Investors Assess Their Climate Risks

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Greenhouse gas emissions from the coal-fired cogeneration Hanasaari B power plant at sunset in Helsinki, Finland, March 9, 2013 (Photo by Fintrvlr) Creative Commons license via Flickr

By Sunny Lewis

OAKLAND, California, October 20, 2016 (Maximpact.com News) – Investors are being put on notice that some mutual funds and exchange traded funds labeled “sustainable,” “ecology,” “green” or “integrity” may actually have very high carbon footprints.

Now, a free software tool that empowers investors to track the carbon pollution that companies embedded in their funds are emitting has expanded its analysis to cover funds worth US$11 trillion.

FossilFreeFunds.org, a website created by the environmental advocacy nonprofit As You Sow, has added carbon footprinting of over $11 trillion in global mutual funds and ETFs to the site – the largest-ever analysis of this kind.

Fossil fuel investments carry real financial risks,” says FossilFreeFunds.org on its site. Their analysis covers more than 8,500 global mutual funds, including 3,000 of the most commonly-held funds in U.S. retirement plans, so that all investors can be aware of the climate risk in their retirement accounts, with financial data provided by Morningstar.

In August, Morningstar introduced a Sustainability Rating for Funds that offers an objective way to evaluate how investments are meeting environmental, social, and governance challenges, helping investors put their money where their values are.

Transparency leads to transformation,” said Andrew Behar, CEO of As You Sow. “Measuring a company’s carbon emissions is a critical way to understand the specific climate risk of your investments.

We have aggregated this data for all of the companies embedded in each of the 8,500 most-held global mutual funds and ETFs,” said Behar. “This tool enables every investor to answer the question, ‘Am I investing in my own destruction or the clean energy future?

The analysis uses data from global sustainability solutions provider South Pole Group, and yourSRI.com, a carbon data analyst and reporting solution provider for responsible investments.

Intially, the analysis will cover funds in Denmark, France, Germany, Hong Kong, the United Kingdom and the United States. The developers plan to expand to include every fund in every exchange around the world.

Institutional investors such as California’s CalPERS and Sweden’s AP4 have embraced carbon footprinting as a way to protect their assets from climate risk.

Major index providers are increasingly offering low-carbon options that incorporate a footprinting analysis.

Traditional fossil-free investment approaches avoid companies with reserves of coal, oil, and gas that represent potential future emissions.

Carbon footprinting turns the focus to current greenhouse gas emissions, helping reveal businesses that operate with higher and lower footprints than their industry peers.

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ConocoPhillips oil refinery, Rodeo, California, December 11, 2012 (Photo by ah zut) Creative Commons license via Flickr

As You Sow explains that, “Carbon footprinting a mutual fund means accounting for the quantification and management of greenhouse gases. It is the first step towards understanding an investor’s impact on climate change.

A carbon footprint is calculated by measuring and/or estimating the quantities and assessing the sources of various greenhouse gas emissions that can be directly or indirectly attributed to the activities of the underlying holdings.

 “Decarbonizing” a portfolio involves investing in companies that have lower carbon footprints than their peers.

The FossilFreeFunds.org platform allows investors to see real scores that are updated every month with Morningstar’s latest holdings data.

A few examples from the analysis:

  • Given that BlackRock recently published a major report on portfolio climate risk, it may be a surprise that the BlackRock Basic Value Fund’s (MABAX) has a carbon footprint 170 percent higher than its benchmark, the Russell 1000 Value Index.
  • Dimensional Social Core Equity (DSCLX) has 85 percent more carbon than the MSCI All World Index, with 13 percent of the portfolio made up of fossil fuel companies including Shell, BP, and tar sands giant Suncor.
  • The State Street SPDR S&P 500 Fossil Fuel Reserves Free ETF (SPYX) holds 40 fossil fuel companies, including companies with reserves like Phillips66, Valero, and Marathon; coal fired utilities Duke Energy and Southern Company, and oil field services leader Halliburton.

Having funds with smaller footprints is one way to avoid climate risk,” said Andrew Montes, director of digital strategies at As You Sow. “It also actively rewards companies that have made positive decisions to lower the climate impact of their operations.

Investor demand will drive fund managers to drop companies with high carbon footprints and include those companies that are shifting to the clean energy economy,” explained Montes.

By providing a way to examine carbon demand and consider the value chain when measuring climate impact, the data can help investors large and small reconcile their investing with their values.


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The Proper Amount of Due Diligence: From Field to Financial Due Diligence

The Proper Amount of Due DiligenceMaximpact Services

Many types of investments are worthy of consideration by investors. However, regardless of the type of investment, it is vital for investors to consider all elements of the investment — including a risk assessment. The most effective tool in determining the reliability, quality and soundness of an investment is to use the process of financial due diligence. Click here to view Investor Financial Due Diligence Checklist.

As in the general principle of due diligence, “financial due diligence” ensures that the course of action being undertaken is wise and financially worthwhile for every party involved. Read on to learn more about the process of financial due diligence, why it is important to investors and businesses, and how a financial consultant can help.

What Is Financial Due Diligence?

When considering an investment, financial due diligence is the most important task toward making sure that the investment is sound. When performing financial due diligence, in a process very similar to an audit, every financial record, as well as any other relevant financial information to the investment, is audited and double-checked to determine if all the accounts are consistent.

By examining categories such as gross value, valuation and balance sheets, financial due diligence provides security to both the buyer and seller in any given transaction.

Although financial due diligence is generally focused on the buyer, the seller can also employ the process before moving forward.

Why Is Financial Due Diligence Important?

Evaluating the real situation of assets, their liabilities and other risks provides much-needed insight into an investment. The evaluation process is one that assists in the ability to make good investment decisions.

  • For investors, financial due diligence provides the type of information that ensures the targeted investment is in the financial position that it states it is in.
  • For businesses seeking funding, having a financial due diligence report in place can serve to impress potential funding sources and investors by demonstrating that the business is committed to transparency and is ready to move forward quickly.

This report assures both parties that an investment is viable, reliable and equitable, and it can assist in identifying any potential risk factors.

Other Types of Due Diligence

While financial due diligence is very important, it is not the only type of diligence tool that is available — and sometimes necessary. “Field due diligence,” for example, is a process used to measure the viability of certain investment sectors, such as renewable energy or agriculture, through the employment of sector-specific experts.

Sector experts perform evaluations, assessments and analysis of potential investments to identify important factors that are used in a decision-making process. In this area of due diligence, sector-specific experts and consultants may be needed to assess in sectors such as agriculture, clean technology, renewable energy, water, etc. Assessments can be technical, environmental and legal, and they can also be based on social impact, sustainability and feasibility.

How Can Maximpact Help Businesses, Investors and Funds?

Financial due diligence is an important task for both businesses and investors. However, financial due diligence is not an easy task, which is why getting it done by a team of experts through Maximpact Services will save you time and money.

Maximpact Services helps investors — such as funds, VCs, angle investors, accelerators, private investors and other types of funding sources, including grant-givers — by taking over the in-depth process of financial due diligence. Outsourcing the labor-intensive parts of the evaluation process for multiple investments enables each party to save time and money to focus on what each does best.

For businesses, Maximpact Services provides financial due diligence reports that will impress investors and increase your chances of fundraising success.

With access to hundreds of experts and consultants covering more than 200 sectors, all players can easily find the experts they need for evaluations, assessments and all kinds of due diligence.

Use this helpful tool and resource:  Maximpact Investor Financial Due Diligence Checklist

Visit Maximpact, and find out more at: Maximpact Finance Services:Due Diligence

Still have questions? Schedule a call with a funding expert and receive expert advice, or contact Maximpact, and we will guide you in finding what you need.

Are You Investor Ready?

34403284_mlIf you are in the midst of launching your own business or if you are currently in business, you are likely wondering if your enterprise is investor-ready. “Investor readiness” hinges on a variety of factors. Simply preparing a strategic business plan and financials is not an indication that your business is ready to take on an outside investment. Even if you are eager for an outside investment, there is no guarantee that anyone will be interested in your venture. Plenty of preparation and hard work is necessary to put your enterprise in a position that interests outsiders. This process is commonly referred to as “investor readiness.” Click here to view Investor Ready Checklist.

Types of Investment

As capitalism has progressed, the variety of funding options has blossomed. Today, business investment takes place in all sorts of forms from new age crowd funding to angel investors, venture capital and traditional bank loans. The challenge lies in securing the necessary funding. It is quite often the entrepreneur’s lack of investor readiness which prevents them from securing investment funds they so desperately needs.

Common Errors When Seeking Business Funding

Put yourself in the position of a venture capitalist or general business investor. Such an individual is constantly bombarded with requests for investments. Though venture capitalists might genuinely be interested in helping to launch or improve enterprises, the truth is that it is often too premature for such an investment. The average business has a variety of weaknesses and structural problems that an investor does not want to be involved in fixing. In some instances, the investor does not have the necessary capital to address such problems either. Entrepreneurs seeking investment capital should ensure that there is a certain polish to their presentation in terms of both content and aesthetics. They should put themselves in the investor’s shoes and consider how the pitch sounds from their perspective and whether the requested amount of funds is appropriate for your business’s current state and goals.

Steps to Take

Begin by assessing your business plan and your projected financial goals. It is prudent to engage the assistance of a funding expert to determine if your investment request is appropriate for the stage that your business is at. The funding expert will analyze your company’s financials and provide appropriate advice. He will also help you figure out the proper type of funding for your business and determine the best way to approach potential investors.

Figure out the type of investment that is ideal for your company as there are different types of funding. Some forms might be appropriate for your business while others are not. It is imperative that you pinpoint the funding types that are appropriate for your company’s objectives. This way, you can determine if an investor’s objectives are aligned with your own. Determine which forms of funding are appropriate for your long term goals as well. For some entrepreneurs, giving up equity will hamper the business in the short-term and/or the long-term. It is therefore important to determine what type of impact a new investor will make on your ability to lead and steer the company. Consider whether ceding a portion of control is really worth the money.

