By Michael Van Patten
My early years heavily influenced my decision to focus my career on growing the impact investing space through the establishment of my current company, Mission Markets. I spent the majority of my teenage years in Ecuador, where my father worked as a diplomat. At this impressionable age, I had the unusual opportunity to experience life in the developing world—Every day I was faced with the extremes of poverty and vast wealth. To this day, I am stunned by the inequalities that exist in the world.
My father used to give me a weekly allowance, and the day after he had given me the money I would come home with empty pockets. I then had to confess that I had given it all away to beggars on the street—it seemed logical, they needed it more than I did. I clearly remember the resulting lectures from my parents: I was foolish to think that I could help these people; I had to block them out, make them invisible to me. I could not at that time and still cannot comprehend that mindset. I continued to give my money away to the same people every day on my way to school. They were anything but invisible to me—my experience in Ecuador stuck with me and has inspired me to change my life for the better.
Mission Markets was born based on these personal experiences, paired with my disillusionment with the traditional capital markets later in life. After returning to the United States and spending 25 years on Wall Street, I became acutely aware of the fact that the traditional single bottom line transactions I was facilitating served no purpose other than making money for myself and enriching people who were already incredibly wealthy. I was putting all of my time and energy into moving money around but accomplishing nothing. My profession was not creating any positive change in the world for those who really needed it. I had to find a career path that would allow me to use my expertise to make a difference.
Microfinance and Carbon were the first markets that caught my eye. To this day, they are the two largest and most developed sectors in the impact investing space. Fascinated by these initial concepts, I began devouring as much reading material on these markets as I could get my hands on. This led me to a number of other verticals—sustainable agriculture, community investment, sustainable fisheries, conservation finance, and many more. These have evolved into the sectors that Mission Markets currently serves.
As I explored the scope of this space I began to realize not only how broad impact investing is, but also how all of the markets, both social and environmental, are interrelated. Unfortunately, the lack of supportive investment infrastructure available to scale these markets causes serious inefficiencies, specifically in the capital raising process. I realized then that I could use my experience to create a comprehensive marketplace that would help to bring all of these markets from infancy to scale. I envisioned a regulatory compliant electronic transactions platform that would be a convenient place for investors to access and learn more about investment opportunities in a wide range of sectors, from social enterprise to sustainable infrastructure.
In order to make the space more manageable we began to map out the sectors we were working with. We separated the capital raising space into large buckets of social markets and environmental markets. We then further segmented these based on the different types of businesses that operate within each: under the social markets umbrella, we include social enterprises, community investing (Community Development Financial Institutions), social investment funds, global microfinance, sustainable agriculture, and cooperatives. For the environmental capital markets we segmented into the following sectors: climate change, conservation finance, renewable energy and cleantech, sustainable fisheries, environmental investment funds, and sustainable infrastructure.
I also see a significant opportunity in the environmental credit markets, and decided to set up a separate platform to facilitate credit trading, Mission Markets Earth. The Earth Platform has trading capabilities for a multitude of environmental credit mechanisms, including carbon credits, water quality credits, renewable energy credits (RECs), fisheries catch shares, habitat credits, transferable development rights (TDRs), biodiversity offset credits, and many more.
Two years ago, all I had was an idea for a platform, sketched out on Powerpoint slides and mocked up in Paint. Today, we have two secure, operational platforms that can be used to raise capital or transact in environmental credits.
Our membership has grown to over 150 members as of January 2011, including a diverse set of over 80 investors and 15 companies with approved, investment-ready offerings worth a total of $325 million. Our investor members range from large foundations, to family offices, to High Net Worth Individuals. Investment opportunities listed on the platform include social enterprises, social venture funds, and renewable energy projects, just to name a few. I look forward to seeing those numbers increase dramatically in the coming months as we gain momentum within the impact investing community. I am encouraged by the growing interest in the space and increasing news coverage of impact investing. I have received overwhelmingly positive responses from key industry stakeholders in the U.S. and internationally.
One of the biggest challenges that we have faced in growing our business is the fragmentation and complexity of the different markets. In order to build an effective marketplace, we must emphasize commonalities and standardize as much as possible but we also have to be careful not to oversimplify. We are addressing the standardization problem using a set of Minimum Listing Requirements, which must be met by any company or organization that wishes to list an offering on the Mission Markets investment platform. In this way, we create an incentive for socially and environmentally focused companies to attain and provide documentation that validates their impact.
We have compiled a list of existing third party Assessments, Ratings and Certifications (ARC) covering all of our sectors. Every company seeking capital using Mission Markets is required to provide documentation of the appropriate ARC in order to validate their social or environmental mission. For instance, if a small coffee company wants to post their capital raise on Mission Markets and claim to be certified organic, they are required to provide a document from one of the agencies that provides those certifications.
Standardized performance metrics are also key. The Global Impact Investing Network’s (GIIN) Impact Reporting and Investment Standards (IRIS) are the first taxonomy of metrics to be integrated into our requirements. By requiring the use of ratings and ongoing performance metrics, we hope to move the space toward greater efficiency by helping companies and organizations seeking capital to quantify and communicate the social and environmental impact of their product or service in a standardized manner. This makes it easier for investors to compare opportunities across sectors and make better and more efficient investment decisions.
It is essential in this industry to facilitate transparency so investment dollars flow to the organizations that are generating the most impact. Impact investors want to know what kind of impact their investment dollars are having. They want to avoid what is commonly referred to as “greenwashing” – investing in a company that claims to be socially or environmentally responsible, when it is not.
Company presentations are recorded and available on our platform for investors who are unable to attend them.
One of the most rewarding parts of my job is meeting and establishing key relationships with some of the most important innovators in the space and creating a business model that empowers them to scale their businesses. Slow Money Alliance, Social Venture Network, B Lab, Social Enterprise Alliance, and First Affirmative Financial Network are some of our first major partners, and the list is always growing. Mission Markets increases the power of these networks by allowing them to learn about and interact with each other. We are utilizing technology and social media to create a dynamic and collaborative financial transaction marketplace that can help scale impact investing, making it much more accessible to a larger group of stakeholders.
Our ultimate goal is to become the key destination for impact investing news, information, and investment opportunities. One thing I have learned from my years on Wall Street is that the industry can only grow if it has the right infrastructure. I believe that Mission Markets has the power to drive significant growth in the social and environmental markets by revolutionizing the way investors, service providers, companies, and networks interact.
Article by Michael Van Patten, who during his 25 years of experience on Wall Street was integrally involved in the design and implementation of private placement and illiquid security transaction platforms for several companies. Michael co-founded the highly successful NYPPEX – the leading provider of liquidity services for secondary limited partnership interests and private equity portfolios for institutional investors. Previously Michael worked many years at Bear Stearns & Co, Inc as an institutional sales and trading professional.
