View our Latest Investment Insights

Many of today’s institutional investors are familiar with the growth of impact investing, and many more seek a better understanding of 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 how to invest for impact.

Tony Tomich serves as Head of Pension Investments at Farmers Insurance®, overseeing $7 billion of pension, 401K and deferred compensation assets for the organization and its employees. Tony also oversees the organization’s Socially Responsible Investments Portfolio and has multiple leadership roles in the space. Tony has been involved with IMPACT since 2004 and currently serves as Chairperson of IMPACT’s Board.

We’ve heard how other IMPACT owners define impact investing. Can we start with your point of view on what it means to invest for impact?

That’s a good place to start given that defining impact investing is a challenge right now because there is so much room for interpretation. The umbrella term that I use for all of the activity in this space is “sustainable investing.” Sustainable investing includes using ESG [Environmental, Social and Governance].

What are the differences in your view?

We used to think of ESG as a separate component of the portfolio, but that thinking has evolved. Today, we see ESG as a factor that we want integrated into the investment process for all of our managers as part of their basic evaluation. This applies across our asset classes. We want to know how the environmental, social or governance risk factors contribute to the overall evaluation of risk of an investment and its overall value to our portfolio.

For Farmers®, impact investing refers to investments that reflect our organization’s desire to invest in the communities where we write insurance policies and do business. In the late 1990’s, Farmers had the opportunity to work with other insurance companies to invest in a way that reflects our corporate values. It was a logical expression of how we want to do business—pursuing a “double bottom line” that seeks to meet both our financial goals and our corporate values. This is the work we began doing through our ownership of IMPACT since 1998 and it involves providing capital that creates a difference on the ground, by making investments that touch underserved communities or populations directly. Investing for impact is about pursuing positive outcomes alongside financial returns.

Is there a difference in the investment approach between impact investing and the other types of investments you’re making?

This leads to an important point that I find myself making often as I discuss impact investing. The approach and process do not change. However, for a large institutional investor, investing for impact is best achieved through an approach that is scalable. It requires the same amount of work to make a million-dollar investment as it does to make a billion-dollar investment. It is less efficient for us to evaluate one-off transactions. So we set out to define a set of investment guidelines and risk parameters that can apply to a programmatic approach and then provide a mandate to an investment manager to execute against agreed-upon benchmarks.

How did your work with IMPACT factor into your investment process?

In our case, IMPACT was created to provide that programmatic, scalable approach we needed for an efficient and effective investment process. It has established an underwriting process that has been in place through multiple economic cycles. As investors in IMPACT, Farmers participates in the organization’s governance and strategy. This gives us great insight into IMPACT’s investment process and allows us to execute at a scale that can make a real difference in the communities we serve. It’s a win-win both for our organization as investors and for the people and communities that we serve.

Why does Farmers prefer debt investments when investing for impact?

We have focused on debt because it better reflects the overall portfolio we have as an insurance group. As a regulated entity, there are different capital charges that we are required to take for different kinds of investments. On the investment side, the assets we manage have to be there to pay claims. On the retirement side, we have a fiduciary responsibility to live up to and we need to make sure we can provide income to retirees’ beneficiaries. Equity investments have a higher capital charge for us. We judge each opportunity on its own merit. Historically, we’ve just been more comfortable executing our impact strategy through fixed income.

Do other leaders at Farmers share your commitment to investing for impact?

At Farmers, impact investing is a very important part of our culture and what we have done for a very long time. The commitment we make is well defined and it’s approved by our systems of governance and our committees. Impact investing is business as usual for our institution.

Do you see impact investing becoming “business as usual” for other large institutional investors?

I think the idea that ESG factors can help contribute to achieving higher risk-adjusted returns or contributing to the management of tail risk is something that institutional investors today are interested in learning about. However, we’re still early in the conversation around ESG investing. There are a lot of definitional aspects being debated that will help institutions to better understand the opportunities and determine how to actively engage. There is still a lot of innovation that we are going to see within the ESG investing space as it matures.

Can you speak to the efficacy of the impact investments you’ve made? Have they achieved your goals?

When we consider impact investments, we are seeking an appropriate risk-adjusted return together with intended impact. This is something every institutional investor should require. It is what differentiates impact investing from philanthropy or philanthropic investing. When we look at what our impact investments have achieved over a long period of time, I’d say these investments have met our expectations. Our experience with impact investing does not reflect market perception that it requires any trade-off in terms of market rate returns. In addition, there are our expectations for impact and we feel that our mission goals have been equally achieved.

What other factors do institutional investors need to pay attention to as they consider investing for impact?

There is a lot of research today that shows social impact is an increasingly important factor to younger Americans in their purchases and investing. Millennials comprise the largest demographic group in our country’s history—even bigger than baby boomers. As this generation grows in influence and evolves into leadership positions, it is inevitable that their values will influence corporate strategy. At the same time, the impact investing space will further mature and grow more mainstream as well. Impact investing is a powerful demonstration of corporate citizenship, and that only adds to its value to institutional investors.

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