Target the Right Type of Investor

Be as objective as you can when attempting to determine which investors are ideal for your business. Perhaps your business is not suited for an investment from a venture capitalist. Maybe an angel investor or crowd funding is a more appropriate option. In general, venture capitalists are not the best investor target for local businesses. However, plenty of crowd funding participants are interested in funding small businesses. Do your homework before soliciting funds from these groups and you’ll boost the odds of finding an interested investor.

Maximpact experts are here to help you simplify the process to become investor ready. You can visit us on the web at www.Maximpactservices.com. Maximpact has 135  business development products and services designed to help your business evolve and meet its full potential. Our mentors and business experts will steer you in the right direction and jump-start your investor readiness. Visit www.maximpact.com now to find solutions you need for success.

Helpful Resource and Tool:  Maximpact Investor Read Check List

What’s new at maximpact and how can we help you

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Tens of thousands of promising projects and ventures are being developed around the world, but too many fail for one reason — the services they need to get to that next step cannot be found or are out of reach.

Finding the right people to support your project is time-consuming. Identifying the right expertise, selecting quotes and arranging contracts can involve costly trial and error. What if you could access a global network of providers that made the process of buying the right services quicker, easier, more effective and, ultimately, of greater value?

Maximpact gives you exactly that.

Maximpact Resource Centre is a global marketplace for finding, buying and selling services, providing access to hundreds of select experts and resources that are ready to be put to work on your project.

Our unique network of like-minded people, all focused on creating a good impact and a more sustainable future, offers unlimited opportunities for those with common interests and goals to work with one another.

Whether you are a social entrepreneur, non-profit, incubator, accelerator corporation and government body, development agency or funder, Maximpact offers a range of solutions for projects of all sizes, including:

Maximpact has served the impact and sustainability sectors for over 4 years, building a growing community of 80,000 that covers more than 200 sectors and sub-sectors. Over 135 business and project services with consulting experience in over 700 businesses and projects around the world. Through our network, you can connect with the right people to help your project succeed.

You no longer have to work alone. Maximpact is your infrastructure, providing a network that brings many benefits. Join one of our global communities that best suits your needs, including entrepreneurs, consultants and many more. We believe that together and with the right environment, a network of positive, like-minded people can make a meaningful and positive impact for us all.

Asian Development Bank Backs Financial Access for SMEs

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By Sunny Lewis

MANILA, Philippines, September 11, 2015 (Maximpact News) – The backbone of Asia’s economies are small and medium-sized enterprises (SMEs), but these companies need better access to finance to grow and generate new jobs for the region, says a new Asian Development Bank report.

The Asia SME Finance Monitor 2014, which assesses 20 countries in developing Asia, finds that SMEs make up an average of 96% of all registered firms and employ 62% of the labor force. Yet they contribute only 42% of the region’s economic output.

“Most of Asia’s smaller firms are faced with difficulties in obtaining finance,” said ADB senior adviser for sustainable development Noritaka Akamatsu, at the September 2 introduction of the “Asia SME Finance Monitor.”

“Asia has millions of SMEs but few of them are able to grow to the point where they can innovate or be part of the global supply chain,” said Akamatsu. “To do this, they need more growth capital and opportunities to access various financing channels.”

The bank takes the position that government in the region need to help SMEs become more competitive and able to participate in global value chains.

Limited access to bank credit is a persistent problem in Asia and the Pacific. Lending to SMEs has declined over the course of the global financial crisis and in 2014; they received only 18.7% of total bank loans.

Several countries have made progress tackling this crucial issue.

Papua New Guinea and the Solomon Islands have made it easier for companies to borrow using movable assets as collateral, Indonesia and the Philippines have introduced mandatory bank lending quotas to SMEs, and Kazakhstan and Mongolia have encouraged loan refinancing schemes.

Still, the region needs to further develop credit bureaus, collateral registries, and credit guarantees to expand financial outreach, particularly in low-income countries, the report said.

The nonbank finance industry, which typically includes finance companies, factoring and leasing firms, for example, in Asia and the Pacific is still too small to meet the financing needs of SMEs, with its lending only one tenth of total outstanding bank loans in the region.

The bank says governments need to put in place comprehensive policy frameworks to help nonbank financial institutions expand their SME financing options.

Ongoing efforts to open up the equity markets to SMEs would also help provide SMEs with the long-term financing they need to mature.

On Wednesday, the bank and the Washington, DC-based global research and development organization World Resources Institute (WRI) announced a new knowledge partnership to support Asian economies toward inclusive and environmentally sustainable growth

The partnership is rooted in common goals and complementary strengths on climate change, energy, cities, water, forests, food, governance and finance.

“We see this partnership combining the intellectual, technical and financial resources of ADB with WRI’s expertise from its global network to jointly deliver solutions to sustainability challenges on the ground,” said Carmela Locsin, director general of ADB’s Sustainable Development and Climate Change Department.

Dr. Andrew Steer, WRI president and chief executive, is enthusiastic about the new endeavor. “There is no doubt that sustainability challenges will not be solved globally unless they are solved in Asia,” he said. “WRI is committed to closely with ADB and other partners scale up solutions in Asia, and to bring these learning’s to the rest of the world.”

PHOTO: Market in Manila, Philippines (Photo by Wayne S. Grazio creative commons license via Flickr)

Social Investors vs. Social Businesses: Who will win the struggle for the future of SRI investing?

little box boxer knocks out dad boxerBy Marta Maretich @maximpactdotcom

We all like to talk about how the social, responsible and impact (SRI) investing sector is growing—and current research indicates that it is flourishing, with more capital and a wider range of investors now entering the field.

All that is good—and it’s what we’ve all be working for. Yet if there’s one thing experience has taught us about deploying the new market approaches to generating social and environmental benefit, it’s that the detail matters at least as much as the big picture.

A closer look at the way the sector has developed in recent years reveals more than just growth: There’s been an important shift in the story we’re telling ourselves about SRI investing. A movement that began with an emphasis on social entrepreneurs and social businesses serving the needs of beneficiaries has become preoccupied with investors and the mechanisms of the marketplace. What caused this shift to happen? And is it necessarily a bad thing for SRI investing?

Changing the subject

As we’ve tracked the growing body of research documenting the exponential growth of the SRI marketplace, we’ve noticed something strange:

Once most of the literature in the field came from social investors, like Root Capital, and accelerators, like the Skoll Foundation, who were actively engaged in developing socially beneficial businesses.

Today the focus has shifted away from social businesses and their beneficiaries. Instead, sector bodies, like the WEF, the G8 Social Impact Investment Taskforce, UK SIF and USSIF, as well as big financial advisory firms (EY, Deloitte, Citi to name just a few), are turning their analytical lenses on investors and markets in an effort to demonstrate (and, in some cases, capitalize on) the potential of the new SRI investment approaches.

In a sector that has its deepest roots in social entrepreneurship, microfinance and microlending, this change may seem surprising, even worrying. Why has it happened?

1. Investors demand attention

First, investors are driving the market for SRI investing and this has lead financial firms and other analysts to study them, and their investment habits, more intensively.

As one example, a USSIF trend report for 2014 tells us that: “Money managers increasingly are incorporating ESG factors into their investment analysis and portfolio construction, driven by the demand for ESG investing products from institutional and individual investors and by the mission and values of their management firms. Of the managers that responded to an information request about reasons for incorporating ESG, the highest percentage, 80%, cited client demand as their motivation.”

This is one more piece in a growing body of evidence that shows personnel in financial firms finally waking up to the fact that their clients are interested in SRI investing. At the same time, they’re realizing that the ability to use these approaches is likely to be an important selling point for their businesses in the future.

This realization comes rather late in a sector that saw small, socially concerned family offices, like Omidyar, pioneering the practice of impact investing back in 2007. But with a new generation of private investors, led by wealthy young millennials and women, now asking for SRI investment options, the message is finally getting through. Mainstream financial firms are focussing more of their attention on socially-motivated investors and promoting SRI offerings to attract what they now realize is a growing client base.

2. Mainstreaming forces a market focus

The second reason for the focus on investors and markets has to do with the recent raft of mainstreaming initiatives for social investing.

In an effort to draw larger investors into the SRI marketplace, these initiatives sought to gather sector information, such as existed, into reports aimed at larger investors. The reports were designed to demonstrate that social investing is, in fact, a real market.  They presented their case in the language of the mainstream and included statistical data, graphs, tables and pie charts—the works. Everything about them was engineered to convince the heavy hitters that SRI investing was something they could engage in securely, responsibly and even profitably.

Several of the most important reports in this vein have been produced by the WEF as part of a series aimed at large institutional investors, including insurance firms and pension funds. The G8 Social Impact Investment Taskforce and its various working groups also produced material aimed at the largest investors including national governments thinking of entering the SRI market.

All this is a world away from the early literature on social investing, which emphasized its impact on social entrepreneurs and beneficiaries, often people in emerging economies and those at the bottom of the pyramid.

Yet the motives behind the mainstreaming push were good. They reflected the commitment of a few far-seeing financiers, like Sir Ronald Cohen, who realized the potential for scaling social and environmental benefit through using the powerful mechanisms of global finance. And, to judge from the buzz around ESG at Davos this year, the approach has been successful in getting mainstream finance to take SRI more seriously.

Aren’t we forgetting something?

This suggests that the shift of focus to markets and investors was needed to get bigger financial players to engage with social benefit. Yet in other ways the rush to mainstream may have been a distraction from some of the most important challenges still facing our sector.

These include fundamental questions about the role of business in society and the role capital plays in supporting the development of companies.

The mainstreaming of SRI investing, though it may be beneficial, doesn’t challenge the status quo behind the international capital markets. Rather, it works with the prevailing forces of global finance in an attempt to turn at least some of them in a more favorable direction. This approach is pragmatic—and its unthreatening nature partly accounts for its popularity at places like Davos—but for some in our sector it doesn’t go far enough toward bringing about a permanent change to the way we do business.

