What The World Needs Now: The Digital Survey That’s Changing Our Understanding of Global Priorities

By Marta Maretich

Impact investing is all about meeting needs. It places capital in businesses that provide human essentials such as water, power, food, education and healthcare. At the same time, it helps meet the needs of the planet and its non-human inhabitants by fostering business approaches that protect ecosystems and conserve natural resources.

Keeping a close eye on need; and the perception of need; is one of the keys to successful impact investing. Now a digital survey is shining new light on what people around the world think they need to have a better future.

Launched by the UN in 2012, My World is an ongoing global survey and data aggregation project. It lets users choose from a list of sixteen issues derived from research and polling exercises with poor populations, as well as the Millennium Development Goals with additional issues of sustainability, security, governance and transparency. Users rank the issues that they think “would make the most difference to their lives” and the results are aggregated into a live online database of results.

Taking the online survey is free and fun and it offers users an opportunity to set out personal priorities. But the real point of My World is to provide UN policymakers with grist for their mill. The project is set to run until 2015, the deadline for the Millennium Development Goals. It’s hoped that the results will help strengthen and focus policy development post-2015.

In the meantime, we can all log on, take the survey, and check out how the results are shaping up. Colorful graphs show the findings so far, with a breakdown of respondents by age and gender. The HDI, or Human Development Index, ranking of users; countries is also captured. A shaded world map shows how many responses have come from each country. A more detailed analysis can be found here.

At this writing, the data set is still far from complete. Yet the results already provide some food for thought for impact investors.

What is remarkable at first glance is the consistency of the responses. “A good education” is number one on the list of priorities for respondents of every age group, gender and development level with the exception of the over 55s. “Better healthcare” comes second in most categories. “Action taken on climate change” comes close to the bottom of the list for most respondents regardless of age, gender or country. “Protecting forests, rivers and oceans” ranks bottom for respondents from low-HDI countries and much higher for those from high-HDI countries. “An honest and responsive government” comes mid-list for most respondents, far above issues such as “reliable energy in the home” or “equality between the sexes”. (Note: These observations were accurate at the time of writing.)

For impact investors, as for UN policymakers, these responses could have practical implications. For example, it’s useful to know that much of the world hungers for education and better healthcare but isn’t that concerned (at least for the moment) with habitat conservation or climate change. This suggests that impact businesses focusing on healthcare and education will have more traction in more parts of the world than those targeting climate stabilization or conservation. Their business models may prove easier to scale and replicate across more countries because citizens are hungry for the goods and services they provide.

The jury is still out on the value of the My World project. It’s not yet clear whether the data it collects will prove conclusive or useful; much depends on how it is analyzed and applied. What is clear is that My World provides a taste of how technology is bringing clients and businesses, beneficiaries and development agencies, much closer together. Impact investors may be able to learn lessons from My World’s findings; and they can certainly follow its lead when it comes to using technology to find new ways to identify, and meet, global needs.

Add your voice to the survey
Read the My World blog

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Impact Investing in Disruptive Technologies

by Marta Maretich

Disruptive innovation is the talk of the tech world after Deloitte published its annual Tech Trends Report 2014 Entitled Inspiring Disruption, the report examines the changing landscape of technology with a focus on the how trends will develop over the next 18-24 months.

Drawing on the findings of an earlier report published by McKinzie last May, the study identifies 10 trends driven by multiple “disruptive” technologies. These are new technologies capable of creating new markets and value networks and, ultimately, replacing existing technologies. Cell phones, and the way they’ve supplanted fixed landlines, are a familiar example of a disruptive technology that has changed the world.

There’s more change coming, the report suggests, and it’s coming fast. Disruptive technologies are driving many of today’s important business trends; trends impact investors should be keeping an eye on. The report examines a number of these including:

Wearable computing bringing technology into new scenarios and transforming accessibility:

  • orchestrated cloud computing linking discrete systems for greater power and integration
  • artificial intelligence, machine learning, and natural language processing leading new, faster and more accurate real-time analytics
  • extended and highly integrated digital engagement facilitating closer relationships between organizations and customers
  • more influential roles for Chief Information Officers with a venture capital approach to leveraging IT assets

These technologies and the others mentioned are already starting to transform the way we work, shop, trade, communicate, travel and play, with accelerated change predicted for the near future. With such wide-ranging effects, it stands to reason that disruptive technologies will find applications in sectors close to the heart of social investors such as clean energy, healthcare, agriculture, conservation, education and even finance.

Disruptive technologies “present unprecedented opportunities to re-imagine how work gets done, how businesses grow, and how markets and industries evolve,” according to Kevin Walsh, head of technology consulting at Deloitte. Impact investors now have the opportunity to take an active role in that re-imagining by identifying and financing businesses that use the disruptive technologies to solve global problems.

Taking it further, now is the time for the sector to ask itself some important questions about disruptive technologies: How will we use them to transform the practice of investing for a triple bottom line, to make it more efficient, more profitable and more effective? How can they help us reach more beneficiaries, diversify our finance products and extend our markets? How will they improve our ability to capture and analyze data, build models and cement the business case for impact?

Finding the answers means the impact sector stands to create the most significant disruption of all: Replacing the old models of finance with new ones that can meet global needs and create a better future for the planet and its inhabitants.

