Women borrowers in Cote D'Ivoire. Photo: REGMIFA / Symbiotics
CASE STUDY:
CABRINI SISTERS
A few years ago, the Missionary Sisters of the Sacred Heart of Jesus (widely known as the Cabrini Sisters) decided to build an impact investing portfolio. Here they describe in depth the reasons for their decision and how they embarked on their faith-consistent investing journey
Introduction
by Sister Barbara Staley
MSC General Superior
As Missionary Sisters of the Sacred Heart of Jesus, we have had one mission throughout our history – “to be Bearers of the Love of Christ to the World”.
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We find ourselves at a moment in our history that demands a transformation in our methodology and understanding in how to be effective in delivering on this mission. With limited human resources but rich in missionary zeal, we have recognised that the purpose of our temporal goods needs to be refocused.
'We decided to dispense with subjugating ourselves to secular financial wisdom and to very deliberately respond to the Church’s demand to recognize ourselves only as stewards, not owners, of our temporal goods.
With this as our reference we are determined to use our financial resources to express a new model of apostolic ministry and broaden our effectiveness of spreading God’s love to all the corners of the earth without the physical presence of Sisters. Thus, our entry into impact investing and venture philanthropy.
About the Cabrini Sisters
Founded in 1880 by Saint Frances Xavier Cabrini, the Missionary Sisters of the Sacred Heart of Jesus is a congregation of Catholic women religious with a mission to spread the love of Christ to the world’s most vulnerable people, with a particular focus on women and children, migrants, and frail elders.
Click below to watch FaithInvest's video interview with MSC General Superior Sr Barbara Staley, CFO Gregory Lane and Director of Investments Kayoko Lyons discussing their impact investing journey, or listen to a podcast version of the interview instead.
Why did we build an impact investing portfolio?
Throughout our 140-year history, the Missionary Sisters of the Sacred Heart of Jesus have responded boldly to the needs of the poor, establishing schools, hospitals, social service centers, immigration service centres, and more around the world. Today, we operate in 17 countries across North America, South America, Europe, Africa and Australia.
At our 2014 General Chapter meeting, the sisters reflected on our future and our ability to respond to the most pressing issues facing the world – such as rising inequality, unprecedented levels of forced migration, and climate change.
We committed to exploring new forms of governance to address these realities – including aligning investment portfolios with mission. Over the next few years, we hired a new CFO in 2017 (Gregory Lane) and then a Director of Impact Investing (Kayoko Lyons) in 2019.
Since then, we have integrated mission values into ~90% of our investment portfolio, most of which is invested in public equities and fixed income funds. This paper focuses on the smaller, more innovative, portion of our portfolio that is invested in private impact investments.
Our impact investing program follows in the footsteps of the pioneering women religious that have been engaged in impact investing long before the term was coined. We encourage others to learn from, and be inspired by, the work of these women leaders.
What did we set out to achieve?
The mission of the impact investment portfolio broadly parallels our organisation's mission – to spread the love of Christ globally to the most vulnerable members of society, including women, children, migrants and frail elders. This broad mandate enabled us to remain flexible, investing across a multitude of impact sectors, geographies and asset types.
That said, we had a few key guiding criteria which shaped the portfolio during the first two years.
Go where others do not go. We are called to serve the needs of the world’s most vulnerable individuals, often in realities where others do not go. We felt comfortable stepping boldly into geographies, sectors, and companies that investors may consider too risky – but we recognise there are vulnerable populations whose needs that cannot humanely be met with investments.
Thus, the call to go where others do not go must be balanced by the confines of our financial and impact goals.
Respond swiftly to the needs of our time. Given the scale of needs around the world today, we find ourselves emboldened to be nimble, flexible and respond quickly to pressing issues facing
marginalised communities. Thus, a pillar of our programme has been to not overburden ourselves with strict parameters and requirements that can prevent us from quickly taking action. We valued building an impact investing portfolio quickly, but thoughtfully, always learning as we went.
Catalyse others. As we spoke with more Catholic organisations, we realised we were unique because we have an in-house Director of Impact Investing instead of an external investment consultant. This meant we could do smaller, niche, impact-first transactions that external consultants usually cannot do as they do not appeal to a broad enough base of clients to warrant the time of diligence.