On a more down-to-earth level, the recent focus on investors and markets leaves out what many think is the most important element of all in this equation: Socially beneficial businesses.

We have a lot of experience in operating for-profit businesses and non-profit organizations that deliver social benefit, but socially beneficial businesses are still a relatively new kind of animal to us. Despite progress in the sector, we still have a lot to learn about how to operate companies that are financially sustainable and able to deliver extra-financial benefits at the same time.

What really matters

The commitment to pursue benefit alongside profit, when genuine, touches every aspect of a business. Leadership, governance, operations, compliance and reporting (among other things) are all affected and we need to understand much more about how this works in practice. The influence of investors, especially those that take an active role in governance, is yet another factor, still little studied or understood, in the development of social businesses.

With so much still to learn about how to “do” socially beneficial business, the recent emphasis on investors and mainstreaming markets can seem misplaced. However, it makes sense in one important way: Only by doing more socially beneficial business will we ever have a chance to find out what really works and develop effective models. And only by attracting sufficient capital will we have the opportunity to do more socially beneficial business.

Time to re-focus—again

So, should the story of our sector be one of global financial markets and canny investors, or should it be one of heroic social entrepreneurs and white-hat social businesses?

The answer is: It needs to be both.

But now that the larger markets and a more ample pool of investors are showing interest, it’s time for the sector to shift its focus back to actually making socially beneficial businesses work across a range of global contexts.

It’s emerging that one of the dangers of mainstreaming is that social businesses can find themselves forced back into the mold of regular companies with no social benefit goals. To avoid this, they need clearer roadmaps for how to manage and develop their companies, especially as they grow to scale. Investors and markets also need to find better ways to engage with socially beneficial businesses in order for the partnership to work successfully.

More research in both these areas is needed. The question is: Who will do this work and so help write the next chapter in the ongoing story of socially beneficial business? Could it be you?

Women Rule: Why the Future of Social, Sustainable and Impact Investing is in Female Hands

Group of female social investors

By Marta Maretich @maximpactdotcomMaximpact.com

In the early days of the social investing movement, women and girls were arguably seen more as program beneficiaries than financial movers and shakers.

Social lenders changed their view when they realized that focusing initiatives like microfinance lending on women turned out to be the most effective way to make whole communities more prosperous. This early insight quickly led to further programs targeting women, including special prizes and support networks for female entrepreneurs and the advent of gender lens investing—an approach to creating female-centred portfolios that puts capital behind women in a more systematic way.

Positive as all this was, things have moved on significantly in the world of social investing. No longer only the beneficiaries of social finance, today women are building a complete ecosystem of social investing that has female financial power at its heart.

Women are wealthy—and socially conscious

Global wealth demographics have their part to play in this trend. Women—or at least some women—are richer now than ever before. And they’re soon to get even richer.

Taking the US as one example, women now control almost half of the estates valued over $5 million and they stand to inherit some 70% of the $41 trillion to be inherited over the next four decades in the largest intergenerational transfer of wealth the world has ever seen. By 2030, roughly two-thirds of the private wealth in the US will be held by women.

This wave of wealth is set to land in the laps of female investors who have been shown to have a more positive attitudes toward social investing than their male counterparts. Half of wealthy women in a recent survey expressed an interest in social and environmental investing while only one-third of wealthy men did. 65% of women thought social, political and environmental impacts were important, as compared to just 52% of men.

Female advisors, step up!

Surveys show that financial firms are not currently meeting the needs of this growing pool of wealthy female clients and many are taking special measures to reach them. Part of the problem is that there are still so few female advisors out there: Only three in 10 advisors are women, according to a 2013 Insured Retirement Institute study, yet 70% of women seeking advisors say they would prefer to work with a woman.

The good news is that the female advisors now at work are already a positive force for social investing. A report by the Calvert Foundation showed female advisors to be more interested in using sustainable investing funds (59%) than their male counterparts (39%). They were more likely to know about alternative investing opportunities and more likely to offer them as options to their clients, too.

More female MBAs?

Boosting the number of women in financial advisory roles could, then, be a way of extending the reach of social investing to more women. But where will they come from?

In theory, a new generation of female advisors is currently learning its trade in business schools around the world. Yet due to what’s often condemned as a male-dominated culture, many MBA programs have poor track records of enrolling and retaining female students and this has the effect of limiting the number of female graduates.

That may now be changing with more business schools making concerted efforts to become more female-friendly in order to attract women students. Some, like Harvard, are actively reaching out to women in an effort to create a more balanced student body. Still others have succeeded and now boast student bodies where females outnumber males. It’s a positive move and, if their efforts pay off, we may see an increased number of female financial advisors starting to come through the system.

When they do, they may well be better prepared to advise on social investments than their predecessors. In a parallel trend, many MBA programs are now offering more training in social, responsible and impact investing to all students, including female ones. This means that more female business graduates will come out with degrees that prepare them to take up active roles in the social investment marketplace.

Women-run investment firms

At the same time, female financial expertise is taking the helm in more direct ways through a growing number of women-run venture capital firms and all-female investor networks. Firms like Cowboy Ventures, Aspect Ventures, Broadway Angels and Aligned Partners are run by women, for women investors.

Their presence in the start-up marketplace disproves the myth that women investors are risk averse. And, even when the firms don’t specifically target women-run businesses, they seem to be having a catalytic effect on female-founded companies: Women-run investment firms reported receiving more pitches from female entrepreneurs because of their networks. As a consequence, a greater percentage of their investments—up to 40% in some cases—have been in companies started by women.

Elsewhere, women are establishing venture funds specifically targeting female entrepreneurs and focusing on female markets. High Note, run by Genevieve Thiers, seeks to will invest in companies run by women who are solving problems for women.

Women in the boardroom — finally!

Female venture capital firms are a good thing for socially conscious female investors, and, from the looks of it, a good thing for female-run businesses, too. But there’s an even more significant advantage to them: they will put more women on the boards of more companies.

How does that work? Increasingly, venture capitalists claim voting seats on the boards of the companies they invest in. With more female VCs, more of those seats will be occupied by women, giving them more influence over the way businesses grow and develop.

There’s no guarantee that the presence of VC women on boards will have a positive effect for social investing — women, after all, can be just as profit-obsessed as men. Yet, given the interest shown by women in using their capital to back social and environmental good, it certainly could. It will also go some way toward correcting the woeful lack of women on corporate governing boards generally. (Other methods, including quotas, are being tried in some countries, including Germany and the UK.)

In social enterprises, the gender picture in the boardroom is slightly more female positive than the norm. Social Enterprise UK’s 2011 State of Social Enterprise Survey found that 86% of social enterprise leadership teams included at least one female director. By contrast, only 13% of the members of the Institute of Directors, a UK organization for corporate board members, are women.

Looking to the future

Capital, expertise and leadership: these are some of the things more female involvement promises to bring to the social investing sector. Female investors, working with female advisors and investment firms, will be able to do more for female social entrepreneurs as well as social businesses who serve the needs women.

This is a long way from women as beneficiaries and it’s all good. But it’s important to point out that it won’t only be women who benefit from women becoming more engaged social investors.

Changes to the gender balance in social investing are part of a wider expansion in the role of women in business and finance. With greater influence, more autonomy, increasing confidence and shedloads of wealth behind them, women are increasingly in a position to change the way the world invests—and do great things for the planet and its people.

Can’t wait to see what happens next.

Asset Managers Need New Skills to Meet Millennials’ Demands for Social, Sustainable and Impact Investing Opportunities

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By Marta Maretich @maximpactdotcom

It’s clear: the global investment landscape is changing. Oil, that mainstay of portfolios, is on the slide. Markets long dominated by pension funds and insurance companies are now seeing greater international ownership of companies and the rise of other players such as hedge funds and private equity firms. Investment horizons are shortening. Regulation is increasing.

These factors are creating a challenging climate for financial asset managers who need to adapt to the new realities of a changing investment marketplace.

To make matters more complex, investor profiles are changing, too. As older investors pass on their wealth, a new generation of socially conscious millennial investors are demanding more opportunities to put their money into investments that produce social good and avoid doing environmental damage. The effect of this trend is already measureable, with studies, like this one from Eurosif, showing all sustainable and responsible investment strategies continuing to grow at a faster rate than the broad European asset management market.

This means that, while asset managers are getting to grips with a new financial picture, they’re also looking for ways to serve new kinds of clients. Many of them already see the writing on the wall: in a recent survey by First Affirmative, a financial network, 49% believed that “the needs and interests of younger investors will have to be catered to if the industry is to thrive.” Female asset managers are ahead of the curve, the same study shows, with a higher rate of awareness when it comes to impact, social and sustainable markets and a greater likelihood to already be offering such options to clients.

The age of the “multilingual” asset manager

Change may already be happening, yet the mainstreaming of socially beneficial investing—and particularly impact investing, which has grown faster than any other part of the market—means that asset managers across the industry will need to upgrade their skill sets and become “multilingual” when it comes to creating investment strategies.

Recent thinking about the future of the impact investing sector flagged the importance of the “multilingual leader”—an individual or team with an array of cross-sectoral skills that create the right mix of social commitment an financial know-how to lead beneficial businesses.

The rise of popularity in social and impact investing will demand that asset managers become “multilingual” in a similar way. In this context, multilingualism will mean bringing all the traditional skills of asset management to the table, and adding to these new tools and expertise to meet the demands and opportunities of today’s more diverse marketplace.

But what, specifically, are these new skills and capabilities?

New skills for a new investing landscape

Practices are evolving even as the market for impact, sustainable and social investing expands, but some core competencies have been identified so far.

