share. I just love the team that John Green at the Black Star Stability Distress Debt Fund has created. It's such a beautiful impact thesis. They've just raised a hundred million dollar fund. We took the funder funds took a five million dollar position and they're trying to tackle this really ugly predatory seller finance type of tool called Contracts for Deed in the United States. It is a $200 billion market. This is a legacy of redlining. I see Lori nodding. Basically traditional banks would not lend into certain zip codes, yet people need capital to finance their $50,000 trailer home. And so this is CFDs, Contract for Deeds is a very predatory form of seller financing where you have all the burdens of home ownership and none of the benefits. You have to keep up with your house. You have to pay all your monthly payments. You've got to pay your tax but you never hold title until your last payment. And the team at Blackstar is gonna buy up these CFDs at a discount, work with the homeowners to season their CFDs into conforming traditional home mortgages and then flip them in the secondary market and that's how they create a net IRR for investors. So you can imagine just the impact. Like how can it not be catalytic, right? You immediately lower the monthly payments. You immediately take partial equity into your home and that's the form of wealth building that we're just so excited about. Super exciting. So we'd love to shift a little bit to how do we scale this market? And Jim, you're very active in public policy. We've had three landmark bills past the bipartisan infrastructure bill, the Chips and Science Act and the Inflation Reduction Act that particularly the Inflation Reduction Act will be flowing a lot of capital but together it will be hundreds of billions of dollars leveraged with private capital. It will be trillions of dollars. And so can you talk a little bit? You talked about the Community Reinvestment Act. You talked about like state tax credits. Can you speak a little bit about what you think the opportunity here is and what the role that impact investors can play to make sure that that capital flows with impact integrity? Yeah, I think whenever you can get the government on board and it's amazing how bipartisan these legislative initiatives are, I think it's really a great thing for impact investing and for opportunities that I think can ultimately make really big changes, system changes. You mentioned a little bit about the Inflation Reduction Act. As part of that is the Greenhouse Gas Reduction Fund and that is I think a pretty exciting opportunity, potentially a catalytic opportunity for impact investors when you kind of boil it down. I think there are three main sections of that. There's the National Clean Investment Fund which consists of about $14 billion and is really targeted to be invested alongside private investors to catalyze private investment into investments that would achieve clean energy goals that are out there. So a lot of opportunities for impact in that space are where the government will come alongside and match. There's the Clean Communities Investment Accelerator which is another part of that and it's about $6 billion. This is really oriented more on the debt side in providing thousands of community-led investment projects primarily in LMI, low to modern income communities. Again, I think a very catalytic part of that legislation and then the final is Solar for All which is about $7 billion that will go to the 60 states and eligible municipal governments and entities to again really focus on LMI communities but enabling clean energy and solar for that population. So I think a really great opportunity. I think we also have talked a little bit about not in that legislation but legislation right now that's kind of tracking called the Employee Equity Investment Act. Which really provides I think a really nice incentive for investors to invest in funds that will help enable employee buyouts, ESOPs so that employees that don't have an opportunity for building equity that comes with owning a company have that opportunity and there are literally tens of millions of people and millions of aging baby boomers that will be selling companies that could become really targets for this type of legislation if it passes. So I think there's really some exciting ways for the federal government to really become involved in incentives that are low cost that ultimately more than pay for themselves in the benefits that will accrue to either the climate or to people. And I would just add on to that that President Biden issued an executive order putting into place something called the Justice 40 so infrastructure and environmental funding that comes from the government at least 40% of it needs to be deployed to underserved communities, historically underserved communities and we think that impact investors have a very important role to play in keeping the government and private sector capital that might not be impact oriented honest and lifting up community priorities so that it's not just government and private money coming in and determining the infrastructure and the sustainable investment priorities of communities that we have to lift up community voices. So Elaine and Tracy, I would love for you to share with us some ideas for how we can convert folks from impact curious to impact enthusiasts. How do we get that money off the sidelines? You know I worked as chief investment officer and impact assets which is an impact investing donor advice fund. We were purely dedicated and we drew clients that wanted to invest but at a big, the biggest national daff how do you go about that evangelical process to kind of move people along to being willing to deploy capital for impact? Yeah, I mean I think there's a few things that come to mind. One is when we started doing this work 90% of the people who were coming to us saying they wanted to do impact investment were women. So we saw this as an opportunity to say here's how we capitalize on this community who are already leaders in their grant making strategies and their families and have them drive the vision for what this looks like and we partnered with Invest for Better to help create a toolkit and start to give some language. So I think part of it is it's very overwhelming and intimidating to enter this space if you have not been part of it and if you're in a traditional grant making structure and the reason you come to the donor advice fund is because you want it to be simple and effective and accessible and not have a lot of steps on the way how do you actually do that? So partnering with funds of funds I think is a really key strategy and also thinking