Invest Positive - Meet Snowball

A diversified impact fund with a multi-asset strategy.

Following a community-wide survey, 40% of the impact investors in our network selected they were interested in investing in funds. As a direct deal platform, we found this statistic incredibly telling of the current impact investing landscape and began to rethink how we can provide the most aligned investment opportunities to our network. Fast-forward to earlier this year, we launched our fund placement offering and began reviewing impact funds. In September, we were delighted to announce our partnership with Snowball to provide the first fund-of-fund impact investment opportunity to our community. Snowball is a diversified multi-manager impact fund that has a four-year track record, investing in public and private market funds which contribute towards social equity and environmental solutions. It only invests in measurable impact and targets a risk-adjusted annual return of 6% net of fees, over the long term. Snowball is also a certified B Corporation and is in the top 5% of B-Corps globally for its governance. Snowball is changing the way we invest by providing an opportunity to make sound financial returns whilst also investing for the future of people and the planet. It has been a privilege to welcome them to the Conduit Connect community. If you would like to learn more, have a scroll to read about Snowball’s investment thesis and how you can get involved.

Snowball is a fund management firm catalysing behaviour change in capital markets so that all capital is invested for social and environmental - as well as financial - returns. We are a fund of funds investor - we select fund managers that aim to create a positive impact with their investments and deliver a market return. Clearly not all impact investing can deliver market returns — nor should it — it is a broad spectrum. At Snowball, we are investing in a sweet spot that is seeing a growing number of opportunities. Impact is integrated across our investment process and we apply an impact framework to all the assets in our portfolio.

The framework considers:

• the potential and actual impact of the investments that its managers hold (enterprise impact);

• how managers work with their investees to improve their impact (manager impact).

Our manager impact framework builds on the four investor contribution strategies developed by the Impact Management Project. When selecting our managers, we use a due diligence framework that digs deep below marketing spin and glossy impact reports. We’ve picked just three key themes from our due diligence framework to highlight.

1.       MISSION AND BEHAVIOURS

One of the key areas we look at in a fund manager is its mission and behaviours. This assesses whether impact really drives an organisation and what systems are in place to ensure it delivers against this. Managers that score well on this tend to have a high percentage of assets under management in impact funds with senior management convincingly leading on impact. This means we end up with a higher proportion of focused, boutique managers in our portfolio — names you may not be familiar with — and very few big names. We really like fund managers who, like us, are B Corporations. They have a governance protected commitment to consider the impact of their decisions on their workers, customers, suppliers, community, and the environment — about 25% of our assets are run by B Corporations.

Managers also may have elected to tie some of their own financial returns to the impact that they generate — typically we see this in the private equity space where impact is tied to the carry a manager can take once a financial hurdle has been achieved. But impact measurement is difficult to do well and whilst we would like to see more of these approaches, we are wary of GIGO (garbage in, garbage out) and the false promises that are made in parts of the ESG sector.

2.       IMPACT APPROACH

Fortunately, the non-profit sector has led the way on showing us the importance of focusing on outcomes and creating a theory of change to deliver those outcomes. In our portfolio, we have a public equity manager that creates a theory of change for each investment, tracking KPIs tied to the outcome targeted. Another manager, investing directly in private companies, produces a stand-alone theory of change report which is refined and challenged throughout the lengthy and detailed private market diligence process. Both managers are generating excellent financial returns alongside a deep and genuine commitment to understanding and improving the impact of their portfolio. Impact measurement at its best should provide inputs into business decision making — so asking businesses to provide impact metrics that don’t help them run their business is a waste of everyone’s time and leads to the meaningless footprint data that frequents some impact reports.

Bizarre but true.

3.       READ THE REPORTS!

The final (deceptively simple but very powerful) element of a robust impact due diligence process is actually reading impact reports. By reading these reports, we are trying to understand if the manager is trying to make a real-world improvement through the way they invest. Is the report open about challenges and failures or is it merely a marketing document? We like to see reporting on impact data, against a recognised framework, over time — so we can see what the trends are.

We report back to managers about what we have learned by reading their report, and discuss with them where we think they can make improvements. Through doing this we get a deeper understanding of the intentionality of a manager in investing for impact. We build long term relationships with fund managers and make more informed investment decisions. And we build a portfolio that optimises for impact whilst delivering a market return.

At Snowball, we diligence, select and manage fund managers who are dedicated to achieving impact. These managers are important players in creating a shift in the way the investment industry acts. Last year, we shared a report providing full insight into our methodology for identifying and working with those managers. Collectively, if we can manage our assets for impact, financial markets can be a mechanism that protects society and the environment, rather than extracting from them. That funds solutions for the challenges our planet and society face, rather than perpetuating them.

As we all watch progress at COP26, as well as the recovery from Covid, we ask all investors what world are we creating with our money? Will we continue to prop up systems that need reform or do we have the courage to invest in a better future?

There are openings for new investors every six months. If you would like more information on Snowball, click the button below.