Familiarity with diverse investment markets: Lack of familiarity with new kinds of investing is often cited as a main reason why many asset managers don’t offer these options to clients. Asset managers with an eye on the future need to familiarize themselves with the ever-growing array of opportunities across the sector. These include private equity impact investing, social investment bonds, ESG screened portfolios, themed funds, and now even electronically traded funds in areas like cleantech, water and edutech.

In a market where innovation is extending the range of options on a daily basis, keeping up can be a challenge. Tuning into the conversation by following the work of leading institutions such as GIIN and the IIPC, websites like GreenBiz , and good twitter feeds such as @pioneerspost  and @IAimpactassets can help newcomers find their way. 30 Must-Follow Twitter Feeds for Impact Investing. For a mainstream take, large media sites like Forbes  and Huffpost and financial publications like The Economist and the FT increasingly cover the social investing trend in terms asset managers can relate to.

Confidence with more information: As digital natives, millennial investors have higher expectations when it comes to communication and transparency, especially where social and environmental impact is concerned. In this, they are in step with a global trend toward more stringent regulation leading to higher demands for disclosure and transparency on the part of companies. Today’s young investor is likely to be more actively engaged than her older predecessor, demanding timely, accurate information on investments to be delivered in a convenient and easy-to-grasp form.

This has a host of implications for asset managers offering socially beneficial investment options to their clients. First, they will need to be able to evaluate the reported data of potential investments accurately and align investor concerns with outcomes in a given strategy. An ability to see beyond claims and accurately judge the quality and reliability of the various reporting practices used by companies will be key. Asset managers will need to choose investments that can deliver a high level of accountability and transparency in both financial and extra-financial performance, for example ones that adopt extended reporting practices and use new standards for sustainability like SASB.

Faster, detailed, two-way communication: Importantly, they will also need to find effective ways to communicate this information to clients more quickly and at every point in the investment cycle.

The practice of annual and quarterly reporting is already being viewed as insufficient by many investors, and real-time, on-demand reporting is now a reality inside some companies. What this will mean for the wider investment marketplace is still not certain, but it’s clear that asset managers will need to be prepared to handle unprecedented levels of information and use it effectively to build strategies and also to communicate with clients.

And they can expect communication to be an increasingly two-way street. With better informed, socially conscious clients wanting more of a say in how their money is invested, the ability to receive and manage investor feedback will be a key skill for asset managers. Satisfying clients will mean keeping pace with their evolving social and environmental objectives and responding quickly to their concerns.

Changing the industry from within

Mainstream finance has made strides when it comes to embracing sustainability, social benefit and impact investing. Driven by government regulation and supported by high profile initiatives like the G8 taskforce, the movement is becoming part of the broader market ecosystem. Industry giant BlackRock’s appointment of Deborah Winshel, a multilingual leader if there ever was one, is one example of a changing mood in finance. Another is the high profile of climate change and sustainability at Davos this year.

Asset managers obviously have an important role to play in giving more investors access to the expanding marketplace for beneficial investing. Their influence, however, goes beyond the purely commercial and is likely to be felt on a deeper level.

Increasingly, asset managers themselves form part of the groundswell toward creating a new kind of financial marketplace. Many are shifting out of traditional investing to take up roles in impact and sustainability. The next generation is demanding more training in innovative financial approaches from their MBA programs, while organizations like GIIN are offering training for professionals already working in the field.

At the same time, inside many large institutions, committed individuals like Harald Walkate of Aegon are quietly at work teaching other asset managers how to build more impact into existing portfolios and how to create investment strategies that maximize social and environmental benefit while delivering profit.

While not a “skill” as such, this new outlook on the part of asset managers may be the most valuable thing they bring to the field of beneficial investing. It will contribute to reshaping the financial landscape and, in highly practical ways, help establish socially beneficial finance as a viable choice for investors of all kinds. For asset managers, this mindset looks set to be one of the factors that will shape their working lives in coming years, demanding from them new skills and new sensitivities and profoundly changing their relationship with markets—and with the millennial clients they serve.

Does the Social Investing Sector Need Activist Investors?

 

devil shadowActivist investors are changing the terms of engagement between businesses and investors. What will that mean for social businesses and the investors who back them?

By Marta Maretich @maximpactdotcom

Social investing continues its march toward the mainstream. Sector research shows a wider variety of investors—including pension funds, mutuals, and governments along with an array of private investors—demonstrating an interest in capitalizing the blended bottom line. This is all to the good, yet the growth of our industry is bound to expose socially beneficial companies, many of which have led sheltered existences in the care of mission-driven investors, to the stormy seas—and resident sea monsters—of mainstream capitalism.

Consider the growing importance of activist investors. These are hedge funds that take a small stake in a company—typically around 5%—and then launch an aggressive campaign to determine strategy and/or change leadership. The activists have gone into overdrive in recent years, carrying out successful campaigns to unseat powerful CEOs, like Microsoft’s Steve Balmer, break up giant corporations, such as Yahoo, and win themselves board seats in corporate giants like PepsiCo. Their aim is to maximize their own profits by re-engineering their investees’ businesses.

Once known as corporate raiders and asset strippers, these bad boys of capitalism are now attracting positive media attention, notably from The Economist, which recently concluded that, overall, activists are a force for good in the marketplace. Their interventions actually can make organizations stronger in the long term, the journal says, bringing more rigor to companies and “waking up” passive institutional investors. Other commentators have reached similar conclusions. Like it or loathe it, there’s no doubt that the threat of the activist investor is a now a force be reckoned with in business; even the biggest, oldest and most influential corporations ignore it at their peril.

Are they coming for us next?

With activism on the rise and activists winning new respect, should the social investing marketplace start preparing to repel attacks in the near future? Probably not.

So far activist investors have only gone after the biggest prey, targeting industry giants, like Dow Chemical and Ford, that they deem to be underperforming. Although rampant in the United States, they’ve had limited impact in Europe, which has a different corporate culture, and hardly any at all in Asia. The danger of them turning their unwelcome attentions on the small fry of social investing is, as yet, remote.

And yet the trend toward activism points to larger changes in investing culture that social investors and mission-driven businesses should pay attention to:

Investors, even small ones, are more powerful than ever. Activist investors are able to wield power with only a small stake in the company through launching proxy campaigns and winning other investors, often passive index funds and institutionals, over to their way of seeing things. The activists may have perfected the mechanisms for forcing change, but they aren’t the only ones capable of putting them to use. It’s certainly possible to imagine a future where investors use similar tactics to take over other kinds of organizations to suit their own ends.

Shareholders are increasingly taking an active stance. The example of the activists is forcing other kinds of investors to reexamine their relationship with the companies they invest in. Index and pension funds, normally passive investors or “lazy money”, are being increasingly drawn into debate with company managers about strategy through the activists’ proxy campaigns. Meanwhile, the “bossy money” of private equity now has to look over its shoulder for the activists, preempting their interventions with forceful strategies of their own.

The importance of the aligned investor

The implications of these changes are likely to be felt most strongly when social investors and businesses come in contact with mainstream investors and markets, for example when they raise capital to scale up. Yet with activism becoming the new normal, other investors, including ones with social credentials, may feel the need to change the nature of their relationships with investees, becoming even more active in shaping strategy and influencing governance decisions than they already are.

The trend toward activism places a new emphasis on the motivations and conduct of investors. For social businesses, more investor influence means that choosing the right investors, ones that will really and truly support the delivery of a blended bottom line over time, is more important than ever. For social investors, and equally for mainstream investors with ambitions to enter the social investing marketplace, the trend should be cause for some soul-searching. How far are they actually willing to support impact? How will they react if social benefit delivery impinges on profit?

More profits, speedy exits

Taking a step back, the phenomenon of the activist holds other lessons for social investors.

The aggressive activism we’ve seen in the mainstream is all about turning bigger profits from quick exits. The approaches taken by activists maximize their own short-term profits but, despite their claims to be doing a service for the market—by shaking up complacent, bloated corporate giants and making them more efficient—it’s debatable whether they strengthen the companies they attack. Activism has been blamed for deterring inward investment, draining money from R & D, and hampering employee training, all things that can add authentic rather than paper value to companies.

Today’s activists are not the right investors for the social sector, obviously, and their new respectability throws the difference between the social and mainstream investing sectors into sharp relief. Through their aggressive interventions, they’re managing to turn profits in a time of sluggish economic growth. It’s quite a feat, but it’s important to remember that’s all they do. They don’t prevent climate change, provide essential financial services, deliver healthcare, ease inequality or reduce poverty (except their own and their investors’). Clever and ruthless as the activists are, turning pure profit is child’s play compared to the complexity of delivering profit and measurable benefit on the same balance sheet.

A new definition for the activist investor

By implication, the social investing sector needs a completely different approach to creating value through investing in businesses and this will involve establishing a new model for the relationship between investors and businesses, one that is collaborative rather than confrontational. The sector is now gaining practical experience about how to achieve true  partnership, but a step further would be to replace the functional primacy of shareholders with the primacy of stakeholders.

For a variety of reasons, the interests of shareholders have come to dominate the world of mainstream finance, and this is what really lies behind the rise of the activists. For the social sector, finding legitimate ways to shift the focus away from shareholders to a wider perspective that includes beneficiaries, customers, employees, habitats and communities, could turn the tide. Doing this will mean continuing to develop the infrastructure of our sector, for example establishing more legal forms that protect directors who make decisions for extra-financial reasons, and persuading governments to adapt regulatory policy.

As we move toward the mainstream, it may also mean resisting the temptation to adopt the mainstream’s norms. Despite encouraging signs that the corporate mainstream is beginning to embrace aspects of the social agenda, especially sustainability, the success of the activists reminds us that the fat bottom line is still king, even when it comes with unquantified costs. Social investors need to continue to work with businesses to find better ways to transform capital into healthy businesses with positive impacts.  If we manage this, it will lead to a new, much more positive definition of the term “activist investor”.

After Davos: Lessons for Impact and Social Investors from the WEF 2015

By Marta Maretich @maximpactdotcom

Aerial photograph of Davos, Switzerland

Davos: Returning to normal after WEF15 but what will the forum mean for us?