about how do you engage your investment advisor to be able to have a different kind of conversation around what you're really looking at is another key strategy for us and I think the other big thing is we're in the business of democratizing philanthropy. We want to see more grants go out the door with an impact focus and catalyze that grant making in a different way. So today we want to put a challenge out to our donors and to other donor advice funds to say we want to double the impact investing grants to nonprofits and recoverable grants in the next five years to a billion dollars and we want to see that happen. So that's the first thing. We want to challenge our partners who are out there to do the same because I do think this is a really simple tool that already makes sense for the donor. They understand the methodology, they understand the mechanism and it's supporting a strategy that already exists. So this is a really exciting shift for us to be able to commit to that and then be able to build on that for the future. Okay, first, wow. This is really exciting and I think I said to you if you can mobilize that capital, Fidelele Charitable will be the biggest funder of impact investing infrastructure in the country by probably, I don't know, you know, an order of magnitude. You'll be a... You will never be able to get out of this room. Yeah, exactly. You'll become like your downstairs will be filled at all times. I do think our donors are ready. We've been building up to this and I think the sector is ready and desperately in need of it. This is not just... We can't rely on grants alone. The whole purpose of the Donor Advice Fund is to give that funding away. So if we don't activate it in all that ways we can, we're not doing justice to them. I'd love to hear that from a deaf. Yes, I love it. Bravo. Wow. So this is going to inspire your peers to follow suit. Yes, absolutely. Because what is the purpose of that capital? They've taken that tax deduction and it needs to be put to work either in the grant making or through impact investing. So this is amazing. And it's fun. And it's fun. But importantly what you said earlier, Alayna, is spot on. It's fun but it cannot be complicated. And sometimes we like to talk in technical language. No, I'm not looking at you. You know what I mean. But we need to simplify how we talk about this. Both in the marketing and the narrative of it. So what we've been trying to say at Social Finance of late is when you think about your traditional investing portfolio, everyone talks about compounding return. That's finance 101. That's how you think about great investment returns over time. Think of your impact first allocation or your impact investing allocation as compounding impact. Imagine just money going out investing behind these amazing new entrepreneurs coming up with amazing new business models to solve problems. The money comes back. You do more and more of it. Imagine having a steady allocation for problems and solutions that that kind of capital is suitable for. And then you do pure grant making because certain problems are always going to require that kind of capital to address. That is resonating with folks. The idea of compounding impact and we're continuing to test the language. So that's just on the narrative side. But then it's also about from an execution perspective, not only making it easy for donors to say, hey, I want to make a recoverable grant into this, but also making it easy and turnkey for the sponsors. That's a big one. We've talked to many, many of the sponsors in the space. And different back offices have different operational capacity, different legal interpretation, different risk tolerance. And we're basically saying we can structure a recoverable grant for you if you like a recoverable grant or we can structure as an investment for you, like what impact assets would do. The legal toolkit has gotten much more flexible to enable sponsors with various degrees of capacities and appetites to execute this on behalf of their clients. So we're really, really excited about activating that group. The goal is to grow the tent. Fran, speaking of growing the tent, I think what we're talking about is really wonderful and it deals mainly with the 5%. What about the other 95%. I think there's a tremendous opportunity for really the mission related investments that potentially could be made by foundations and endowments that would unlock, you know, really much greater pools of capital. You know, our foundation made that decision. It was for us at the time somewhat of a leap of faith. You know, this was in 2017. We're going to go 100% in. It took us about three years to do that and we've been able to do it across the asset classes. So in a balanced portfolio we have fixed income large cap, small cap, emerging markets, so forth and have been able to generate market rate returns in fact beat the market 100% impact and it would be great to see that happen to the other side of the portfolios out there as well. Definitely. Agreed. 100% of the foundation assets were in the public trust and 5% is sprinkled around but we all see mission related investing endowment investing for impact other aligned strategies like proxy trading and shareholder engagement can also increase the impact. The alliance actually recently published a piece of research that was funded by Robert Wood Johnson foundation called impact on the balance and we called for more program related investments and more mission related investments but also tried to look at the liability side of the balance sheet and say that there's impact hiding there in the form of unfunded guarantees that we're looking at. We're looking at a number of foundations issued ESG bonds to the public markets around the time of COVID to accelerate the grant payout to try to throw a lifeline to a bunch of nonprofit organizations that we're looking at going under and so playing with what I call the time value of impact in the same way that we play with the time value of money. So, yeah, foundations can be more and more for sure. So, Jim, let me go back to you just for a quick second. You mentioned in the past that you've had some investments that came in as program related investments and then graduated to mission related investments. So, can you talk about that? Like what are the circumstances under which I won't say graduation because that implies a value like what are the market failures that you're solving for in PRIs that then allow some but not all to graduate to MRIs? Well, I think when you look at the marketplace you know and most of the PRIs would be considered early stage venture you know in the venture world you're going to