Read the McKinsey report.
Read the Deloitte report.
Read about Clayton Christensen the Harvard professor who identified the concept of disruptive innovation.

Find disruptive impact deals.

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What the Impact Investing Sector Needs Now

By Tom Holland, Founder and CEO of Maximpact

The impact investing sector is reaching a critical moment in its evolution.

It’s expanded hugely in the 18 months since Maximpact came on the scene, attracting attention from world leaders, governments and mainstream investors.

New funds are launching almost daily while more mature funds are developing sophisticated investment philosophies, models and methodologies.

All this is healthy; it’s what we’re all working for. But to continue this healthy growth, impact now needs several key things:

Increased collaboration:
Despite the growth in the sector, many parts of it are still working in separate silos. Activity is up, more capital is invested, but the sector is still very fragmented. Many impact organizations don’t connect with the wider impact community or take advantage of the many possibilities it offers. There’s nothing wrong with specializing in your area, but impact investors need to adopt a big umbrella approach and do more to collaborate across organizations, regions, sectors and disciplines.

Diversity:
There are lots of different impact investing models out there now. Instead of spending our time debating definitions, we need to embrace this diversity and use it to our advantage. Quality is important but we shouldn’t assume rigid standardization is the only way to achieve it. A wide range of approaches gives investors options and offers multiple ways to tackle problems using impact capital.


Greater efficiency:
For impact fund managers, sourcing impact deals is still a very time-consuming process. A fund manager may have to review 100 deals to find 2-3 that are right for him; that’s highly inefficient. At the same time, an impact entrepreneur may have to take her pitch to many, many funds before she finds finance. This is a huge amount of time and energy that could be used building the business and doing good for the planet. The sector needs to find ways to make this matching process more efficient so that more deals can be done.


More money:
The final thing the sector needs is, of course, more money. We’d all like to see increased amounts of capital invested in the right places; and by the “right places” I mean in businesses that produce results for a triple bottom line. It isn’t just large cash infusions that are needed, but a whole range of different levels and types of investment by individuals as well as institutions. Crowdfunding will play a role, making it possible to deploy very small amounts of capital for good, so will large-scale investing by governments and major financial institutions.

The points on this wish-list are interdependent. Only by making deal flow more efficient; and ensuring diversity as well as quality across the impact sector; will we be able to attract the volume and variety of capital that will really make a difference. Collaboration, the first item on my list, holds the key to resolving the issues around the others: efficiency, diversity and capitalization.

At Maximpact we try to practice what we preach when it comes to developing sector capacity and this starts with a commitment to collaboration. Our platform is designed to encourage collaboration among users and we welcome opportunities to work with other parts of the sector ourselves; in fact, we will be announcing some exciting new collaborative and innovative partnerships and alliances in the near future.

There’s still much more to do, but we are looking forward to seeing how the developing sector meets its new challenges; and to playing an active role in finding the solutions we’re all looking for.

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Bringing Biomimicry to Market: Impact Investing Inspired by Nature

BringingBiomimicrytoMarket-ImpactInvestingInspiredbyNature_maximpact.154240By Marta Maretich @maximpactdotcom

Biomimicry has captured the world’s imagination. From the moment Janine Benyus; seminal book Biomimicry: Innovation Inspired by Nature appeared in 2002, hopes have been high for this new approach to design and engineering. Elegant, poetical and paradigm-changing, biomimicry and its sibling discipline, bio-inspired design, spoke to our hopes for harnessing the elegant solutions of nature for a more sustainable future.

Twelve years on, where are biomimicry and bio-inspired design today? And what opportunities are there for impact investors looking for ways to place capital in innovative, green and sustainable nature-based solutions?

Biomimicry success stories

There have been some notable successes in bio-inspired products in recent years. Self-cleaning paint incorporating the lotus effect; the ability of the structure of the lotus leaf to repel dirt; came onto the market as early as 1999. Today world wide annual sales of products using the lotus effect are now over $100 million with Degussa, Ferro and Sto some of the companies reaping the benefits.

Another example is the sharkskin swimsuit, famously banned from competition for giving unfair advantages to swimmers with its scale-mimicking technology. Calera, a company that specializes in converting carbon dioxide into green “reactive cements” to replace traditional cement has made its name with a bio-inspired process for capturing CO2. The high tech industry is turning out products incorporating bits of bio-inspired technology, too, especially in the fields of robotics and computer science. But the best-known, and most commercially successful biomimetic design of all time must be Velcro, the fastening system based on the structure of the cockleburr that is now incorporated into countless products including clothing, medical equipment and packaging worldwide.

These successes continue to inspire a generation of scientists. Research and development in this area have skyrocketed over the last ten years with the number of peer-reviewed papers now reaching about 3000 annually. According to the Da Vinci Index, a database tracking scholarly activity, interest in biomimicry has increased tenfold since the millennium. Patents for biometric innovations are also up: 67 were issued in 2012 as compared to just 3 in 2000. Biomimetic, biometric and bio-inspired research activity is buzzing in labs and universities around the world. AskNature, a database of projects under investigation shows the depth and breadth of bio-inspired research.

The successes of bio-inspired products and processes is also motivating product developers, entrepreneurs and major corporations to find ways to make something of the findings coming out of the science. Today proponents can be found in many places in the commercial world, including some surprising ones such as the Los Angeles Auto show with its biomimicry and mobility design challenge.