The World Economic Forum has been and gone, leaving the Davos snow more than a little trampled. Now that 2500+ of the world’s most powerful people have flown home in somewhat fewer (it seems) than 1700 private jets, what do we know about what’s coming in 2015? And, more specifically, what lessons did the Forum hold for impact and social investors?

Impact and social investing are part of the global economic reality, so the larger trends identified at Davos will be felt in our sector, too. Quantitative easing in the Eurozone, the unpredictable fallout from the Grexit, the slowdown in growth in China and India, its surge in the US, will all shape the world economic outlook for 2015 and will inevitably have their effects on the social sphere. And yet it was interesting to notice certain issues — some our own favorite topics — were more prominent on the agenda than they have been in previous years.

Climate Change

The financial crisis pushed climate change off the agenda; the presence of Gore as the opening act at Davos seems to indicate that it’s now back on. The ex-US Vice President (and his musical friend Pharrell Williams) were on hand to drive home, once again, the message that we need to act fast to avert disaster. This can’t have been news to the delegates at Davos, all of whom have heard Gore’s arguments before and yet have presided over the increase in the use of fossil fuels we’ve seen in recent years.

Among those in the know, real indicator that things are changing was the advocacy of Lord Stern, Tony Blair’s climate change adviser.  At Davos, he argued cogently that fossil fuel is not, as it long appeared, cheap anymore, and that alternatives are now getting cheaper. Governments don’t have to make a tradeoff between growth and preventing climate change, he said, and his argument seems to be gaining traction in the world of business. It’s one that impact and sustainable investors have long understood, of course, but the mainstreaming of sustainability should bring new opportunities for impact investors and climate-friendly social enterprises alike, especially when it comes to collaborating with business and government.

Alternative energy

Related to the issue of climate change is that of energy, another hot topic at Davos. The energy landscape is changing, partly because of the wider acceptance of the reality of climate change, but also because alternative energy sources are coming into their own. A plunge in oil prices, due in large part to the availability of cheap gas from fracking, is driving oil-producing nations to re-examine their strategies, diversify their activities and rethink their future. It’s also fanning the flames of the divestiture movement, which is gaining ground as the value of fossil fuel stocks, for so long the central pillars of many portfolios, continues to fall.

For impact and social investors, this shift in focus will help in two ways. First, the exit of capital from fossil fuels could spur a renewed wave of investment in existing forms of alternative energy such as wind, solar and hydrogen, and in energy efficient technologies, all areas where impact investing has a track record. Second, turning away from fossil fuels will require more investment into developing new alternative sources of energy. Investment in energy R&D and in companies rolling out alternative energy solutions to new markets will be attractive opportunities for social investors.

Inequality

The specter of Thomas Piketty was found haunting many of the sessions at Davos. The French economist’s landmark tome, Capital in the 21st Century, has sparked wide-ranging debate about the nature and role of capital in our times. One of its impacts is to highlight the growing problem of wealth inequality, an important theme threading through many discussions at WEF15.

The Economist explains Piketty in four paragraphs

Different delegates working in different contexts and sectors interpreted inequality in a number of ways. Piketty is mainly concerned with the current dynamic that sees wealth in societies moving inexorably in one direction—upwards—and accumulating in the hands of fewer and fewer people at the top (such as those attending the Davos conference, for instance). Other kinds of inequality, however, were on the agenda, including the disparity between rich and poor nations, and among different groups, for example women and marginalized groups, within societies.

For impact and social investors, investments aimed at reducing inequality of all kinds are already part of the landscape and can take a number of forms. Affordable loans for college students, edutech that brings learning to those who need it, and provision of healthcare for girls and women, are all examples of investments that can help reduce inequality. Technology also has a role to play. Sheryl Sandberg, when asked by Arianna Huffington, opined that more technology, specifically access to the internet, and, less specifically, “more data” would bring more equality to the world. Social investments that extend tech to the tech-poor are already on the cards, but more work, targeted specifically on easing inequality, is needed from our sector.

Corruption and crime

In a recent blog, we showed why the impact and social investing sector should be putting its weight behind the growing global movement to fight corruption.  At Davos, corruption and crime were prominent on the agenda, an indication that the movement is now hitting the mainstream thanks to the efforts of campaigners like Global Witness. The connection between corruption, poverty and the health of markets is becoming clearer, as is the role of the business community in tackling this scourge. These topics and others were addressed in number of sessions and an issue briefing at the WEF. Impact and social investors should keep abreast of how this discussion develops and, in keeping with their commitment to ethics, adopt anti-corruption strategies wherever possible.

Changes to the way the world invests

The delegates at Davos showed a new level of interest in the way capital markets are changing, and this has implications for the impact and social investing movements. This change-consciousness was evident in this year’s sessions, many of which acknowledged, in different ways, a new mood and attitude toward investing in  mainstream markets. Yet it can be seen most clearly in the future projects funded by the WEF for next year. Projects on accelerating capital markets in emerging economies and direct investment by institutional investors, for example, point to trends in the markets that could be important for impact investors. Meanwhile. Phase III of the Mainstreaming Impact project has been cleared to move forward, led by Abigail Noble. If the excellent work coming out of this project so far is any indication, this will give us even more data to work with and deepen our understanding of the developments in our own corner of the financial world.

An insight into the things to come?

The World Economic Forum provides a fascinating snapshot of the forces that shape our global economy and thus determine the fate of billions—billions of people, that is, not only dollars. It gives us a fleeting glimpse of the individuals making the decisions and the merest hint of how things will go in the year to come. For our emerging sector, it’s vital to tune in to the lessons of Davos and learn what we can, especially if our aim is to one day become the mainstream that Davos represents.

And yet, in another sense, Davos may be less relevant to us than it first appears. As a guage of the status quo—what is now—nothing compares to it. But as a guage of what will be, it falls short. Piketty reminds us all that economics is, after all, not a hard science like mathematics, but a social science with historical underpinnings. Looking at the past is very helpful for understanding the present, as he ably proves. However it doesn’t necessarily help us predict the future with perfect certainty. For many, Davos is already the past. The future, if committed impact and social investors have their way, could be very, very different.

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The Evolving Meaning of Sustainability

By Marta Maretich  @maximpactdotcombaby hands plant

Sustainability is a key concept for our times. For impact investors who want to put their capital behind better ways of doing business, it’s an important indicator of investability. But what exactly do we mean when we say “sustainability” or “sustainable”?

The dictionary sheds a little light.

Sustainability:
1. Conserving an ecological balance by avoiding depletion of natural resources.
2. Able to be upheld or defended.

Originally taken from the biological sciences, the term sustainability first referred to conservation of natural resources. Though it retains this meaning, sustainability today can mean different things in different contexts. Sustainability in its classic sense and new uses of the term are proliferating as sustainability goes mainstream in business and popular culture.

The mainsteaming of classic sustainability

The definition is changing as the movement goes mainstream. More businesses are taking steps to incorporate sustainability into their operations as well as their performance metrics; national governments are regulating and incentivizing it in a number of new ways. Meanwhile investors are increasingly making non-financial performance, including sustainability, a priority when choosing where to place capital.

All this means that “sustainability” is an evolving idea with increasingly diverse interpretations. Most sustainability efforts still focus on the environment, however, with an emphasis on maintaining ecosystems and conserving natural resources for future use.

Sustainable forestry: Saving forest habitats has been an active area for impact investors. Despite the collapse of carbon markets, organizations like Rainforest Alliance are expanding their activities. Certification schemes like the FSC are helping sustainably sourced wood to become standard in building and consumer goods.

IrrigationSustainable agriculture: Impact intermediaries like Root Capital and development organizations like OPIC have developed successful models for promoting sustainability in agriculture. Encouraged by government regulation and subsidies, big agribusiness companies like Monsanto and multinationals like Coca Cola, are now pursuing sustainability strategies.

Sustainable water use: With changing climate in places like California driving the adoption of more sustainable water policies, businesses and services are springing up to meet a newly-defined demands. Driven by regulation, large multinationals including Unilever are beginning to look at water sustainability from a number of angles: their own use, water use by suppliers, and the water needed to use their products.

Sustainable mining: Mineral extraction is a sector with a raft of social and environmental issues and has been avoided by many social investors. That may change as groups like the IIED work to build the commitment to sustainability across the industry.

Sustainable energy: The focus is on wind, water, solar and other forms of generation and storage, such as hydrogen cell batteries. A popular area for impact investors, even designer Vivienne Westwood has committed GBP£1 million to sustainable energy. Big fossil fuel companies are also putting money into it. Though their motives are often questioned, it is a sign of how far the notion of sustainability is becoming part of the fabric of corporate life in the developed world.

Sustainable consumer goods

Sustainability has taken on a new meaning in consumer markets as it has become a persuasive selling point for everyday goods and services. Public enthusiasm remains high for brands with sustainability credentials and sustainable practices, far from being unusual, are now what consumers expect of businesses.

Sustainable fashion: The fashion industry has been thriving in a throwaway culture, but the photograph of a lady in a dress of flowerssustainable fashion movement hopes to change attitudes and move toward sustainability. To keep up with this vibrant movement, follow top tweeters in fashion sustainability and check out the five top sustainable fashion stories of 2014.

Sustainable building: Changing the way we build and design cities could make a huge difference to our future and, increasingly, governments are regulating for sustainability in construction processes, materials and design. This is reshaping the construction industry, especially in the developed world. Construction companies are adapting the way they source and use products and materials and new education centers, like this one at Harvard, and this one in Edinburgh, are training the sustainable builders of the future.

Sustainable tourism: More people are taking vacations than ever before, but increasingly tourists want to avoid damaging the environment, squandering natural resources or hurting local communities. The global travel industry is waking up to this fact and offering sustainable tourism to the masses. Portals such as Sustainable Tourism Online provide go-to resources for the public and professionals who want tourism to be good for the planet and the communities in host countries.

