Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Appendix V: Additional returns data
Figure 27: Sector distribution of notional
MF
11%
EI
12%
SE
5%
FT
1%
AH
28%
CDFI
43%
Source: Calvert Foundation, J.P. Morgan.
CDFI = Community development finance institution;
AH = Affordable housing; MF = Microfinance;
EI = Environmental initiative; SE = Social enterprise;
FT = Fair trade
In depth: US-based fixed income reveal a flat (but disperse) range of yields
Characteristics of the data set: Instruments, sectors, geographies
While the GIIN survey represents a broad spectrum of impact investments across
sector and instrument type, we have also been granted access to a set of data on fixed
income investments that spans a longer history. The data set, provided by Calvert
Foundation 115 , covers 1,587 predominantly fixed-rate debt investments going back as
far as 1990 and totaling $1.385bn in notional. There are three instrument types with
enough data to explore, and the distribution of deals and notionals across instrument
type is shown in Table 25. The investments themselves span sectors including
community development finance initiatives (“CDFIs”), affordable housing,
environmental initiatives, fair trade, microfinance, and social enterprise. Figure 27
shows the distribution of sectors across the data set, and Table 26 shows the data in
terms of number of deals as well as notional.
The geographic distribution of this data set is heavily focused on investments in the
US, representing 91% of the deals and 94% of the notional in the database. The
investments in the US tend to target companies in poor communities that either
provide basic services such as housing to low-income families or hire underemployed
people in these communities. Table 27 shows the number of deals and
notional invested in the most commonly referenced countries in the database. After
the US, Nicaragua, Ecuador, Azerbaijan and Bolivia are most frequently represented,
albeit only by 1% of the total notional each. The remaining deals were done in 26
other countries.
Table 25: Instrument distribution
# of
deals
Notional
(USD mm)
Debt — Fixed Rate 1,492 1,228
Debt — Variable Rate 63 86
Debt — LOC 32 55
Total 1,587 1,369
Source: Calvert Foundation, J.P. Morgan.
Table 26: Sector distribution
# of
deals
Notional
(USD mm)
CDFI 870 588
Affordable Housing 225 386
Microfinance 195 146
Environment 165 161
Social Enterprise 80 72
Fair Trade 52 15
Total 1,587 1,369
Source: Calvert Foundation, J.P. Morgan.
Table 27: Geographic distribution
# of
deals
Notional
(USD mm)
United States 1,437 1,294
Nicaragua 29 11
Ecuador 27 19
Azerbaijan 20 9
Bolivia 11 10
Other 63 28
Total 1,587 1,369
Source: Calvert Foundation, J.P. Morgan.
Illustrating the yield curves
Based on our characterization above, we can see that this data set is a subset of the
impact investment space focused on US-based fixed income investments. Given this
context, we can now look at the financial information revealed by the data set. The
most interesting characteristics are the interest rates charged across tenors for the
various instruments. Essentially, by plotting the interest rates against tenor for the
data sets by instruments in Figure 28, Figure 29, and Figure 30, we look to see
whether an impact investment yield curve emerges. Interestingly, there is not much
of a yield curve at all, but rather a fairly disperse range of interest rates. This
115 This is a set of transactions that borrowers from the Calvert Foundation have engaged in.
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