Market challenges

There have certainly been breakthroughs in finding applications for bio-inspired products and enthusiasm for the concept remains high. Yet even fans of biomimicry admit there haven’t been as many commercial successes as they’d like. This is because there are still significant challenges in bringing biomimicry to market, as green and sustainable business blogger Joel Makower has identified. Part of the problem is that bio-inspired innovations often arise in laboratories a long way from the marketplace (there’s a similar problem in cleantech). Their promises are often conceptual and can take years or even decades to find a viable commercial use.

Even the most brilliant ideas take a while to catch on, too; and they often require a champion. As Zygote Quarterly editor Tom McKeag points out in this blogpost, biomimicry’s greatest success stories, Lotusan and Velcro were far from overnight successes and only made it to prominence “because of the long and dogged efforts” of the individuals who discovered them. Similarly, despite ten years of effort and huge latent potential, materials like spider silk and adhesives materials inspired by gecko feet have so far failed to find their way to market.

This has led to some frustration from mainstream investors who were attracted to the high-tech mystique of biomimicry and expected it to produce quick financial results. As ethical finance thought leader Hazel Henderson commented in a recent interview, “the term “biomimicry” is sufficiently mysterious and obscure that: a) they’ve never heard of it and they don’t know anything about it, and b) it’s sort of intriguing because of the fact that a lot of corporations see this as the leading edge of innovation.” She went on to predict that, “a lot of trustees and pension fund beneficiaries are going to be knocking on the door of asset managers in institutional endowments and saying: “Hey, why aren’t we investing in biomimicry-type companies?”

Impact investors are starting to ask the same question. But, as Henderson implies, it may not be the right one.

Tapping into the ecosystem

Biomimicry and bio-inspired design is best thought of as a methodology and a framework for innovating. This means it’s not necessarily about individual businesses or single products or even technologies. Rather, it’s about a whole new approach to the process of development that depends on a rich ecosystem of research, learning, innovation and cross-sector collaboration.

To successfully engage with the field, impact investors need to look deeper into this ecosystem and ask themselves better questions: What is the best way for impact investors to put their money into beneficial bio-innovation? What role can impact finance play in speeding the process of bringing bio-inspired products and technologies to the marketplace?

New ways of thinking about investing in this sector are already taking shape. To address the oversimplified attitude toward biomimicry investing, Henderson and Benyus have collaborated on a set of criteria for identifying, working with and investing in companies that adhere to ethical principles in biomimicry finance. The approach recognizes that bio-inspired products and processes aren’t necessarily sustainable or socially beneficial; not all funds touting bio-based financial products operate according to green principles. Based on Henderson’s Life Principles, the criteria are aimed at helping investors find finance companies that place capital in biomimicry-related ventures in ethical ways.

Then there are the organizations actively building links between biomimicry research and the market. The Centre for Bioinspiration is a California-based for-profit enterprise that works directly with businesses to incorporate bio-inspired and biomimetic approaches into their products. It supports research into the economic landscape for biomimicry, tracking the growth and development of the sector. It also hosts an annual conference that focuses on the link between bio-technologies and products and the marketplace. This work is helping ease the transition from lab to market for new technologies and products, while it offers companies practical ways to incorporate bio-inspiration into product design.

Biomimicry 3.8, a social enterprise and nonprofit hybrid—and a certified BCorp—has proven that the concept of biomimicry is itself a marketable commodity. Founded by Janine Benyus and Dayna Baumeister, Biomimicry 3.8 this cross-sectoral venture has developed diverse revenue streams through delivering consulting services to businesses, publicly-funded institutions and governments. At the same time, it pursues its core mission of propagating biomimicry by providing thought leadership for the industry, keeping an index of current research projects, mapping the biomimicry community and acting as an information hub for professionals and the public. It provides materials and training for teachers along with resources like the Biomimicry Design Lens, a framework for incorporating nature’s processes into design, available as a free download.

Biomimicry 3.8’s work is helping keep the issue of bio-inspired innovation on the front burner for researchers, commercial industries and the public while the industry matures. In this way, it acts as a champion for the young bio sector in a way that could hold lessons for other young sectors such as impact investing.

Partly because of this work, biomimicry and bio-inspiration continues to grip the popular imagination and inspire books, reports, blogs, magazines and documentaries (many of them available through the Newsstand). Zygote Quarterly, edited by Tom McKeag is a prize-winning online magazine that offers cutting edge information on biomimicry research in a beautifully designed format. The Nature of Business by Giles Hutchins applies the principles of biomimicry to a new business paradigm, as does Katherine Collins; The Nature of Investing. The popular Cradle to Cradle by William McDonough and Michael Braungart brings biomimetism into the debate about recycling.

More than 100 years after the invention of Velcro, the taste for biomimicry is keener than ever, thanks to its devoted proponents and the innovations that have made it out of the labs and into the public arena. More than a trend, biomimicry is a movement and a framework for innovation and change. Impact investors who want to join this movement have the opportunity to connect with it in its early stages and support it as it grows.

View biomimicry deals on Maximpact.com.