have some that are going to maybe get a 1x return they're not going to be great returns you're going to have some failures along the way and then you're going to have some that just are home runs maybe they're 10x and sometimes even more. So, it is a little bit dependent on really the quality of the management team the opportunity and timing in the marketplace it's that way for impact just like it is in the traditional markets. We've been I think really successful with our program related investments we've made probably 70-80 of them in the last 10 years and I would say of those maybe 10 to 20% are in funds so a first time fund manager and we have I think an amazing success story in that we only have maybe about 4 or 5 of those that have been failures and the rest continue to operate if we were to aggregate their numbers there are about 10x the size that they were when we began so the impact has really grown and they're reaching about 600 million people so it's and across all of the sustainable development goals and then we have I would say about a half a dozen of those maybe more that have graduated so to speak in that they're now attracting market rate capital and to the point where they're looking pretty good to us for a market rate investment for the endowment which you know it has a bogie when I say bogie a return we need to make about a 7-8% return there just to keep up with inflation so these need to be really good investments and when we talk about the logo walls that we have it's always great to see some that we're on the PRI wall that are now on the MRI wall the mission related investment wall and we do see that and it's a validation to us that this really is a spectrum it is a developing growing marketplace just like venture was before when it started in the early 70s you know that's what's happening in the impact investing space right now as we continue we're going to see more products we're going to see more successful fund managers we're going to see more investment direct investment opportunities and we're going to see impact investing really mainstream not only for right now family offices high net worth individuals but also for endowments and institutional investors that's when obviously you get even much greater skill so that track record would be the envy of any Silicon Valley VC so kudos to you and your team Tracy we know that there are certain investment theses there are certain geographies there are certain investment types that may never graduate they require permanent subsidy and I feel like you wrote the book a little bit on that on innovative structures to address intractable challenges so could you talk just for a minute about the dreamers initiative or the worker upskilling fund absolutely the beautiful thing is many of the managers we anticipate going into the fund of funds vehicle will graduate like Blackstar because if they can prove out yours was a successful PRI for us exactly you mean the Massachusetts one that actually was a very successful PRI it's at the end of the day it's it really depends on the problem that you're trying to address right Fran mentioned to specific vehicle which is in our economic mobility portfolio social finance and we believe because of our commitment to student friendliness these types of deals will probably require permanent subsidy because we're really going after a very vulnerable population we have a strong commitment to ensuring that this type of consumer finance remains the most student friendly so for example the dreamers graduate loan fund that we built we are providing the same rate of financing that US citizens could get from the federal government when they go get their medical degree get their JD etc and then when they go get their medical degree they're allowed to go to public schools they're even authorized to work but because they're not US citizens they don't get Pell grants they don't get the federal student subsidized loan program so we created a vehicle to enable them to borrow at approximately the same rate as US citizens now people if you really underwrite that like how do we even price the risk of getting repealed you can't even do that they can't work in this country and the whole thing is like poof so it will require catalytic capital to get that program going and we foresee that we're doing a lot in the upscaling arena Jim talked about the IRA just between the BIL and the IRA the bipartisan infrastructure law and the inflation reduction act Brookings estimates that there will be 32 million new workers needed we need new infrastructure and climate workers with the new skills that will be required from solar wind turbines, renewables of all kinds we are working on a really exciting strategy because we are not going to achieve the green transition we all want unless we have the workforce to deliver on it so how are we going to like a snap of a finger come up with 30 million skilled workers this is going to be a long road and we're thinking about various workforce financing tools and at the end of the day you know if the consumer is the one the worker is the one going to repay even if it's incredibly student friendly and many of our deals are no fees no interest rate and it's just literally repaying the cost of lagone if they're able to get up that economic escalator it's inherently subsidized and it will be subsidized forever so I'm going to ask one kind of philosophical question that we have talked about but it's one that I'm a little obsessed with and that is in a world and a financial the financial capital markets that do not price in externalities that are rife with systemic risks like climate change and inequality what is market rate what is a market rate investment and do catalytic like on an impact adjusted basis are catalytic capital investments like the ones that Tracy mentioned are they really concessionary that is doing the job of like a social failure a social market failure and so we operate within a profoundly broken economic system and financial system and we always compare catalytic capital to market rate but what is embedded in market rate is a ton of negative externalities social economic and environmental externalities some positive as well but it's I believe that corporations since the dawn of the industrial revolution have been have been free writers on the back of communities workers the environment families and I think the work that you all are doing are really about like can we move from risk adjusted to impact adjusted and we might say that some of the initiatives that you talked about in on an impact adjusted basis are actually more competitive than so-called market rate so just wondering if we can kind of