November 6, 2018
Investing for impact is a flourishing field. Currently a $250 billion market and growing, there are at least 60 different names for the idea of “doing well by doing good.” From “transformative” to “values-based,” impact investing runs the gamut of names and activities. Conversations around the how and why of impact investing are happening with increasing frequency as the intersection of return and meaning hits its stride.
At Advantage Capital, investing for impact has been part of our DNA for more than a quarter of a century. The federal and state economic development programs we work with, such as New Markets Tax Credits, meet this definition as well: the very idea that investing in distressed communities, urban and rural – where there’s historically been little private investment – can make a huge impact on local economies, businesses and families.
As such, a few years ago, we started a biannual survey of our active portfolio companies to learn more about the social and economic impact they are making in their local communities. This latest survey reflects the activities of 202 industry-wide portfolio companies from across the country, in rural and urban areas alike.
What we’ve learned about investing in small business is this:
– Job creation and retention provides the long-term opportunity to empower families, strengthen communities, and save states money
– Businesses invest in people through job training, benefits, strong wages and more – creating a stronger workforce and powering local economies
Working Towards Prosperity
Our survey found that 202 companies supported more than 12,000 jobs from January through June of this year. Of those, about a third were new jobs and two-thirds were jobs that were retained because of our investment in the business.
What’s the value of retained vs. created jobs? For one, a retained job means community stability. One of the worst things that can happen in a community or a business is the constant churning of employees or residents in and out of work, and in and out of the community. Retaining jobs also creates the opportunity for upward income mobility. Workers can move up in their jobs rather than shifting from one job to another to get better pay and more opportunity.
We also measured changes at the household level. Twenty-one companies (10% of those surveyed) reported that company-provided benefits and/or wages allowed employees to replace one or more public assistance programs – things like unemployment payments, food stamps and Medicaid.
More than one-third of these 21 companies said their new employees hired within the first six months of the year replaced Medicaid with private health insurance. As one of the biggest components of state spending, a reduction in Medicaid can make a big difference in state budgets.
Building a Stronger Workforce
Nearly 9 out of 10 companies (87%) offered health insurance benefits for their employees, and 75% offered wealth creation opportunities such as retirement plans and stock ownership.
Though extremely important, it’s not just health and wealth that companies are offering. In an era of low unemployment and even underemployment, the companies we surveyed are focused on increasing workforce participation. More than 80% of companies provided jobs that were accessible to those with a high school degree. And the average full-time wages, at more than $56,000 a year, are well above the national full-time average.
Employee training is also a consistent trend. More than 60% of companies provided some sort of training program, helping those they hired gain the skills needed for the job at hand.
Looking Ahead
Twice a year, we’ll be sharing the results of our survey. But as chief impact officer, these are the things I look at every day. For us, impact is what changes because of our investment strategy and approach. It’s what changes at the business level – how is the growth or stabilizing effect of the investment transformative inside and outside of the company?
Impact is also what changes at the community level. What’s the impact of the investment on the community: the schools, other businesses, and critical services?
Finally, and with arguably the most dramatic results, impact for us is what changes at the household level. We’ll be continuing to measure the social impact – and refining ROI with impact. Indeed, doing well by doing good.
The investments, portfolio companies and recommendations listed on this website represent only a sample of companies that have received investment capital from Advantage Capital-related entities. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities highlighted herein or contained in any other information provided by Advantage Capital. Past performance is no guarantee of future results. For a full list of companies, please click here.