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Seven Steps to Allocating More of Your Portfolio to Impact

Guest blog by En Lee and Sam Lindsay

For many investors, impact investing has remained largely confined to private investments. For this reason, impact investments may still account for only a small proportion of many portfolios.However, with new opportunities for impact investing now emerging across different asset classes, investors are beginning to allocate more of their assets to businesses that generate social and environmental outcomes. To encourage this move, the Investor Team for the Impact Investing Exchange Asia (IIX Asia) has come up with a simple 7-step process that helps investors and advisors assess investment portfolios and begin the process of shifting the emphasis in the direction of more impact investments.Step 1: Define Core Values and Mission

  • Identify core values, mission, country and sector preferences
  • Understand the motivation (e.g. preserving family legacy or instilling values in the next generation)

Step 2: Identify Target Impact Areas and Role of Investment

  • Identify your target outcomes and objectives (improving healthcare, empowering rural women through education)
  • Define the risk/return profile of your investments (wealth preservation, commercial returns etc.)

Step 3: Integrate Impact Allocation

  • Determine allocation across asset classes: cash, fixed income, public/private equity, real estate…
  • Distinguish between philanthropic and investment capital in the portfolio

Step 4: Evaluate and Select Investment Opportunities

  • Determine which investments should be non-impact, mission-related and mission-driven
  • Direct investments (e.g. private equity, debt, hybrids etc.)
  • Indirect investments (e.g. funds, funds of funds etc.)

Step 5: Implement a Strategy

  • Identify potential impact investment opportunities (e.g. by using a impact accelerator such as Impact Partners or a deal site like Maximpact)
  • Commence due diligence, structure investment, execute and close transaction and if necessary, post-deal monitoring (specialists can assist in these areas)

Step 6: Monitor, Analyze and Report Results

  • Measure financial, social and/or environmental returns
  • Insist on impact assessment report from a reputable assessor (professionals such as Shujog Impact Assessment can help)
  • Identify a suitable impact methodology for the identified outcomes (e.g. GIIRS)

Step 7: Consider Changes in Objectives, Strategy and Managers

  • Revisit country and sector focus
  • Evaluate investment financial and social/environmental performance
  • Assess asset allocation, risk/return profile and intended social and environmental outcomes

A version of this blog was first published in the IIX Asia digital publication, Impact Quarterly.


About the Authors:
En Lee is Co-Head, Asia Pacific for LGT Venture Philanthropy, a global impact investor supporting organisations with outstanding social and environmental impact. He is the former Director and Head of Investor Team at Impact Investment Exchange Asia. Sam Lindsay is a consultant for the Aligned Network and a former Investor Team Member at IIX Asia.


About IIX Asia:
Impact Investment Exchange Asia (IIX Asia) is the world’s first public trading platform dedicated to connecting social enterprises with mission-aligned investment.


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Root Capital Proves the Business Case for Social and Environmental Due Diligence

by Marta Maretich

Like most social investors, Root Capital assumed the social and environmental due diligence it carried out when assessing potential loan clients was a necessary cost to the organization. When they took a close look at their loan book, the truth took them by surprise.

“We initially set out to build the impact case for social and environmental due diligence,” says Willy Foote, founder and CEO of Root Capital. “Along the way, we started to notice an emerging business case for social and environmental due diligence in the form of reduced risks and new growth opportunities.”

Analyzing its own data from a well-established and diverse portfolio of social lending projects, Root Capital was able to identify five areas where there were compelling synergies between social, environmental and financial interests:

1. Identifying and mitigating credit risk Social and environmental due diligence proved key to mitigating supply risk; related to smallholders selling their harvest to other buyers; and the risk of product rejection due to inadequate quality or certification violations, leading to financial losses.

2. Generating new business Root Capital found it attracts new clients because of their track record of caring about social and environmental factors. Their good reputation in the communities where they operate boosts their business.

3. Identifying businesses with growth potential Businesses at an early stage may not be able to present compelling financial statements. In these cases, due diligence can uncover growth potential; for example, a strong base of producers and the existence of potential higher-value markets.

4. Strengthening businesses Social and environmental due diligence provides an opportunity for clients to identify ways to improve their relationships with suppliers and manage their natural resources more efficiently, improving the viability of their businesses.

5. Deepening relationships with existing clients The social and environmental due diligence process reveals unmet financial needs among existing clients; and gives Root Capital an opportunity to meet them, thus building their loan portfolio with trusted clients.

All this sounds terrific; but what do the numbers tell us about the financial value of social and environmental due diligence?

According to the briefing, early analysis suggests that Root Capital’s social and environmental due diligence program covers its own costs. With five percent of their loan officers; time devoted to it; across a loan book of $120.8 million to 205 enterprises in 2012; initial analysis concludes that social and environmental due diligence helped Root Capital avoid write offs and generated enough incremental revenue to pay for itself.

This is potentially game-changing news for the impact and social investing sector which has long thought this kind of due diligence was a financial cost, not a benefit. It turns out that due diligence can be a means to bring local market knowledge, environmental awareness and community engagement into the financial equation, leading to better decisions for the lender and better impact outcomes.

The impact case for social and environmental due diligence is already strong; Root Capital, with its commitment to measurement and transparency has done much to validate it. With this briefing, and more like it planned for the future, Root Capital is now taking steps toward building the business case. For the impact sector, it is a further sign that the practice of impact and social investing is advancing and at the same time becoming a mainstream way of doing business.