get a little philosophical before we take some I didn't answer the question I just posed the question so I will say this I've been an entrepreneur for all my life investing in many companies and I look at all of the great successes that I've had at the time that I made the investment or and it was not just an investment of time but it was an investment of myself my energies you know my time I wouldn't consider any of the market rate yet they were fantastic successes so I think we get hung up sometimes on this market rate and I think you can get really sophisticated and look at what your investment advisor is going to say is market rate but you're going to have a hard time ever meeting moving the needle if you're constantly focused on is this market rate because at some point in time you know you have to take the leap of faith to really make something work you know in my experience it's a little bit of a misnomer I'm not someone that is financially managing money for other people but I've found that you know when you bet on yourself and on principles and values and on good people around you those are the important things to create value it's beautiful thank you Jim any other comments on my unanswerable question I think we waved a magic wand and we had impact adjusted benchmarks we've all sat in these meetings with wealth advisors saying oh we outperformed the benchmark by 200 basis points but if it were impact indexed who knows maybe it would be or if the benchmark was impact index maybe they are underperforming the market people probably know about the effort impact weighted accounts and it's now been spun off as a C3 called is not a good acronym international foundation for valuing impacts but essentially it's trying to do the same thing how do you actually price an externalities in the accounting statements so that your balance sheet actually embeds impact adjusted values when you do your assets and liabilities when you do your PNL it's showing some promise and that's like reforming accounting practices reforming gap which is different but just to even take a step back based on what Jim was saying what is market rate return let's not forget that we this whole time that impact investing has flourished in the last 14-15 years we have been living in a zero interest rate environment and when cost of capital is low many mediocre ideas got funded I think the reckoning is going to come in this upcoming economic environment and when fund managers are going to be presented with trade-offs when the impact is going to be running into tension with financial return how are they going to make decisions what are they going to prioritize what are they going to sacrifice what if they promise to the LPs and it gets back to values right where we started Jim I'll just add I think that in the philanthropic and the grant making side of the house we define impact as inclusive informed and intentional and if we took those three I's and we tried to apply it in the investing side I just wonder if there might be a different weighting of the decisions generative AI for impact anyone Jim we were talking about it a little bit Tom I'd love to see and have talked about a fund that focuses on on impact for AI because I think that AI has the tremendous power for good or for bad and I'd love to see the focus be on good I think we invest in a lot of companies particularly in the disability space that are using AI in their technology in their platform and it's really a great example of how it can really be a game changer for good and I'd love to see the emphasis on that well I will say Fran's right in the middle of that to talk about it particularly as it relates to ESG because ESG has become a very politicized term and I think the interesting thing is that I don't know that most of the politicians really understand what it is to begin with and it is something that's very concerning to us in the impact of investing space and I think ESG and sustainable investing is a part of that we are working on different strategies to help educate but also lift voices from those that are respected that are I would say more mainstream conservatives to speak out about the effort that we are looking at right now we are concerned about legislative attempts to take the affirmative action case and try to apply it to impact investing or grant making that's another area so it is a real concern and I think it's incumbent on all of us in this space to have an active role to help educate and really lift the rhetoric and not let it be co-opted for a political agenda I can just start by saying we actually don't fund private prisons through Fidelity so that's just what I want to clarify but I will also add that our average donor is a 64-year-old white man and our average recoverable grant participant is a 55-year-old woman so we are starting to see changes and I think every week in the pandemic I got a call from a donor who was sheltering in place with their adult children and they were saying we are having dinner conversations around impact investing what should I say what should I do how do I start to move the needle I think there are lots of opportunities to enter but I also think it's about how you it's not just an age or a gender it's also about how you define the impact you're seeking and whether it's justice or health or ag or democracy I think all of these things are places where there are a lot of entry points not just in the markets but also in the community it's a tough question and I'm assuming you have a 401k gentleman who asked the question who's having a conversation on the side you have a 401k because I think it's different for private private 401ks and public pension funds the guy in the front who's looking at his phone he um the public pension funds are under attack especially in red states where there's state legislation potentially prohibiting pension fund fiduciaries like state treasures from doing business with or investing in any oriented fund even if the ESG factors are financially material so we're fighting for single materiality in this country and it's a sad statement for 401ks I mean I won't opine on how moving from defined benefit to defined contribution completely change the power dynamic and push the onus of asset allocation and planning on the employee so there's that is a thing because if that were the case then you might have access to some of these private debt, private equity funds venture capital funds for better or for worse but because you're in a 401k you tend to have access to retail products and so it's difficult to impossible to get exposure to private debt and equity where a lot of the deep impact work that these folks do shows up