Furthermore, asset owners often cannot carry out diligence on these investments themselves unless they have in-house staff as this requires substantial time and expertise. As such, we felt compelled to share our learnings with other mission-aligned investors, particularly Catholic asset owners who want to make impact investments but do not have the operational capacity to do so. And because diligence on private investments is expensive and time consuming, we sought to share our findings to help minimise costs to others.
The mission of the impact investing portfolio parallels our organisation's mission – to spread the love of Christ globally to the most vulnerable members of society.
Responding swiftly to the needs of our time
Mission Driven Finance Freedom 100 Fund is a unique impact fund that posts bond for immigrants held in detention centers in the US, allowing them to await their asylum trials outside of a detention center with friends and family.
We are repaid by the Department of Homeland Security when the individual appears at their trial so we may not get our investment back for up to seven years or longer.
At the time, we did not have a policy on long-term investments, but merely a desire to keep our weighted average tenor shorter (3-5 years).
However, when discussing the liquidity profile of the investment with our Superior General, she urged us to make this investment immediately. She recognised the foolishness of waiting to draft a long-term investment policy if it kept an individual confined to a detention centre a day longer than necessary.
What did we do?
During the first year of our impact investing journey we:
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laid the foundational infrastructure for the private portfolio (policies, procedures, tools, etc);
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surveyed the landscape while building pipeline;
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found the right partners to support us.
We started a diligence process identifying low-hanging fruit investments in sectors we understood well, namely financial inclusion and loan funds. We built the portfolio opportunistically at first, learning and refining our investment thesis as we went. We also engaged in many internal conversations to better understand our financial needs, risk appetite, and impact goals.
In the second year, we prioritised organisations empowering migrant populations around the world and relaxed our return expectations, separating a smaller impact-first portfolio with a capital preservation-only goal. We also acknowledged our preference for shorter term exposures as we began our journey, thus we prioritised debt over equity.
Additionally, we recognised we could add more value as a first-time investor with smaller organisations and more flexible terms, hence our ticket sizes also decreased as we supported younger, smaller organisations. That said, we continued to opportunistically allocate to larger, non-migrant focused impact funds that were run by organisations that:
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were deeply mission-aligned;
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could be long-term partners of our investment team;
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were operating on the ground in footprint countries of our sponsored ministries.
Navaza – a beneficiary of the Sisters' investments via Beneficial Returns
We did not make any direct investments in healthcare, education and tech, mostly due to our own lack of expertise in these sectors, along with complex nuances of Catholic ethics and healthcare, questions about whether tech solutions born outside vulnerable communities ultimately translate to meaningful impact outcomes, and concerns over push for rapid growth and financially lucrative exits in the tech space.
We also paused on the efforts to internally build a finance-first, market rate climate solutions investment portfolio as we acknowledged the learning curve is steep and we needed an external partner for support.
A few things we did not do well and are working on now:
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standardised impact measurement across the portfolio,
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racial and gender equity lenses, and
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incorporating migrant voices in our decision-making process.
Finally, to get a better sense of our portfolio...
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We have made 20 investments to date, including two credit unions, six CDFIs (community development finance institutions), three social enterprises, eight private debt funds and one private equity fund
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By dollars invested, roughly 65% is in emerging markets (mostly Africa & Latin America) and 35% in USA/Canada/ Europe (mostly the US)
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Half of the organisations in our portfolio have an intentional focus on migrants
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We have been the first investor, or in the first group of investors, for ~40% of our investments
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A third of our investments are led by women
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The weighted average tenor of our portfolio is 3.8 years
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The expected annual return is 2.3%
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We have not had any payment defaults to date
To get to this point we spoke to 200+ potential investees and did diligence on 31, supported by a consultant and one of our investment advisors. The 11 transactions we declined during the diligence process were due to a variety of factors:
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Red flag references that we could not confirm or deny their accuracy
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Lack of transparency in sharing information
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Organisation was in a too early stage of development
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Recognised our investment would not be additive – they could get funding elsewhere
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Too complicated a structure
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Concerns about whether certain tech solutions actually result in improved outcomes
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Concerns about financial return expectations trumping impact outcomes
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