It is also something of a challenge to the rest of us: When will other impact investors choose to reveal and make useful sense of their numbers? When you see how unexpected the results can be, you know that the sooner we all do it, the better.

For more on this and future briefings, go to Root Capital’s website.

Sustainability Drives Impact Investment in Natural Resources

by Marta Maretich

Natural resources have always been precious to mankind. Today, they are more in demand than ever. Population growth, climate change and the rising affluence of developing nations are putting a strain on the planet’s limited resources. Water, arable land, food, fuel and raw materials are seeing a period of unprecedented demand and there is worldwide concern about future shortages and the destruction of ecosystem services, such as photosynthesis, pollination, flood prevention and climate stabilization, that results from over-exploitation.

But while the pressures on our resources are getting bigger; and the consequences of depleting them are getting clearer; there are positive developments, too. A global movement for sustainability is now maturing and this is encouraging an explosion in the kind of responsible resource businesses that belong in our impact portfolios.

Sustainability goes mainstream

Once a thing of the green fringe, sustainability is now mainstream and this is one of the factors that makes natural resources attractive investments now. Governments are the key drivers of today’s sustainability agenda as they increasingly use policy, regulation and subsidy to support the development of new kinds of businesses and convert existing businesses to more sustainable practices. Working in concert with governments, international bodies like the UN, the WEF and the World Bank are launching programs designed encourage sustainability and establish standards in a range of resource sectors. Natural resources are seen as key to development for some of the world’s poorest communities; including rural smallholders and indigenous peoples; and this puts them at the center of international efforts to raise living standards.

Meanwhile, public awareness of sustainability issues increasingly drives consumer choices. Businesses; even those that once ignored the idea; now know that being able to demonstrate sustainability makes economic sense. Jobs in sustainability are multiplying as businesses hire analysts, consultants and other specialists to manage their sustainability and reporting commitments.

Resources take center stage

With sustainability a growth area for world markets; and a priority for many world governments; there is a new focus on natural resource investing. The emphasis now is on finding ways to make more of nature’s gifts while preserving and maintaining them for the future. New businesses; and new ways of doing business; are springing up, encouraged by government policy and shaped by the expertise of development and philanthropic organizations who have blazed trails in the areas of sustainable use of resources.

This is good news for impact investors looking to place their capital in the natural resources sector. Here are some of the trends and developments in four resource areas: Oceans, Minerals, Forestry and Land.

Oceans

The world’s salty waters have been a focal point for resources-based activity in recent months. Concerns about overfishing and acidification, a consequence of the seas absorbing high CO2 emissions, are leading governments, environmental campaigners and business leaders to place a new emphasis on the oceans and this is changing the investing landscape.

On the governmental side, 2013 saw the US instituting the National Oceans Policy, joining other governments including Australia, South Africa, Namibia and the Philippines in establishing comprehensive, future-focused policies for ocean resource management. The social enterprise sector kept in step, highlighting the issue by including an ocean themed “track” at SOCAP13. For the first time veteran campaigners and ocean champions discussed ocean topics along with journalists, entrepreneurs, and impact investors from other sectors including small scale agriculture, health, and poverty alleviation; all of which are connected to ocean and coastal issues. Meanwhile, in the private sector, The Economist is throwing its weight behind sustainability issues as it plays host to the World Oceans Summit in California in February of this year.

These developments set the stage for a mini-boom in sustainable marine businesses in areas like fishing, aquaculture and energy and mineral extraction. New government regulations will also drive growth in compliance industries, such as environmental remediation and business-to-business services providing sustainability reports and the like.

Minerals

Mining; and its products, mineral; have a bad reputation in the world of sustainability. Mineral extraction is widely associated with human rights violations, environmental damage and conflict. For those reasons it remains a largely unexplored sector for impact investors. Yet in the mainstream financial markets, mining is big business, with growth driven by demand from the resource-hungry emerging economies like China, India and Brazil; demand that is not going away anytime soon. This fact, plus the alluring possibility of helping to bring change to the mining sector, means that impact and sustainable investors should think again about minerals when looking for places to commit their capital.

The tools for change may already be in our hands. An excellent piece of research conducted by the International Institute for Environment and Development (IIED) charts the significant progress made in mining policy, oversight and governance over the last decade, especially by the International Council on Mining and Metals (ICMM), a coalition of mining companies that has embraced sustainability standards and put issues like indigenous rights, community development and climate change on its agenda.

The IIED report indicates a rising awareness and acceptance of sustainability in the industry itself; a hopeful sign for the future. The challenge for the next 10 years, it concludes, will be implementing those standards we now have more widely. Such a move could transform the mining industry; and impact investors, with an insistence on standards and reporting, could play an important part in this transformation.

Groups like the Alliance for Responsible Mining (ARM), which works on behalf of an estimated 20 million small-scale and artisanal miners worldwide, are already hard at work bringing change. They have developed supply chains for sustainably mined products and created the Fairtrade and Fairmined gold standards for the industry. Deals have already been struck with jewellery manufactures and, like conflict-free diamonds before them, these ethical products should find favor with consumers as they hit the marketplace in the near future.