Evolving meanings: Financial sustainability

Beyond its original, environmental meaning, sustainability has recently developed a financial meaning that applies in some sectors. Governments strive to make public services “sustainable”. Non-profit organisations try to create “sustainable” programs to deliver mission. In this context, sustainable can mean both environmentally sound or financially viable for the future or both.

Sustainable healthcare: Concerns about being able to afford healthcare for citizens in the future is driving innovation in healthcare delivery and finance models.In a bold move, the UK health service, the NHS, is embracing both environmental and financial sustainability.

Sustainable transportation: Concerns about climate change, contracting budgets and public pressure are encouraging many governments, including China’s,  to organize public transportation policies around sustainable principles, in both the financial and evironmental senses.

Sustainable finance: In a final evolution, “sustainable finance” seeks to apply the principles of sustainability to banking and investment. Impact investing and its sister disciplines across the spectrum of social finance including responsible investing, ethical investing, social investing and microfinance form part of this growing movement, which seeks to revolutionize the use of market methods to create better social and environmental outcomes.  Sustainable finance methods are now being put to use in a wide, and growing, range of contexts, with new techniques and approaches developing across the sector. For more on sustainable finance,  browse the top five stories in sustainable finance for 2014.

Conclusion

Sustainability has moved from the margins to the mainstream and is now a widely-accepted approach being incorporated into many areas of business, finance and the consumer marketplace. As it continues to expand its influence, sustainability will continue to evolve new meanings and serve as a paradigm for conservation and wise stewardship of the environment, human and natural resources and, now, capital. This movement is positive, but for impact investors seeking sustainable investments, it will mean taking a closer look at all claims for sustainability and determining exactly what is meant.

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Why corruption is a problem for impact investors—and what we can do about it

Money in pocketBy Marta Maretich, Chief Editor @maximpactdotcom

“Corruption is a disaster for development. It wastes the resources that can build sustainable economies, guts confidence in government, and fuels inequality and conflict. So common sense dictates that massive global efforts to end poverty must find a way to fight corruption, or they will fail.”  —Dana Wilkins

So writes Dana Wilkins, an analyst for Global Witness, the anti-corruption campaigning organization, in her recent blog on the corrosive effect of corruption on global efforts to fight poverty. Her remarks highlight the problems corruption creates for development aid, but every word of it should set alarm bells ringing for impact investors, too.

Because, if corruption is a problem for the development aid sector, it’s twice the problem for impact investors. Here’s why:

Corruption strikes simultaneously at both of impact’s stated aims: profit and benefit. It cripples the growth of business and drains investor returns while it chokes off the possibility of creating social and environmental benefit. Sustainable, socially beneficial businesses are unlikely to thrive in corrupt contexts. Impact investors who put money into them run risks they may not initially see or understand, including reputational risks. Impact measurement and reporting, too, can be tainted by corruption, making it impossible to assess the real effects of an investment.

All this makes corruption fatal to the success of impact. Worse, by investing the wrong way, in the wrong places, investors could actually harm the communities they want to help.

Far from fostering economic development, careless investing actually makes corruption worse by propping up a sick system. As Wilkins told us during a recent conversation, “Investing blindly in corrupt contexts can exacerbate the political and economic conditions that undermine long-term development”. And, by pouring good money into corrupt systems, impact investors can come to be seen by local people as part of the problem rather than part of the solution.

Steering clear of rotten deals

So what can impact investors do to avoid getting caught in the corruption trap?

Due diligence is key, according to Wilkins, and should never be stinted on when making an investment. Careful due diligence processes that take account of corruption activity and provide insight into local conditions will help investors steer clear of rotten deals and find healthy ones. “Impact investments must be informed by due diligence and an in-depth understanding of the political economy of corruption in the country,” she told us.

This holds true for investments anywhere in the world, not only those in countries that are infamous for crooked dealing. Although many high profile corruption cases have come out of the developing world, like this one involving Nigeria, it’s important to remember corruption is a global scourge that taints developed economies, too.

Global Witness’s current campaign focuses on getting western economies, especially the US and the UK, to ban anonymous companies, the unaccountable entities often used to launder money stolen through corruption. And, as Global Witness founder Charmian Gooch points out in her award-winning TED talk, theft on such a massive scale is impossible without the collusion of reputable banks and multinationals.

For impact investors, this means taking a hard look at any investment before committing capital to it, regardless of the size, stature or location of the business. By making it a practice to look beneath the surface of deals—a thing all investors would be wise to do—they can choose investments knowledgeably and avoid putting money in the pockets of criminals.

Providing anti-corruption leadership

Avoiding bad deals is one thing, but what else can the impact sector do in the fight against corruption?

Driven by a dual commitment to good business and social and environmental benefit, our sector could (and should) take a leadership role in the anti-corruption movement. Establishing good governance and reporting practices across the impact investing industry will be key, but the first step is to embrace the principle of transparency, according to Wilkins.

“Impact investors should be 100% transparent about the way they do business and who they do business with,” she told us. “This can have a knock on impact of helping improve transparency and accountability more generally, and save investors being seen as complicit in the corruption that is bleeding so many developing countries dry.”

Beyond this, the sector can do more by supporting the work of anti-corruption campaigners like Global Witness and other groups, like Global Financial Integrity. Global Witness is now pushing for anti-corruption to be embedded in the UN’s Sustainable Development Goals, the post-2015 successor to MDGs, a move that could catalyze change across the development sector and give support to wider efforts to end corruption.

Joining the conversation about anti-corruption policy, like this one lead by the US government, is another way the sector can exert influence. Finally, supporting change from within industries through careful investment combined with vocal support for internal anti-corruption activists is another way to help. This will be crucial in industries where the instance of corruption is high—forestry, land, oil, and minerals top the list.

The world is sick of corruption. This survey of millions of people identified “honest and responsive government” as priority #4 out of 16; that means one free of graft, bribery, nepotism and fraud. And it implies a clean operating environment for business, too. The impact investing sector now has an opportunity to respond to this call for fair dealing and put its growing influence behind global efforts to bring change.

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The Future of Investable Social Finance

by Marta Maretich, Chief Editor @mmmaretich @maximpacdotcom

The Future of Investable Social FinanceWith the beginnings of a track record to back up its claims (including that much longed-for evidence of successful exits) finance remains a solid bet for impact investors. The future looks positive as a new generation of impact-backed financial service providers hone their skills, diversify their products and discover untapped markets of underserved clients in different parts of the globe.

Many of these customers will be in emerging economies, where demand will be fueled by growing populations needing access to financial services. There will be a continued need for small-scale lending to individuals, such as that provided by groups like Kiva, as well as philanthropically motivated programs to provide vital financial services at the bottom of the pyramid. Increasingly, however, there will be a demand for more sophisticated services and products in emerging economies as populations there urbanize and become more affluent.

These consumers will be joined by successful local companies, which, as they scale up, will need access to more sophisticated services on a bigger scale. Evidence suggests that such companies may still lack access to mainstream banking services, and so will need to rely on specialist finance providers in order to grow and gain access to world markets. Experienced social finance providers, like Root Capital, are already beginning to expand and diversify their offerings to meet the needs of maturing market sectors.

To effectively serve these markets, financial providers will need local knowledge and a good feel for the needs of specific consumer groups in specific locales. Providers with experience in certain markets; for example those that have grown out of philanthropic programs to become self-sustaining for-profit businesses; will be well positioned to use their knowledge to successfully, and profitably, meet client needs. Impact investors should be on the lookout for finance providers with a track record that stretches over years and gives evidence of deep local knowledge and connection.

The developed world also holds growth potential for finance businesses with impact aims. Though countries like the UK and the US are well-served with mainstream providers, many individuals still lack access to affordable credit and other services. Some are forced to rely on expensive payday loan services and other potentially exploitative forms of credit, often compounding their debt problems. Meanwhile, many poor citizens remain “unbanked” for a variety of social and economic reasons. There is scope for alternative finance providers, some working in cooperation with local governments, to provide solutions to these and other finance-related issues.

Home finance should be another area of focus in developed economies. Kicked off by poor practice in mortgage lending, the financial crash saw mainstream lenders backing away from what they saw as risky markets, leaving a gap in service provision to poorer communities that can be filled by specialist financial providers under the umbrella of “community development finance“. Increasing environmental regulation, and the need to bring down energy spending, will drive government-backed home improvement initiatives (such as installing insulation and clean energy systems) and green construction programs, which in turn will require financial facilities to see them through.

Impact investors can expect to see more regulation and oversight in the social finance market in the future, especially in emerging economies. This is good news. Though it may affect profits, oversight will also make finance more attractive for mission-driven investors who want to back positive change. The application of impact metrics and quality ESG standards will be key to distinguishing good financial providers from not-so-good ones, and this will help investors choose the best places to put their capital. In time, the evolution of metrics, rankings and accreditation for social finance companies will help make practice on the ground more effective as the industry matures and grows.

These are just a few examples of what the future may bring for impact-backed financial service providers. In brief, there is great potential for impact investors to get behind innovative businesses bringing the benefits of appropriate, ethical finance to underserved markets. The potential for impact is huge; and the positive results are already being seen in some sectors. Having already come a long way from its humble origins in microlending, the practice of socially responsible finance provision continues to grow in popularity and evolve to meet a wide range of needs. Impact investors have played an important role in its success so far; and there’s no reason why they should stop now.

This blog is part of a three part series on impact investing in finance. Read part one: Why Finance is (and Always Has Been) an Important Sector for Impact Investors. Read part two: A Guide to the Different Forms of Impact-backed Finance.

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A Guide to the Different Forms of Impact-backed Finance

by Marta Maretich, Chief Editor @mmmaretich

Impact investors have put capital behind mission-driven finance providers since the earliest days of the social investing movement. Now the industry has grown and diversified to offer a wide range of finance provision models and approaches for investors to back.

