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For us, impact investing provides insights into new areas of investment that are often overlooked by mainstream investors.

Rekha Unnithan, Nuveen

Many of today’s institutional investors are familiar with the growth of impact investing, and yet many more seek to better understand this vital and growing sector. To illuminate the opportunities and challenges of impact investing, IMPACT Community Capital (“IMPACT”) has asked some of its owners—institutional investors who embraced impact investing as early pioneers—to share their perspectives. We think now is the right time for this opportunity and we hope this series deepens your knowledge of what impact investing means, how it fits into an institutional investment approach, and what questions your organization should answer when deciding whether to invest for impact.

Rekha Unnithan leads the private markets impact investing team at Nuveen and serves as a board member of IMPACT. Rekha is responsible for determining Nuveen's impact investment strategy across sectors, asset classes, and regions. She originates and underwrites new deals and manages Nuveen’s impact portfolio across the thematic areas of Affordable Housing, Inclusive Growth & Resource Efficiency.

Many institutional investors today want to better understand the difference between traditional investments and impact investments. How does your organization define impact investing?

At Nuveen, we define impact investing as the intentional investment practice of creating both risk-adjusted financial returns alongside measurable social or environmental outcomes. We don't believe that impact investing is simply about making a certain type of investment and then passively observing whether or not it has a positive impact. Intentionally driving towards solutions is key. Nuveen’s approach to impact investing within the portfolio I manage, is focused on investing in private markets where we believe there are significant capital gaps—areas where solutions can benefit people and the planet.

What value does your organization find in impact investing—financially, socially, etc.?

Nuveen is a wholly-owned investment management subsidiary of TIAA, the Teacher's Insurance Annuity Association of America, and manages assets on behalf of TIAA and its clients. TIAA was originally founded in 1918 to create retirement security and solutions primarily for non-profit organizations and their employees—so its participant base and board are very concerned with what's going to happen in the world.

We have been taking environmental, social and governance issues into account in terms of our investment practice for a very long time. We're one of the earliest investors involved in responsible investing. We are long-term investors. Impact investing in our view lends itself very nicely to a long-term view of creating change. It also fits nicely in our private equity practice, where we invest in companies to give them the capital needed for the medium- to long-term to support their growth.

In our view, impact investing is one dimension of a responsible investment practice. We truly believe that, in the areas where we invest, there can be meaningful capital gaps. When filled by the right type of acumen and the right type of investor, the solution can create competitive returns and can also contribute to social and environmental topics that are pressing today.

What are the criteria you use to determine what fits into your mandate from an impact investment perspective?

First, we come at impact investments wanting to make sound financial returns, but also driving towards creating increased scale or depth of social impact. Our core beliefs drive our impact investing practice. We believe that the low-income emerging customer is a paying customer that is drastically underserved in terms of accessing products like credit, savings products, insurance, health care, education, and safe and affordable housing. There are two billion adults globally who don't have access to a bank account, but 66% of them have a mobile phone. So how do you provide prudent and ethical financial services and solutions to that population? How do you really treat them as a customer? That is to us making an actionable investment in ideas and lives.

Our second criteria is an acknowledgement that the global population is charted to get to 10 billion by 2050 or close to that. We increasingly face a problem of resource constraints. How do we operate in a way that is a bit more holistic in our approach with respect to thinking about doing things better, faster and more efficiently with less waste? We think there is a compelling argument to invest in companies that are looking to create resource efficiency.

Finally, our impact investing practice is tied together with a cross-cutting theme of technology as an enabler to reduce the cost of customer acquisition, to lower the cost of disposing materials, and to reduce the energy and carbon footprint of our buildings through use of things like LED lights, etc. Technology cuts across our investment verticals.

What do you see as the misperceptions of impact investing for institutional investors and how can they possibly be overcome?

While Nuveen has been directly and indirectly investing for impact for 20-plus years, the term is catching on like wildfire these days. Yet there is also a common misperception of conflating impact and philanthropy—and that impact investments might equate with giving up return. The conversation around trade-offs continues and at Nuveen we believe it’s important that we get beyond that. We want to talk about investing with impact that seeks to fulfill investment return goals while driving real-world solutions.

Another challenge for institutional investors is, how do you measure whether or not an investment is selected intentionally to generate impact or whether impact just happens to be a side benefit? One recent industry initiative that I helped lead, and now sit on the board of, is the Operating Principles for Impact Management. It is a global set of principles that were led and launched by the International Finance Corporation (IFC). They set out nine principles seeking to define what is and isn’t an impact investment. Over 60 asset managers globally signed onto it and Nuveen is one of them. The ninth principle asks signatories to conduct an independent verification of their impact management and philosophy.

This means not just saying, “I'm going to create a glossy report and talk about my impact,” but rather questioning: “Do I behave in a way that takes impact into consideration, contributes to impact and articulates it through the investment process.” We hope these principles can address the challenge. They are getting some sort of independent verification of their processes.

Do you find that a positive social, environmental impact enhances the overall performance or value of your impact investments?

For us, impact investing provides insights into new areas of investment that are often overlooked by mainstream investors. As I mentioned, we focus on the low-income emerging customer, and seek to invest in solutions that address resource sufficiency on climate topics—and so we are typically investing in a thinner part of the market, where there's a scarcity of capital. People who are willing to go into new parts of the market—where the perceived risks are high versus real risks that can be managed—might view that they're getting compensated for their action through financial returns, and I think we would observe that.

Let’s talk briefly about the future of impact investing. What challenges need to be addressed?

Through our direct investing activities as well as our ownership of IMPACT, Nuveen has been a leader in the impact investment space. We want to see continued growth of the sector— to kind of signal to the market that, you can in fact address some of these big problems from an investment practice perspective. Continued collaboration with other players in the market will be key to growing impact investing, and to learn from each other ways to inculcate best practices. The more people are talking about the various ways to invest in impact, the more institutional capital will move into the space.

I also think that, although billions of dollars are moving towards impact, we need to be humble and recognize that there are a lot of problems globally that cannot be solved through impact investing. There’s continued need for governments and public and private partnerships to address issues, to think about the required systemic changes.

Finally, I think we should consult work that university and research organizations have done about how to address societal challenges effectively, so capital flows towards things that are going to have an impact. We need to know what the problems are and understand them, and actually go back and measure if we're actually making a difference.

Disclaimer: This post is not an offering document for any securities. It is also not an offer of, or an agreement to provide, advisory services directly to any recipient. The information presented is intended to describe certain views of the author and Impact Community Capital LLC. The information presented in this post may contain statements of opinion, forward- looking statements and relies on certain assumptions. Any such opinions, forward-looking statements and assumptions may be inaccurate, and there can be no assurances that the examples included herein will reflect actual investment outcomes. Neither the author nor Impact Community Capital LLC intends or assumes any obligation to update or revise these opinions, forward-looking statements and assumptions in light of developments which differ from those anticipated. Past performance may not be indicative of future results and there can be no guarantee as to the return or volatility of any particular impact investment or set of impact investments. All investments carry a risk of loss that investors should be willing and able to bear. Use of this document is subject to the terms and conditions set forth on Impact Community Capital LLC’s website and can be accessed at