Arts and culture seldom seem to be part of the impact investing conversation. But under the surface, things may be quite different, according to a report from Upstart Co-Lab called Hiding in Plain Sight: Impact Investing in the Creative Economy. Upstart Co-Lab found that 107 investment funds are involved in what’s called the “creative economy”—a term meant to capture the economic contributions made by art, culture, design, and innovation industries in given regions. Spanning “impact,” “conventional,” and “sustainable and responsible” categories, these funds are responsible for about $60 billion in assets.
While these investments may be dwarfed by those in support of high-stakes priorities like solving world hunger or mitigating climate change, the creative economy’s reach is surprisingly wide.
Hiding in Plain Sight describes five major sectors within this economy, and the entities formed to invest in it are as diverse as the investments they have made.
The most popular creative economy sector, sustainable food saw investments from almost 49% of the funds in the report, half of them impact funds.
This category includes food and beverage companies that aid consumer awareness of resource conservation, preservation of cultural heritage, and access to healthy food.
Many organizations in this sector are tech-focused groups. For example, Switzerland-based Beyond Impact supports innovations in food manufacturing and biotechnology to reach a more sustainable economic model that can withstand a growing population. The firm has invested in “clean meat” technologies and a platform that helps manage people’s physical reactions to medicine, chemicals, diseases, and food.
The sector also includes a high number of community initiatives. The Cincinnati Development Fund, for example, supports healthy food facility projects in low-income neighborhoods, including a $335,000 loan to a displaced natural foods store and a $980,000 investment in a commercial kitchen for local food entrepreneurs.
Accounting for over a quarter of the funds studied in Hiding in Plain Sight, investors in the ethical fashion sector attempt to address a variety of sustainability and human rights issues, from labor conditions to the environmental impact of manufacturing processes and the preservation of cultural heritage.
While some of the funds associated with ethical fashion have a broader primary focus on consumer products or technology, the report includes four funds aimed specifically at the fashion industry. For example, Alante Capital is a venture capital fund backed by Eileen Fisher that seeks to marry social and environmental sustainability within the fashion landscape. Alante invests across three verticals—production, distribution, and waste recovery—and supports companies in multiple ways. Specifically, it helps companies optimize their operations, track their impact, gain wider customer bases, and secure future investments.
Upstart Co-Lab notes that of all of the sectors, ethical fashion is the most interconnected—more than 75% of the funds involved in ethical fashion have also made investments in other sectors within the creative economy.
Social Impact Media
Twenty-four percent of the report’s funds invested in companies that use communication to create positive social outcomes, give a platform to underrepresented voices, and build a diverse workforce.
For example, technology-focused venture capital firm Andreessen Horowitz launched its Cultural Leadership Fund in 2018 to “connect the greatest cultural leaders in the world to the best new technologies” and “enable more young African-Americans to enter the technology industry.”
New Media Ventures, on the other hand, invests in both nonprofit and for-profit organizations that work to better advocacy, civic engagement, and voting systems through media. The organization’s seed fund and angel network support groups such as Blavity, helping the publication’s multicultural creators diversify and expand their audience.
The creative places sector consists of real estate projects that are both affordable and target creative people or businesses. With investments from only 17 of the report’s 107 funds, this sector is currently the least active category featured, though Upstart Co-Lab recognizes a growing interest in it.
For example, Enterprise Community Partners of Maryland has invested $36 billion in affordable housing development over more than 30 years. Through grants, equity, and debt, its investments have supported the building of 529,000 homes.
Enterprise’s interest in creative placemaking saw it award $100,000 each to five organizations across the country to “use arts and culture to make their communities more resilient.”
Other Creative Businesses
This sector involves partnerships that investors cultivate with other arts, design, and culture businesses that have sustainable business practices, provide quality jobs, and offer social impact.
In the United Kingdom, the Nesta Arts Impact Fund has invested £7 million ($8.9 million USD) in 22 charitable arts organizations with social enterprises that show impact. Their work includes investments in the Central School of Ballet and the National Holocaust Centre and Museum.
The Creative Economy’s Global Reach
In addition to its part in supporting creative and cultural activities, the creative economy has a role to play in reaching the United Nations’ Sustainable Development Goals (SDGs). Upstart Co-Lab sees parallels between the objectives of many of the above sectors and SDGs related to education, economic growth and employment, sustainable cities, and sustainable consumption and production. Hiding in Plain Sight calls upon impact investors to embrace a “creativity lens,” arguing that creative economy investments can align investors with environmental, social, and governance (ESG) principles and help realize the values of inclusion, equity, and sustainability.
As Upstart Co-Lab founding partner Laura Callanan told one interviewer, despite their seeming differences, creatives and impact investors share something fundamental: “they care about the human condition and they can help each other do something about it.”