Microcredit

Microcredit was one of the earliest forms of social impact finance and it remains one of the best known. The idea of lending as a way to improve the lot of the poor goes back to the origins of finance, but its modern version was crystallized in the 70’s when early advocates like Muhammad Yunus began to experiment with using finance provision as a tool to lift communities out of poverty.

Microcredit involves making small loans available to poor people, especially those traditionally excluded from access to bank loans, through programmes designed to meet their particular needs and circumstances. Loans are usually small and short-term. Collateral is often replaced by a system of collective guarantee groups whose members are mutually responsible for ensuring that loans are repaid. Alternatively, borrowers may find one or two personal guarantors. Often these are respected local community leaders.

Microcredit is designed to give borrowers an alternative to traditional informal forms of credit such as moneylenders, pawnshops, loans from friends and relatives. Crucially, it’s designed to keep vulnerable borrowers out of the clutches of exploitative lenders, such as loan sharks.

In important ways, microcredit is the mother of the diversified social investing sector we see today. Many of today’s leading social investors, including Ashoka and Accion, cut their financial teeth on microlending, using philanthropic money to establish lending programmes as a way to further their social missions. Microlending sowed the seeds for what has become an explosion of social investing innovation as more and more organizations turn to finance provision as a way to extend their reach and multiply their impact.

Microfinance

The term microfinance can refer to a range of financial services including loans, credit, savings, insurance, money transfers, remittances and other financial products.

In the field of social investing, these services have traditionally been targeted at poor and low-income communities, often in emerging markets, with the aim of making them affordable for people who don’t have access to mainstream providers. Many microfinance institutions have developed their models to combine philanthropic support with finance, providing capacity building grants, training and market-building activities along with capital and credit.

According a recent GIIN/JP Morgan survey, this picture of microfinance is still fairly accurate, but it is changing fast. Increasingly, for-profit finance providers are entering the sector in places like India and sub-Saharan Africa and the practice of microfinance is being rolled out in to serve customers in developed countries, too. This suggests that the microfinance model is both flexible and sustainable, and that it can be adapted to encourage a variety of beneficial outcomes in many different contexts.

Microfinance is not without its critics. There are those who feel that it threatens traditional philanthropy and fails to recognize the complex causes of poverty. Recent years have seen cases of fraud in the microfinance world: in 2011 an international scandal in the Indian microfinance market threatened to discredit the burgeoning industry. All this has led to calls for better regulation by national governments and sparked efforts by the social investing sector to establish standards for responsible microfinance practice.

Nonetheless microfinance has seen a real boom in the years since early adopters began to branch out beyond microlending and there are signs the industry is maturing. The Microfinance Information Exchange (MIX), on online a platform, now collects and validates standard financial, operational, product, client and social performance data from institutions across the globe.

Meanwhile, microfinance continues to gain popularity and attract new players to the marketplace with commercial banks like Citi now getting involved. This makes sense, since some of social finance’s greatest success stories are now coming out of the microfinance sector in the form of a string of profitable exits for impact investors like Bamboo Finance, Triodos and Lok Capital.

Growth Finance

Just as microlending led to microfinance, microfinance has paved the way for what might be called growth finance. In growth finance, providers offer financial services resembling those available through mainstream financial providers to customers in underserved markets. For example they may make bigger, longer-term personal loans or provide commercial credit facilities to growing businesses. In each case, services are structured in a way that makes them accessible and affordable to the client base.

Growth finance recognizes the fact that certain market sectors, especially those in poor communities and emerging economies, still don’t have access to mainstream finance even when they rise above the rock-bottom base of the pyramid. While microfinance is well equipped to meet the needs of the very poor, growth finance offers a way to support individuals and communities as they increase in prosperity and build more robust economies.

Growth finance also offers a way to extend vital financial services to impact businesses as they scale up and face the challenges of what’s been identified as the “pioneer gap“; the tricky mid-stage of growth where philanthropic financial support dries up and mainstream support remains out of reach. Recognizing this, many active microfinance institutions are extending their services to offer growth finance options to their markets. For example, seasoned social lender Root Capital is now preparing to offer more loans as well as larger, longer-term loans and other services to meet the changing needs of their rural client base.

The goal of impact is, of course, to build businesses and markets that are robust enough to one day attract finance from mainstream providers. Recent exits offer some evidence that this is already happening: Leapfrog, an impact investor in financial services companies in Africa, recently sold its stake in the Ghanaian company Express Life to FTSE 100 company Prudential.

This exit is another promising sign that the impact model can deliver, yet there is still much work to be done before all global markets have access to finance through mainstream providers; and some may never get there. For this reason, impact investors continue to play a key role in capitalizing businesses that offer the right kind of financial services for developing markets and underserved communities. But what does the future hold for impact investing in financial service providers?

To find out, see part three of this series: The Future of Investable Social Finance. Or read part one, Why Finance is (And Always Has Been) an Important Sector for Impact Investing.

Browse financial sector impact deals.

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Investing With a Purpose: A detailed look at the San Francisco Bay Area Impact Investing Landscape

By Ana LaRue, Digital Media Manager at Maximpact, @larue_ana

While a large part of the San Francisco Bay Area is busy discussing the latest definition of “hipster” and inflated tech valuations, there is another trend currently creating a lot of buzz. This one is related to the notion of “doing well, while doing good” by addressing social and environmental challenges through the deployment of capital.

Doing well while doing good: Trend or mainstream investing approach?

Impact investing is an investment approach that intentionally seeks to create both financial return and positive social and/or environmental impact. It typically focuses investment on for-profit, social- or environmental-mission-driven businesses. Impact investments can be made in both emerging and developed markets and, like other types of investments, impact investing returns can range from below to above market rates. (It is estimated that 79% of impact investors are already targeting market rates of returns.)

Investors interested in making a difference in the world can focus on a variety of sectors, such as energy, natural resources, water, sustainable agriculture, clean technology, biomimicry and financial services. Regardless of the chosen sector, impact investing focuses on building new markets and supporting socially and environmentally beneficial businesses as they scale, something that resonates with responsible investors in the Bay Area.

Recent successes show that the field has a lot of potential and that the buzz is justified. This investment approach could unlock significant sums of investment capital, complementing efforts by public bodies and philanthropic organizations to address the most pressing global challenges. To make it even more attractive, estimates show that the impact investing industry could grow to US$500 billion in assets by 2020 (from around US$50 billion in assets back in 2007 when the definition of impact investing first emerged).

Impact investing vs. venture capital

Why is this trend so significant for the Silicon Valley area, you might ask? A recent article published by Sir Ronald Cohen, a man widely regarded as the “father of social investment”, created quite a stir when he stated that “social impact Investing is the new venture capital.” Cohen argued that impact investing will play a transformative role in the future of our society, similar to the one venture capital has in the past.

While there are similarities between impact investing and principles traditionally applied to venture capital, there is more to the story. Most promising technology entrepreneurs have no problem coming up with a compelling exit strategy: acquisitions and IPOs are a well-known path to success in Silicon Valley. However, investments that blend financial returns with intentional social or environmental impacts tend to be more complex, often calling for longer repayment schedules than those used by venture capital (VC) deals, especially when the investment is in less mature markets where business models need more time to develop.

Impact investors are also often willing to take on significantly more risk than a traditional VC if the social mission aligns closely with the investor’s vision and his commitment to developing non-traditional sectors. Finally, even if a company appears attractive from a purely financial perspective, impact investors won’t invest unless positive outcomes (impacts) can be quantified and demonstrated.

Find impact investing opportunities in the Bay Area

If impact investing is on your radar, the Bay Area is a great place to start looking for ways to get involved. The region is home to a substantial pool of potential funders as well as many highly creative impact entrepreneurs, giving investors plenty of choices. Below we list* just some of the biggest impact players in the Bay Area.

Venture Philanthropy Organizations: Non-profits that invest using a VC strategy

Impact Investors: Organizations investing in for-profit companies that have social impact potential

Impact Intermediaries: second-party organizations (accelerators, incubators, venture capital consulting companies and others) operating in the impact investing arena

Non-Profits and Foundations with unique models that incorporate venture capital principles

Social Entrepreneur Organizations with existing venture capital support

Connectors: Organizations that bring together impact investors with social entrepreneurs

Looking beyond the Bay Area

The Bay Area offers rich pickings for impact investing, but remember that impact is a global game: would-be impact investors shouldn’t limit their search to a single geographic area.

Today there are literally hundreds of impact funds across the globe, with diverse areas of interest and investment philosophies. They are run by specialized asset managers as well as mainstream financial institutions such as J.P. Morgan, UBS, Credit Suisse and Deutsche Bank. The same goes for innovative networking platforms that connect impact investors and entrepreneurs looking to make a difference. Maximpact is just one example of such a service, offering an online deal listing platform where a broad array of global opportunities can be examined in one place. So if impact investing intrigues you, don’t hesitate to look more broadly and take advantage of innovative tools available to impact investors today.

*This list is partial and there are plenty more innovative impact investing focused businesses serving the Bay Area. If you have additional suggestions, we would love to hear about them.

Why Finance is (and Always Has Been) an Important Sector for Impact Investors

By Marta Maretich, Chief Editor @mmmaretich

If you were asked to guess which sector attracted the biggest proportion of impact investment, which would you say it was?

Looking at the websites of major impact intermediaries and financial institutions you might guess the answer was agriculture, clean energy, water, or healthcare. But you’d be wrong.

Finance still makes up the biggest single slice of the impact investing pie. According to the recent survey by GIIN and JP Morgan, 42% of all impact investing assets under management in their sample were finance, with microfinance and financial services each accounting for 21% of the total. This compares to just 8% for agriculture, 11% for energy, 6% for healthcare and just 3% for water. This means that a significant proportion of impact investments are actually made into finance institutions, and not directly to companies or individuals.

This answer may surprise you; it may even disappoint you; but it shouldn’t.

