“Paradigm shifts between Gen X and Gen Y are significantly redirecting capital flows in the global economy.”
Founded by Alexandra Cart and Christina Alfonso, the firm works with asset managers to create new investment products that combine both financial and social returns for their investors. By developing these impact investment products, Cart and Alfonso are facilitating a very important intergenerational dialogue that shifts the focus from the profit-maximization strategies of previous generations to impact-maximization strategies that address the social and environmental challenges the Millennial generation has inherited. We had the opportunity to discuss this important dialogue shift and the most important trends in impact investing with these two pioneers.
Can you tell us the story of what inspired you both to start Madeira Global?
Christina M. Alfonso: I started my first social venture at the age of 12, converting my then-free middle school newspaper into a hybrid for-profit/nonprofit model that engaged the student body by donating a portion of the proceeds to a local orphanage. I have always been fascinated by dual-purpose business models – ones that were creative enough to be self-sustaining and profit-driven, while still managing to achieve a positive impact. While I did not always envision myself being an entrepreneur, my early professional experiences in investment management shaped my view that innovation in a stagnant space had the potential to address massive inefficiencies and spark a new wave of interest and a new approach to investing. In recent years, my work has led me to see a very clearly defined gap between supply and demand in the impact investment space, and when we started our own firm, we felt strongly that we would be able to benefit from the agility and risk-taking necessary to achieve what has not been achieved on a commercial scale in this sector.
Alexandra P. Cart: Problem-solving is embedded in my DNA. Having worked in both the public and private sectors, and having experienced first-hand their advantages and disadvantages, I wanted to leverage this knowledge to solve the inefficiencies in both systems. Impact investing, for me, is the perfect confluence of finance and philanthropy.
How has your firm grown since you started?
CMA: Having worked in both private wealth management and private equity in the US and abroad, I can confidently say that attractive investment solutions relative to social impact are in extremely scarce supply. There is a unique opportunity for first-movers, like Madeira Global, to repurpose investment capital to meet an increasing market demand in the for-profit social sector.
APC: We have been incredibly fortunate to be building a business at a point in time when paradigm shifts between Gen X and Gen Y are significantly redirecting capital flows in the global economy.
“Almost 70 percent of Gen Ys change their financial advisors once they have discretion over family capital due to the lack of confidence in shared values with their advisor. As for women, within one year of being widowed, 90 percent will change their advisor for similar reasons.”
As young women heading into the finance sector, was there any fear involved in your decision to start the company?
CMA: Alexandra and I both come from hard-working families and male-dominated industries, so I’m not sure we ever gave much thought to what we would be up against in starting our own firm, which I am told by other entrepreneurs is a good thing! Of course we knew that we were taking a risk but we also felt very strongly that the timing was right, that the demand would continue to increase, and that we were well-qualified and well-positioned to lead this effort. From that point forward, it has been a very gratifying labor of love and one that the market has responded to favorably.
Have you dealt with any resistance in your industry on account of your gender or age or both?
APC: One of the reasons that Christina and I partnered is because of our shared values and work ethic. We both aim to under-promise and over-deliver. There are, of course, judgments that get made; however, we let our work stand on its own merit and we’ve found that that is the most productive way forward.
What have been your largest challenges so far and how have you faced them?
CMA: Naturally, as an early entrant to the market, there is a lack of supporting infrastructure and processes in place for pioneering firms like Madeira, and impact investing as a whole. Today, global banks, which provide the largest distribution platforms for financial products, face a challenging environment to meet impact investment demand. However, key players are overcoming internal bureaucracies and policy hurdles to begin to step into the space. The silver lining lies in the steady demand increase in their investor bases for values-based solutions at both the private and institutional levels. We are unwavering in our commitment to meet this demand and are prepared to join forces with our institutional counterparts to do so.
Have you identified any trends in the impact investing world that you can share with us?
APC: Digital platforms, which provide unprecedented access to information, have granted Millennials (aka “Gen Y” – those born between 1980-2000) access to the harsh realities of inequality, injustice, and social issues across the globe. These Millennials have shown an increased interest in working for, investing in, and buying from socially responsible companies. Given that Gen Ys are set to receive $42 trillion dollars from Baby Boomers in the coming decades, I think there is enough purchasing power for this trend to have enduring influence.
Given this expected wealth transfer to women and Millennials, do you think there will be a commensurate increase in impact investing?
APC: Yes, absolutely. Millennials have shown themselves to be extremely interested in impact investing. Almost 70 percent of Gen Ys change their financial advisors once they have discretion over family capital due to the lack of confidence in shared values with their advisor. As for women, within one year of being widowed, 90 percent will change their advisor for similar reasons. In short, investors are making decisions based on their values and this is proving to inform and drive the investment process more than any other factor in these cases.
What are the most important qualities that you look for in a company that you are considering investing with?
CMA: Our expertise is in bringing the environmental, social, and governance aspects of the underlying businesses to light, which extends to their stakeholders and supply chain. This adds a dimension beyond financial return expectations to the investment decision-making process for our investors. So, as you can imagine, a business that shows strong qualities in each of those areas – strong governance qualities in particular – would have qualities that, not surprisingly, lead to stronger growth performance in the long run.
What advice do you have for other mission-driven entrepreneurs?
APC: We believe in the power of social entrepreneurs to deliver solutions to the problems that face our societies and environment. Governments and NGOs have proven to be challenged in facing these complex and seemingly insurmountable issues alone. Thankfully, the private sector has risen to the challenge, led by social entrepreneurs, to channel much-needed capital to businesses that have the potential to create lasting change. We fully support their efforts and will continue to work as a facilitator in bringing commercial viability to this growing segment of the market.
What’s next for Madeira Global?
CMA: Our aim is to broaden our reach as a firm and to continue to work with asset managers and our network of investors to bring scalable impact investment products to the market.