Social Impact Investing

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SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE Report Brown and Norman (2011) Brown and Swersky (2012) Table 6.5. Some market estimates from industry reports Country Estimate \ Estimate Type Approach \Region MKT potential year England £165 million Potential Survey (78 SIFIs) 2010/11 England £750 million potential demand (£1bn in 2016) Potential Mixed, but essentially 2015 Bottom-up (starting from sector level demand) Survey (125 investors) 2013 Saltuk et al (2014) Global USD 10.6bn commitments Effective and Transactions Addis et al.(2013) AUS A$ 300m investment, Potential Top-down 2012 A$2 billion AUM Harji et al. (2014) CAN >CAN$1.6bn in AUM Effective and Survey & interviews 2013 Transactions Chua et al. (2011) Asia USD 44-74bn potential Potential Bottom-up (starting from 2020 AUM sector level demand) La Croix (2014) FRA EUR 6.02bn Solidaritybased Effective and Member reporting 2012 AUM Transactions Clark et al. (2013) Global USD 1.3bn total assets Effective Survey 2013 (12 funds) Weber and Scheck GER EUR 24m market Effective Bottom up (Sum of key SII 2012 (2012) volume investors) Hope Consulting USA USD 120bn (willingness Potential Survey (5,227 individuals; 2010 (2011) to invest in high 873 investment advisors; performing non-profits) 727 foundations) Freireich and Fulton US USD 26bn community Transactions N\A 2007 (2009) investing Notes: Estimate year refers to the date to which the estimate corresponds to (usually different from publication date). AUM stands for assets under management. Source: OECD, based on desk research. 6.66 The pure survey approach is followed by Saltuk et al. (2014) and is described in Box 6.2. As previously discussed, the key for successfully estimating the SII market is to guarantee that the sample is representative of the target population and that selection biases are mitigated. These remain key challenges in nearly all SII surveys because the boundaries of the target population (and definition) are still blurry. 6.67 A common caveat found in most industry reports relates to the strategies employed to estimate the current (or potential) market. Strong assumptions, such as constant shares (across time and geography) for the SII component of more aggregate measures can induce significant biases. Also, it is sometimes assumed a nexus\relationship between SII demand and supply that is not self-evident. For example, Chua et al. (2011) first calculate a sector-level SII demand projection assuming that 5% to 15% of total demand in each sector is satisfied through SII. Second, building on the demand estimate, the SII total invested capital is calculated through a formula based on estimated profit margins (by sector), return on equity and average cost of capital. 6.68 An additional caveat found in some industry reports is an emphasis on case studies and\or a selection of very successful SII transactions, investors or social enterprises (e.g. Clark et al., 2013). In particular if such small (and biased) samples are built upon to draw conclusions on the evolution of the SII market. It should be noted however, that such reports do not claim to size the whole SII market, but rather provide a kick-start to the discussion on building the evidence base. Avoiding selection biases is crucial and to do so, it is crucial to include in the samples not only the best and the good, but also the not so well performing cases (Bloom and Clark, 2011). The right incentives need to be devised in order to ensure the survey participation of, at least a representative sample of the target population. Providing feedback on interim survey results can be a good incentive to increase survey participation (Bloom and Clark, 2011). © OECD 2015 99
SOCIAL IMPACT INVESTMENT: BUILDING THE EVIDENCE BASE 6.6. Challenges in SII data collection 6.69 Scoping and sizing the global SII market is an enormous challenge. There is no consensual definition across different geographies and, above all, market players and researchers involved in SII. This implies that most market estimates are not directly comparable. Data is not being collected in a standardised and systematic way. 6.70 Most importantly, the lack of a consensual definition creates enormous challenges in identifying the target population — i.e. what exactly is being measured. For example, the scope of SII demand cannot possibly be identified as long as the boundaries of SII delivery organisations are blurry. Sampling schemes avoid the need to capture information about the whole population by focusing on a representative subset. However, sampling requires a clear definition of the population along with a number of key observable characteristics. So, in the case of SII, even if a sampling frame is properly devised and a robust sampling methodology is used, it results in biased estimates because it is unclear what the population of interest should be in the first place. In other words, it is not possible to find a subset of the populations that, according to some observable characteristics, is representative of the population. Therefore, estimates of SII scoping exercises are usually biased towards certain sectors, instruments or investor types. Accordingly, extrapolating total market sizes based on limited and unrepresentative samples should be regarded with caution. Chapter 4 of this report provides a structure that helps defining SII, the basis for engaging in data collection efforts. 6.71 In most measurement exercises, a common error is to exclude data that could be relevant (Type I error). In the case of SII, focusing on a narrower scope can result in significantly incorrect measurements. For example in Clark et al. (2013) only a selected number of intermediaries were analysed. The coverage in the series of GIIN\JP Morgan investor surveys (Saltuk et al., 2011; 2013; 2014) has been increasing, which reveals that some important investors might be (or have been) left out. 6.72 However, the early stage of SII market development can potentiate another type of measurement errors: including data that is not relevant for SII (Type II error). For example, applying the working definition described in Chapter 4, some delivery organisations can be wrongly included as SII investees. As discussed in that section of the paper, some certified B-corps may not be included in the potential demand for SII, because some of the certified companies would not meet the other necessary eligibility criteria for SII. Another example can be found in the ASSB dataset in the UK, which samples social enterprises from all existing firms with less than 250 employees (see Section 6.3). 6.73 The lack of a statistical definition of SII means that data is embedded in other broader data categories. Disentangling what is the subset of information that corresponds to SII can be extremely challenging. For example, in top-down approaches very strong assumptions are usually required, as discussed earlier in this section. In addition there are several SII data layers (e.g. social need granularity) which add substantial complexity to the analysis. A more granular approach may require data collection efforts that are more resource intensive and might entail additional confidentiality issues. The trade-off between level of detail and comprehensiveness of the information should be taken into account when deciding to collect data. As an example, for the purpose of analysing SII transactions, survey respondents might include investor platforms or the investors themselves. While focusing on investors provides a greater level of detail, it multiplies the number of respondents, thus increasing data treatment and survey management needs. 6.74 Finally, a common challenge in data collection is clarifying why, what and for whom data should be collected. This is particularly important because different goals require different data types (and data sources). Having a clear goal for data collection and well-defined data requirements is crucial. Two types of measurement objectives were identified in the OECD SII Expert Meeting in London. On the one hand, it 100 © OECD 2015