Conflict minerals have been a contentious issue for some time and a measure of progress has been made in addressing the human and environmental costs of mineral extraction in places like the Congo. Electronics industry giant Intel has now moved to make all its microprocessors free of conflict minerals. The industry pressure group, the Electronics Industry Citizen Coalition (EICC), has compiled a useful list of conflict-free smelters and refiners, while the NGO the Enough Project has ranked companies for their use of conflict-free minerals.

Yet the path ahead is not yet clear for sustainable mining; and this is another reason for impact and social investors to enter this market. A powerful coalition of business leaders recently petitioned a panel of federal judges to overturn a provision of the 2010 Dodd-Frank law that requires companies to disclose their use of minerals from Africa. This would be a major setback for the movement for sustainable mining. However, the presence of more social investors and conscientious corporations in this resource sector could make all the difference to the way mining develops in the future.

Forestry

Unlike mining, forestry is already a popular focus for impact investors. Many sustainable forestry enterprises have cropped up in recent years, working to conserve; and sustainably exploit; wooded environments across the globe and these remain attractive investments.

It hasn’t all been plain sailing, though. Carbon offset schemes were central to many forestry enterprises and the collapse of the world carbon markets in 2012 was a blow to the sector. Some forestry sustainability accreditation programs have come under fire, too, and there has been a shakeout in certification schemes that many hope will lead to a more reliable system.

Despite this, impact investors, like the Packard Foundation, have largely stuck with forestry because of its many wider benefits. Sustainable forest management supports biodiversity and habitat conservation, creates local jobs, protects indigenous communities, fosters eco-tourism and recreation, contributes to food stability, and aids climate stabilization; as well as having the potential to generate diverse revenue streams and attract tax breaks.

Meanwhile new technologies are expanding the horizons of sustainable forestry. Innovations, such as the use of drones and sophisticated geo-mapping techniques, are advancing the science of forest management, making it possible to do more with woodlands while we protect them. Eco-tourism and boutique woodland businesses are taking off in many parts of the world. The link between agriculture and forest habitats is contributing to the search for ways to bring prosperity to some of the world’s poorest communities. At the same time, big multinationals such as paper manufacturers are bowing to regulatory pressure and seeking ways to develop more sustainable supply chains, a shift which will have implications for sustainable forestry businesses.

Land

Land is a resource that offers a host of opportunities for impact investing both in emerging and developed economies. Essential to human life and prosperity, land produces food, water, wood, fibre, fuel and minerals and, when managed responsibly, it also provides vital ecosystem services such as photosynthesis, pollination, nutrient cycling, water purification, soil formation, climate stabilisation and flood prevention.

Increasingly, land use and ownership is seen as the key to solving many of the world’s most pressing environmental and social problems. Large international organizations like the United Nations Convention to Combat Desertification (UNCCD) are now promoting responsible land investments as a way to halt land degradation and preserve the integrity of our natural capital. Land and property rights are also central to poverty alleviation, and securing land for use by rural populations is a priority for many development organizations.

Yet, as is true across the natural resources sector, there is a right way and a wrong way to invest in land. Oxfam has raised concerns about a global land grab where big investors, often foreign governments and pension funds, buy up large tracts of farmland, especially in parts Africa, Latin America and Asia, squeezing local people out. Their report drew attention to the negative impact on local communities of the wrong kind of investing and led to a call to the World Bank to end its participation in these deals.

To make sure they are part of the solution, not part of the problem, impact investors need to be aware of the issues. The right kind of investing respects the rights of locals to “Free and Prior Informed Consent”, promotes land rights and good land governance and fosters food security both locally and internationally. To avoid possible pitfalls, investors would do well to tune into the conversation about land use here and here, and subscribe to sets of principles like these and these.

In the developed world, land investment is often part of a move to a more green and sustainable lifestyle. Iroquois Valley Farms, chosen as one of the Impact Assets 50, leases farmland to organic farmers, while Beartooth Capital acquires western ranches for conservation and use as eco-tourism destinations. In cities, land acquisition plays a part in neighborhood regeneration and community home ownership schemes. With these models turning profits, and the movements behind them gaining popularity, we can expect to see more opportunities for land investment in developed economies in the future.

Conclusion

Natural resources have long been a promising sector for impact investors, especially those with an emphasis on the environment. What’s new is the increasing involvement of governments in supporting sustainability. For some natural resource industries, this is putting sustainability on the map for the first time. For others, government support and improved standards are advancing the development of sustainable practices and sparking innovation. All of this is good news for impact investors who want to put their capital behind businesses that contribute to the future health and prosperity of the planet and its inhabitants.

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MINT Condition: Impact Investing Leads the Pack in the New Emerging Economies


By Marta Maretich

BRIC, CIVETS, MIST: The world of finance loves a catchy acronym almost as much as it loves a new set of emerging economies, ripe for investment.

Recently the talk has been all about MINT, a grouping of Mexico, Indonesia, Nigeria and Turkey, economies touted as the new powerhouses of the global marketplace. According to Jim O’Neill, the man who identified the successful BRIC grouping, MINTs are hot this year, offering attractive investment opportunities in lively, fast-growing markets.

As financial advisors worldwide race to download country reports from the Economist Intelligence Unit, impact investors and development finance specialists can indulge in a moment of self-congratulation. While mainstream investors may not have taken the MINTs seriously until now, a good number of social benefit investors already have financial commitments; and solid track records; in these countries. A snapshot of the sector shows the depth and breadth of the impact and sustainable investing activity already happening in the MINTs.