The social investing movement has its origins in banking, with well-meaning pioneers trying to find ways to use the tools they understood; financial tools; to better the lot of their fellow men and women. Providing finance, whether in the form of small loans or more sophisticated services like consumer credit or banking, was the possibly earliest form of social investing and it still makes sense to many responsible investors who choose to put their capital into finance businesses.

Popular with investors

As the GIIN/JP Morgan survey indicates, there are also practical reasons finance is attractive to impact investors. Microfinance, according to their information, appeals to “closer-to-market” investors while financial services attracts “competitive return” investors. Although the research sample isn’t large, the findings indicate a reality: As one of the longest-established sectors of social investing, finance now has a track record. With experienced service providers like the Grameen Bank, Triodos and PAX World returning stable profits over a number of years (17 years in the case of veteran Grameen), finance has made a place for itself as a mainstay of impact investment portfolios that may also include riskier and low-return investments.

Financial provision has also proven a flexible tool the face of a changing world, especially in an era where the practice of economics is seen as an important lever for social change. Recent years have seen an explosion of innovative ways to “do finance using models designed to reach underserved markets, especially ones in developing economies. Today, alternative finance intermediaries, including banks and insurers, are proliferating across the social investing sector and impact investors are following that expansion.

This trend reflects a deeper development in the social investing space. Once a controversial idea, now the notion that financial services are a necessary part of human life; or even, as Nobel Laureate Muhammed Yunus states, a “human right”; is widespread. Social finance in all its forms is one of the most familiar aspects of the social investing movement in the eyes of the public, for whom many of its more arcane forms, like catalytic capital and public-private partnership deals, are too complex to grasp and hold little human interest.

But which types of financial services are popular in the impact investing sector? And how is the relationship between impact investors and financial service providers set to change in the future?

To find out, see part two of this series: A Guide to the Different Forms of Impact-backed Finance and part three: The Future of Investable Social Finance.

Find impact deals in financial services.
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Services to Impact Funds: Why Data Can’t Give Us Everything We Need

By Marta Maretich

The impact investing sector is developing at an amazing rate and so are the needs of impact funds, investors, advisors and companies. As we move rapidly beyond the early development stages, services are starting to emerge as an important theme for 2014.

A recent article charted one aspect of the emerging trend. BCorp plan to use their data aggregation systems as a basis for providing a variety of services to the sector. The introduction of BAnalytics, a merger between the investment management tool Pulse and BCorp’s GIIRS, will allow the group to offer a range of data-based services including rating, evaluation and analysis.

BCorp is following in the footsteps of traditional financial services industry where advances in technology have delivered the ability to manage mind-blowing amounts of live data; and turn profits from them. As traditional financial service providers have discovered to their joy, data, crunched at this speed and at this scale, has the power to transform business performance; and data aggregation and analysis is itself big business for firms who make wrangling data their focus.

BCorp’s move toward offering data-based services is a welcome sign of a maturing impact marketplace and it indicates the shape of things to come. Fund and company ratings are needed to establish standards in the sector; benchmarking holds out the hope of creating comparisons, while more transparency can do no harm. We’d be remiss not to develop these systems.

Yet for now the most important application of data may be that it proves convincing to investors. Mainstream investors, who include large institutional investors and foundations, could unlock huge amounts of capital provided they can be persuaded to trust in the impact approach. Data is reassuring both to them and to the financial professionals who advise them, according to research by the WEF.

However, although important, data-based services won’t offer everything the impact sector needs to grow today. The nature and ecosystem of impact investing makes it different from traditional investing in fundamental ways; and this will drive the need for a whole range of specialist services not necessarily dependent on data.

Beyond data-based services

Take metrics for example.

Impact businesses and funds must build social and environmental impact metrics into their plans along with all the usual financial ones, correct? Straight financial metrics are no mystery to most businesspeople and financiers; years of trial and error have taught us how to “do” them. The same can’t be said for social and environmental impact metrics, which have been around for a relatively short time.

The recent emergence of IRIS as the leading measurement system, developed by GIIN and now administered, along with GIIRS and PULSE, though BCorp, means that the sector now has access to tools for measurement. (Whether it’s a good idea to make a single metrics approach so dominant at this early stage is a question we won’t tackle here.)

However, the mere existence of IRIS doesn’t mean impact measurement is now taken care of; and here is where the need for services comes in: How do impact enterprises and funds use IRIS? How do they know which measures to choose from the long list? How do they embed impact metrics into their business plans and their operations? How do they translate these processes across geographies and cultures?

The answer is that many will need expert help to set up impact data collection, reporting and analysis. There is a role for impact metrics specialists who can help establish processes and create systems that deliver accurate impact information while supporting business objectives.

Call in the specialists

This is only a small example of the kind of specialist service impact sector businesses and funds will need as the sector takes off, “specialist” being the operative word here.

Impact investing is a new sector; and it’s a complex one due to the range of actors and agencies involved. Hybrid financial arrangements are common and collaborative partnerships, blending public, private, philanthropic and government capital, are increasingly seen. Impact businesses often pass through a number of agencies, including philanthropic intermediaries, on their way to market viability and there is a growing spectrum of kinds, flavors, types and sizes of impact businesses.

Fund managers, investors and financial advisors; even very clever ones; will need help navigating this expanding field of opportunity. Impact business people will need access to expertise as they grow their businesses in a multi-stakeholder context and roll them out across the globe.

In both cases, having access to specialists; that is, experts who understand the unique requirements of impact investing; will be a decisive factor in success. Media, finance, legal, governance, research, scientific, managerial and HR expertise, with a spin on impact, will all be in demand, as will specialists capable of working in cross-sector partnerships and internationally.

Finding the expertise we need

Where will these experts come from? Some will come from the sector itself. Graduate programs are already incorporating social investing into their curriculi and a generation of “multilingual” professionals is beginning to emerge. These new impact investing leaders will understand the language of finance as well as they do that of social and environmental benefit. Their contribution will undoubtedly fill some of the sector’s need for services, but not all.

In the immediate future, the impact investing sector will need to reach out to the wider finance and business community to find the services it needs to grow. There will be a role for agencies who can help impact investing financiers and businesses source expertise from a pool of impact-able specialists in a range of fields. As the sector continues to become more accepted by the mainstream, and the needs of impact finance and business become better understood, this pool should become larger and better adapted to meet the needs of impact. The challenge lies in finding a way to give the sector easy access to the expertise it needs now.

So, data, though essential, will not provide us with all the answers. Instituting systems for capturing and analyzing data (both financial and social) is a step in the right direction but there is a risk that the focus on data and data-driven services may distract us from the real task at hand: building impact businesses and funds that deliver tangible social and environmental benefit along with financial profit. To do this will take huge amounts of human ingenuity, innovation, “hard” as well as “soft” expertise; and, yes, data too.

[Image credit: 123RF ]

 

 

WOMEN IN IMPACT – MAVIA ADVISORY PROFILE

MAXIMPACT CATCHES UP WITH NEW ADVISORY FIRM – MAVIA PASSION FOR IMPACT LLC

 

Tell us more – what is mavia?

mavia is a social finance and philanthropy advisory firm based in Zurich.

We strive to increase positive impact for our clients and their beneficiaries by creating transparency and bridging the gap between people wanting to engage in positive change and adequate, high quality investment and philanthropy opportunities for impact.

We offer our clients independent, personal and professional advice in strategic philanthropy by creating strong and trusted relationships with them as well as with our network partners. In this way we ensure consistent mission alignment from planning the whole way through to implementation of a personal philanthropy journey.

Who is the typical mavia client?

There is no such thing as “the typical mavia client”. Our clients are as diverse as people can be – each one with different motivations, values and needs. We deliberately chose to have a diverse advisory board, to represent that kind of individuality with different cultures, religions, interests and background. What our clients have in common though, is that they are all personalities looking for opportunities to make a real difference through philanthropy or social investments. They all have a “Passion for Impact” that drives their decisions and engagements.

Can you give an example of a mavia engagement?

One of our clients is a medium size foundation based in Switzerland. The foundation supports projects in Switzerland through traditional grant giving according to its mission and thematic focus. Together we are working out a strategy on how to include impact investing in the existing activities. This decision influences a foundation on different levels, from service offering, to internal know-how but also culture. It is very important to ensure that change is introduced gradually and in line with the foundation’s mission. The first impact investment with our client is planned in the next 12 months; a great opportunity to learn together and go new and innovative ways.

Another example is an institutional client in the financial services industry. Our client is interested in adding philanthropy to the existing service offering, for reasons of client retention, business development and corporate responsibility. We advised to base decisions regarding additional services on insights from a client survey instead of setting something up and risking to miss the target. In this case we collaborate with a partner, who is specialized in conducting surveys to measure and evaluate “soft” factors. This way the client has a meaningful data set as a basis for his decisions about additional products and services, which make sense to be set up in the future.

Last but not least we are working with a wealthy private client who is not new to charity but rather new to strategic philanthropy and wants to include the next generation in this process. As we work on the Philanthropy Canvas, an easy and straight forward working tool developed by mavia and inspired by BusinessModelGeneration.com, we talk about basic values and interests that drive many money related decisions. This is a great opportunity to understand the other one’s views and needs. The outcome here is not necessarily family philanthropy, it can be of course, but it is also possible to have separate engagements and to exchange experiences and learning within the family on a regular basis. One of our clients once said: “I don’t see the need for everybody in the family to be involved in everything. Because not everybody has the same skills and time and quite frankly you can end up making things far too complicated when you have to consider everybody’s interests, commitment and agenda.”

What makes mavia different?

We give honest and direct advice at any time. In everything we do we try to foster clarity and simplify rather than making things more complicated. We believe that this leads to more joy and fulfillment for our clients, who then again choose to engage in philanthropy for the long term and this increases positive impact.

For us it’s about transforming good intention into a meaningful journey for our clients and to be part of the success story of philanthropy. A story of positive change and growth, that leaves us with a smile on our faces.

Enjoy your impact journey and engage!