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development in the US, or are made
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concern, and submitting and voting
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sustain land trusts, to a meeting o
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that are often excluded from market
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Some organisations that have used S
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it helps identify the critical sour
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and shareholder trust through posit
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Approaches Some commentators have i
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Wieland and Handfield (2013) sugges
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EthicalQuote (CEQ) tracks reputatio
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Displaying commitment to CSR is one
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Brand Differentiation CSR can help
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takes health and safety, diversity
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advance with the practice of CSR wh
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Stakeholder Influence One motivatio
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Regulation Fifteen European Union c
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jurisdictions. E.g., some jurisdict
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"Impact investments can be made in
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venture capital community. Investor
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countries via local intermediaries.
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determining views of affected commu
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Another measure of economic impact
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The Board for the CCEG was to inclu
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17 Love Relationship Online dating
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Social Value Act 2012 legislation.
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Development released a report outli
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Benefits and Costs of Social Impact
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UK On 18 March 2010, Secretary of S
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US Massachusetts: The second of two
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US Federal: The U.S. Department of
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would establish a five-year pilot p
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We are dedicated to finding ways to
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In the past, public monies have oft
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indicate that more Americans want t
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Youth" to "Opportunity Youth" in or
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income must file a Form 990. The fo
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In its first three years, SIF has a
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The Office of Social Innovation pri
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of Management at UCLA; and launched
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Notes _____________________________
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Investing for Impact Case Studies A
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Contents What is Impact Investment?
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What is Impact Investment? Impact I
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A case study approach in an asset a
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Segments of Impact Investors High T
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Foundations Like high net worth ind
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in the developed and the developing
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By creating mechanisms through whic
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Asset Allocation Framework Asset cl
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Cash Shorebank Deposit Program fina
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Mezzanine/Quasi Equity Instruments
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Venture Capital Bridges Ventures CD
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Real Estate JP Morgan Urban Renaiss
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absolute return (hedge funds) BelAi
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senior debt Root Capital Impact Fir
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Venture Capital Aavishkaar Impact F
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eal estate Ignia Impact First Inves
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senior debt Root Capital Layered St
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The New York City Acquisition Fund
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Appendix Methodology The Investing
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Websites •• Bridges Ventures: h
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Cash Quasi Equity Public Equity Buy
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Page 210 and 211: SOCIAL IMPACT INVESTMENT: BUILDING
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Page 301 and 302: Global Research 29 November 2010 Im
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Advocacy Foundation Publishers The
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XVI for Drug-Free Communities Landm
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Vol. VIII 2022 ComeUnity ReEngineer
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Vol. XV 2029 Inner-Cities Revitaliz
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The e-Advocate Journal of Theologic
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Issue Title Quarterly Vol. I 2015 I
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The e-Advocate Juvenile Justice Rep
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2018 - The Theological Law Firm Aca
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About The Author John C (Jack) John
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