Mexico:

IGNIA, a venture capital firm based in Monterrey, Mexico, supports the founding and expansion of high growth social enterprises serving communities at the base of the socio-economic pyramid. Established in 2007, IGNIA’s portfolio has grown to include a diverse range of businesses offering everything from high-quality eyeglasses and affordable financial services to core infrastructure, such as water grids and housing, to poor communities. IGNIA’s aims are in line with the impact sector’s; to serve these communities while returning an attractive profit to investors; and their track record demonstrates that this is do-able.

Indonesia:

This long list of organizations investing in Indonesia, courtesy of the AVPN, shows that social investors have been awake to the potential in this Asian economy for some time. Respected impact investors, like LGT Venture Philanthropy, have been offering support to entrepreneurs in Indonesia for years, while many green and social benefit enterprises are scaling up their operations in the country: Blue Life makes aquatic greenhouses for sustainable food production; Oryza Lestari manages resin-producing agarwood forests ecologically. Both are currently seeking funding in the global impact markets to grow their businesses in Indonesia.

Nigeria:

Tony Elumelu and his charismatic brand of “Africapitalism” are taking Nigerian impact and sustainable investing markets by storm. The massive fund he established with the Rockefeller Foundation has the potential to catalyze investment in the country; and transform the lives of its poorest citizens, provided it’s deployed using proper metrics to guage impact. Other investors, like Leapfrog Investments, have already shown the value of investing in this populous country. Leapfrog’s Nigerian insurance business, ARM Life, provides affordable financial services, including life insurance pensions and retirement planning, to a young, rapidly growing, and underserved market of Nigerians.

Turkey:

In contrast to the rest of the MINT grouping, Turkey is something of a new frontier for impact and sustainable investors. So far, there are few Turkish examples of impact enterprises and only a few funds placing capital specifically in sustainable, green or social Turkish businesses. Yet the impact and social investing sector has been busy in Turkey doing the sort of essential groundwork that opens new markets. With support from the Impact Investing Policy Collaborative (IIPC), Anja Koenig conducted pioneering research into the social impact marketplace in Turkey. Her work has raised awareness of opportunities in the country and paved the way for policy changes that will remove obstacles to future investment; just in time for Turkey to become the new darling of global investors as the T in MINT.

Mainstream finance may be all aflutter with excitement about the MINTs, those promising new kids on the world economic block. Yet in the social benefit investing sector, we’ve known about them for years; decades in some cases. More importantly, we’ve helped them build the markets that are now so famously taking off. And we will continue to do this, especially those parts if the market that often get overlooked in a boom: those serving the poor and marginalized at the bottom of the socio-economic pyramid.

Fads come and go in finance just as they do in fashion. Next year, there will doubtless be another grouping of “it” countries with another clever acronym; it’s the sort of story that drives the trade. However, really building businesses, markets and prosperity in emerging economies is something that takes long-term commitment, commitment that the impact sector has already demonstrated; and will go on demonstrating long after the craze for the MINTs is a memory for mainstream investors.

For more on the MINT countries, listen this excellent series of programs by Jim O’Neill aired on BBC radio 4.

To find live deals in all of the MINT countries, log in to Maximpact.com.

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Impact Investing in 2013: Reasons to be Cheerful

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by Marta Maretich

This has been an amazing year for impact investing. Here we round up some of the top reasons why the sector has the right to feel cheerful about 2013; and look forward optimistically to 2014.

1. The Impact G8

If it needed confirming, June’s Impact G8 was the sign that impact investing has officially arrived. It was UK Prime Minister David Cameron’s own idea to host this high-level social investing pow-wow; and the leaders of the world’s eight largest economies were eager to attend. That tells us something. For the first time social investment found itself on the G8 agenda and we saw major nations, like the US and the UK, announce significant investments in developing our sector. How good was that?

2. Mainstream Investors Join the Party

Morgan Stanley, USB and Goldman Sachs were some of the big financial institutions that created impact funds in 2013, largely because of demand from investors. Good for them. We knew they’d get there eventually.

3. Social Stock Exchanges

A sensible idea that’s catching on partly thanks to the UN’s Sustainable Stock Exchange initiative. 2013 saw the launch of a Social Stock Exchange (SSE) in London and an enhanced Impact Investing Exchange Asia (IIX). They joined other global exchanges including the SVX, Ethex, and KSIX in a global push to establish more exchanges.

4. Social Impact Bond Results

We’ve been keeping our fingers crossed for social investment bonds (SIBs) since the first was rolled out in 2010. Finally the results are coming in and it looks like this pay-for-performance model is delivering. Phew! Now can we expect to see more take-up of the SIB model by the public sector? Hope so.

5. Metrics Move On

Questions may remain about how to measure impact and how best to use measurement data to improve effectiveness across all three bottom lines. But, take note: no one is arguing about the need for metrics any more. Instead, 2013 saw us using our energy to develop more streamlined, business-based and strategic approaches to impact measurement. IRIS, the best-known system, has come a long way and we are looking forward to alternative systems emerging including ones that measure outcomes and impact, not just outputs.

