The creative industries is the next frontier in impact investing – value | Candle Made Easy

How investors get creative to achieve great returns.

Photo courtesy of Anna Kolosyuk via Unsplash

In 2016, Mary Stuart Masterson and Beth Davenport, the founders of Uppriver Studios, had a vision: to bring quality film and television production jobs to New York’s Hudson Valley while adopting environmentally responsible practices. Six years later, after landing a deal with an HBO Max TV series, Uppriver Studios operates a thriving, carbon-conscious manufacturing facility that has created nearly 200 jobs and helped generate $57 million in film and television production spend in to bring the region.

Uppriver Studios demonstrates something pioneering impact investors have long known, that financial returns and positive social impact can go hand-in-hand. There is already $17 trillion in socially responsible and impact investing capital at work in the US alone. In recent years it has come to the attention of some of the largest banks, wealthiest families, oldest foundations and largest pension funds.

And it’s paying off – Morgan Stanley’s study of the performance of nearly 11,000 sustainable mutual funds from 2004 to 2018 concluded that “compared to traditional funds, sustainable funds have uncompromised returns and carry less risk of loss. ”

But in a rush to show that they are “doing good by doing good,” institutions and individuals have missed a large part of the global economy where women, youth, indigenous peoples, and other underrepresented groups thrive: the creative economy. A report from the Global Impact Investing Network appreciates that “arts and culture” represent only 0.1 percent of impact investors’ assets under management and demonstrates the importance of naming and framing the conversation around companies in the creative industries and real estate space where creative work occurs and creative experiences are shared.

While visionary and diverse leaders have been a fundamental part of the global impact investing landscape over the past 15 years, the largest impact funds lack diverse decision-makers at the top. This is worrying as fund managers and venture capitalists have been shown to invest disproportionately in entrepreneurs and business leaders who share their gender and race.

This means that the people and institutions that control how impact investing funds are allocated look a lot like the people and institutions that control all types of investment allocations. Unsurprisingly, investors found on Wall Street are interested in opportunities in the technology, energy, and financial sectors as the best way to deploy their $1 billion impact funds.

At Upstart Co-Lab, we are working to change that by expanding investors’ understanding of the importance of the creative industries and the potential it offers to balance profit and purpose. We’ve categorized the 145 industries that states and regions across the US use to define their local creative industries into five categories: Ethical Fashion, Sustainable Food, Social Impact Media, Other Creative Businesses, and Creative Places. We speak in a way investors understand to make the opportunity more accessible and obvious.

The creative economy is one of the fastest growing sectors. The creative industries, ranging from restaurants and bakeries to fashion and film, are forecast to account for 10 percent of the global economy in the next few years. Potentially transformative in terms of income generation as a source of fulfilling jobs, the creative industries globally employ 30 million people in the formal economy, plus an estimated 300 million people in the global informal economy.

The creative industries also create significant opportunities for founders and workers of all kinds. Alongside other underrepresented groups, the creative industries employ 285 million women and more people aged 15-29 than any other sector. In the US alone, up to 35 percent of all women-led companies and 38 percent of BIPOC-led companies are in the creative industries.

Since 2020, the Upstart Co-Lab Member Community – a group of impact investors interested in investing in the creative industries – had closed and committed $8.85 million across 12 funds and companies expected to make social and… achieve environmental impact as well as financial return.

Examples of funds our members are now considering include Runway, founded by Jessica Norwood, which addresses the “friends and family” funding gap for black entrepreneurs by providing seed funding and end-to-end business support, and Supply Change Capital, a company that Founded by Noramay Cadena and Shayna Harris, it aims to accelerate change by investing in BIPOC founders at the intersection of food, technology and culture.

It’s encouraging to see more investors embracing the opportunities that the creative industries offer for their portfolios, but there’s still a lot more work to be done. In the short term, investors interested in making a difference through the creative industries should do the following:

  1. Recognize that whatever their impact priorities – jobs, financial inclusion, social justice, environment – ​​the creative industries can make a difference;
  2. Rest assured that your financial risk and return goals can be met across all asset classes and investment styles through impact investing in the creative industries; and
  3. Ask your wealth advisor about impact investing opportunities in the creative industries.

Laura Callanan is a Founding Partner of Upstart Co-Lab, a nonprofit organization that provides investors with social impact opportunities in fashion, food, film and television, and other creative industries. Read more about how Upstart Co-Lab is revolutionizing how creativity is funded in its 2021 Impact Report.

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