Social Impact Investing

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<strong>Impact</strong> Investments: An emerging asset class Global Research 29 November 2010 Table 29: India population data Divide the total population by the number of households to obtain an average household size. Then multiply by the economic activity rate to obtain average number of earners per household. India Total Population 973 Households 183.3 People per household 5.3 Economic activity rate 69% Earners per household 3.7 Source: WRI, UN Statistics Division. Note that the average number of people per household is calculated based on population and household numbers for the entire population, not just the BoP. Table 30: Indian household income bracket conversion Multiplying the per capita income by the number of earners gives a household income bracket. Per capita income bracket India household income brackets 2002 PPP 2005 PPP 2005 PPP A 3,000 3,260 11,923 B 2,500 2,717 9,936 C 2,000 2,173 7,949 D 1,500 1,630 5,962 E 1,000 1,087 3,974 F 500 543 1,987 Source: WRI. Calculating the number of households Having translated the per capita income brackets into per household income brackets, we can then reference the population data provided by WRI again to see how many people fall within the brackets that will afford our products or services. But again, in the case of housing, it is most relevant to have the number of households (rather than number of people), so we need to translate the population data. Table 31 shows the steps to the calculation. We start with the number of people in each income bracket, and then focus in on the urban population (since our housing case study was for urban populations). Once we have the number of urban people in 2005, we can grow that number using the WRI’s urban Indian population growth rate, which is 0.9% over the period from 2005 – 2010. Finally, we scale the number of urban people in each bracket by the economic activity rate from Table 29 to get the total number of people (earners and non-earners), and then divide by the average number of people per household. Table 31: The number of households in India's BoP income brackets To grow the population from 2005 to 2010, apply India’s 0.9% urban population growth rate for 5 yrs. India Household Income brackets Number of people % Urban Number of urban people Number of urban people Number of households 2005 PPP 2005 2005 2005 2010 2010 A 11,923 31.5 68% 21.3 22.3 6.1 B 9,936 68.3 53% 36.5 38.1 10.4 C 7,949 147 37% 55.0 57.5 15.7 D 5,962 309 20% 61.2 64.0 17.5 E 3,974 349 8% 28.6 29.9 8.2 F 1,987 19.3 6% 1.1 1.1 0.3 Source: WRI. 0.9% growth rate is the urban population growth rate for India over the period from 2005 – 2010 according to the WRI database. Relationship between revenues and invested capital Shifting from the income statement to the balance sheet: Assume a ratio of expenses to total invested capital = 1 to 1 Our analysis estimates the potential market for selected goods and services to BoP consumers. We present the revenue opportunities, assume an operating margin and hence arrive at estimates of expenses and profit. In order to move from the income statement to the balance sheet and calculate required capital it is necessary to make an assumption regarding the relationship between Invested Capital and the revenue base of the company. This relationship is 88
<strong>Impact</strong> Investments: An emerging asset class Global Research 29 November 2010 not something that financial analysts are called upon to estimate and there is no established methodology or rules for doing so. In order to make a reasonable estimate we took a sample of global small cap equities. Our sample consisted of almost 6,000 non financial companies with Market Caps between $100m and $1bn. We also excluded any companies with sales of less than $10m. The results are shown by region in Table 32. While there is obviously dispersion and the ratio is driven by, among other factors, the capital intensity of the business we found the average Sales to Invested Capital ratio to be 99.7% and hence have used a 1 to 1 ratio in all our sizing studies. Table 32: Small caps by region (market cap $100m–1bn) Region Sales/Invested Capital Europe 95.7% US 114.8% Asia (ex Japan) 86.9% Japan 157.6% LatAm 77.9% Global 99.7% Source: J.P. Morgan 89
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Fund Azzad Ethical Mid Cap Fund Bri
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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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SOCIAL IMPACT INVESTMENT: BUILDING
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Global Research 29 November 2010 Im
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Impact Investments: An emerging ass
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Page 415 and 416: About The Author John C (Jack) John
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Social Impact Investing

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