Social Impact Investing

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Impact Investments: An emerging asset class Global Research 29 November 2010 • Private wealth managers such as Capricorn Investment Group and New Island Capital in the US are integrating impact investments into their traditional asset management portfolios. • Commercial banks such as Triodos Bank in Europe and Charity Bank in the UK tap into retail customer interest in impact investment and lend to charities. • Retirement fund managers such as PGGM in Holland and TIAA-CREF in the US are responding to demand for impact investments rather than simply sociallyresponsible investments that “do no harm.” • Boutique investment funds such as responsAbility in Switzerland and Root Capital in the US are raising capital from a growing class of high-net worth individuals, family offices and private foundations seeking fund managers who can offer high-impact, low-risk investment options. • Companies such as General Mills and the Starbucks are diversifying their supply chains and expanding their fair trade operations through impact investment. French food company Danone is teaming with Grameen to address malnutrition. Others are using impact investments to identify the potential for serving new markets. • Community development finance institutions (“CDFIs”) in the U.S. such as the rural-focused Southern Bancorp and New York-based Carver Federal Savings Bank. In Appendix III:CDFIs, we present a short history of this segment of the investor base. While some of these investors are more recent entrants to the market, others have been making impact investments for some time, including DFIs, which have been operating for over sixty years. Historically, many of these investors operated independently or partnered within one geographical region. More recently, disparate sectoral or regional initiatives are coming together to build a cross-sector, global impact investing marketplace. In January 2009, the Monitor Institute published Investing for Social and Environmental Impact: A Design for Catalyzing an Emerging Industry, a report that documented the activities and challenges faced by these early impact investors. This report made recommendations for the development of critical industry infrastructure, without which impact investing would at best remain a small niche subset of private investing with disparate participants, and at worst taper out entirely in the face of the global economic downturn. Recognizing the need for a global, cross-sector impact investment infrastructure As different investors develop their impact investment portfolios, similarities emerge between their investment activities. Ten years ago the Social Investment Task Force was set up in the UK to define "how entrepreneurial practices could be applied to obtain higher social and financial returns from social investment" 7 . In October 2007, The Rockefeller Foundation hosted an international meeting of approximately 15 impact investors to discuss the similar investment approaches and challenges shared by the group. A broader meeting in June 2008 brought 40 impact investors together to discuss how they could work together to accelerate the development of the impact investment industry. The investors at this meeting found that their common challenges included: deal sourcing, impact measurement, and the lack of a common language to describe their investment activities and performance targets. They also highlighted the need for an organized network to advance their shared interest in using for-profit investments to fund social solutions. In essence, these investors envisioned a well-developed impact investing marketplace that functioned like the traditional capital markets. They sought a marketplace in which investment opportunities are transparent; performance data is accessible, 7 “Social Investment Ten Years On - Final Report of the Social Investment Task Force,” April 2010. 16
Impact Investments: An emerging asset class Global Research 29 November 2010 credible, and comparable; investors can access ratings agencies, syndicators, clearinghouses, auditors and other necessary market intermediaries; and co-investors are easily identified. Having acknowledged these needs, the group set out to seed the organizations that would accelerate the development of this newly-dubbed impact investing industry. In addition to serving their own needs, these investors also hoped that helping to build an effective impact investment infrastructure would attract new investors by reducing deal sourcing and transaction costs and providing examples of efficient impact investments. The Global Impact Investing Network is established to build market infrastructure In September 2009, J.P. Morgan, Rockefeller Foundation, and the United States Agency for International Development (“USAID”) launched the Global Impact Investing Network (“the GIIN”) to accelerate the development of an effective impact investing industry. The GIIN was tasked to develop the critical infrastructure, activities, education, and research that would increase the scale and effectiveness of impact investing. The GIIN’s work is rooted in the needs identified by early impact investors and currently consists of four main efforts that mobilize hundreds of investors and other industry participants. • Investors’ Council: The GIIN Investors’ Council is a membership group comprised of leading impact investors representing a diverse range of institutions from around the world. The Investors’ Council provides leadership in the industry, facilitates shared learning and collaboration, serves as a platform for disseminating the latest research and best practice, and supports the creation and adoption of industry infrastructure, including impact metrics. • IRIS: Impact Reporting and Investment Standards (“IRIS”) 8 is a language and framework for measuring the social performance of impact investments. IRIS addresses a major barrier to the growth of the impact investing industry—the lack of comparability and credibility regarding how funds define, track, and report on the social performance of their investments. IRIS provides a standardized approach with the aim to lower transaction costs and improve investors’ ability to understand the impact of the investments they make. • Outreach: The GIIN Outreach initiative elevates the profile of impact investing by highlighting exemplary impact investments, industry progress, and best practices. Working with partners, the GIIN also supports and disseminates research, informs conference and event programming, and promotes mainstream media coverage of impact investing. • ImpactBase: ImpactBase 9 is a global database of impact investment funds, searchable via an online platform. ImpactBase is an online search tool, created to bring order to a fragmented and inefficient marketplace of impact investing funds. On ImpactBase, fund managers can create profiles for their funds visible to a global set of mission-aligned investors. Investors and advisors can search these fund profiles to find investments that may fit with their impact investment objectives. ImpactBase is currently in beta and should be fully functional by December 2010. 8 http://iris.thegiin.org 9 www.impactbase.org 17
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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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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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SOCIAL IMPACT INVESTMENT: BUILDING
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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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