6. Better Exits

2013 brought some relief for those of us who are still worried about the lack of exits in the sector. The traditional venture capital exits; IPOs and acquisitions; may not be right for all impact investments. But now clever impact financiers, many working in developing economies, are beginning to identify other ways for investors to get their money out: royalties, demand dividends and employee stock ownership plans are some of the creative approaches being used. New methods of grassroots capital sourcing, like crowdfunding, could mean exits are less of an obstacle in the future.

7. Smartness

It’s been a terrific year for sector research. There’s no way to do justice to all the publications; major and minor, digital and in print; that have informed us in 2013, but here are some game-changing staff picks: From Blueprint to Scale (Monitor Group); From the Margins to the Mainstream (WEF); Women Wealth and Impact (Veris Wealth Partners); Bridging the Pioneer Gap (ANDE and Village Capital); Impact Investing 2.0 (Pacific Community Ventures, CASE, and ImpactAssets). More of this quality research in 2014, if you please.

8. Data Adds Up

The ability to gather, analyze and deploy data is becoming vital to success for all kinds of industries, including ours. So it’s a good thing that 2013 saw impact investing gain not one but two (count’em) open data platforms; Wikivois (soon to become part of The Global Value Exchange) and ImpactSpace; created just for us. Now all we have to do is find new ways turn this raw sector data into positive impacts in the real world.

9. Great Get-Togethers

The social investment sector loves to socialize and 2013 gave us more opportunities to get together than ever before. At SOCAP, Skoll, events around the Impact G8 and countless smaller national and regional convenings we schmoozed, we shared, we learned and we found inspiration. Why stay in your silo when there are so many great events to choose from? Get out there!

10. The Next Generation

2013 brought us glimpses of the next generation of impact investing leaders. They are young “millennials” many are female; many come out of developing economies. They are “multilingual“, fluent in the languages of finance and business and philanthropy and development. For them, the idea of using market models to create beneficial impacts is a no-brainer. They’re perfecting their craft in an increasing number of graduate programs that teach social finance and impact investing as part of the core curriculum. We can’t wait to see where this new generation takes the practice impact investing next.

So there you have it, our list of reasons to be cheerful about 2013.

There are certainly more reasons than this (it has been a fab year!) and we would really love to hear about them from you. Email or Tweet us with your own reasons to be cheerful about impact investing in 2013 and we will be delighted to share your stories with our readers.

In the meantime, have a great holiday season and be sure to rest up: next year is set to be even more lively for the impact investing sector. Can’t wait!

[Image credit: 123RF]

Sustainable Luxury Heroines

Guest contribution by Milena Cvijanovich

Women are undoubtedly the leaders of the fabulously successful new Sustainable Luxury business model. They show us through their amazing results how cool, glamorous, sophisticated AND essentially powerful Luxury can be when it has the mission to respect our planet and life of its inhabitants.

High-profile individuals such as Livia Firth with her Green Carpet Challenge and Francine LeFrak, founder of Same Sky, help break the vicious circle of poverty, discrimination and marginalization through beautiful objects handcrafted by women for a market which can afford to help this change. Unsung heroines such as social entrepreneurs Adriana Marina of Animan; and Aissa Dione, a Senegalese textile designer, are further shining examples of the beauty of this new-found synergy. These businesswomen have brought hope and pride back to their own struggling communities with the highly successful manufacture of exquisite textile and other heritage crafts sold to top designers worldwide.

I’ve collected just a very small sampling of these inspiring women and their contribution to the powerful duo-luxury and women’s empowerment.

Livia Firth, wife of actor Collin Firth, seduced the fashion industry, taking clever advantage of her A-list status to launch the Green Carpet Challenge. Throwing the gauntlet to celeb sand designers to take on eco textiles, she got stellar results: Gucci’s new zero-deforestation handbag line, Valentino’s haute couture eco gowns worn at the Oscars, Mette-Marit, crown princess of Norway’s sustainable Pucci dress at a royal wedding. Eco Age, Livia’s venture, is sky-rocketing with star-studded partnerships. As Livia says, “No one has to wear hemp and sandals” to show eco-awareness. With a wink she makes me feel her soft black dress whispering, “Hemp – by Valentino.”

Francine Le Frak has been a philanthropist practically since her childhood. Well-known in the entertainment industry, she is an award-winning theatrical, television and movie producer and has been recognized as a social issue film producer. In 2008, Francine founded Same Sky, a socially-conscious jewelry venture. The company began in Rwanda to give women who had survived the Rwandan genocide a new chance in life. “My vision for Same Sky is to continue partnering with other like-minded companies in order to build a marketplace for products that are handmade, possess authenticity and support artisan communities around the globe. Ultimately we want to spread the idea that shopping can change the world.”

“The beauty of having a successful business is it gives you a wonderful economic platform from which to do good.” Connie Duckworth, retired Partner and Managing Director of GoldmanSachs, transforms the lives of Afghan women through Arzu Studio Hope, a highly successful social enterprise offering stunning bespoke carpets. Working with renowned designers including Zaha Hadid and Michael Graves, Connie celebrates the art of weaving while bringing education and economic independence to women in a struggling,war-torn country.

While the traditional textile industry was disappearing in Senegal with the influx of foreign products, textile designer Aissa Dione came along, an Amazon in shining armor, and launched in 1992 a company specialized in high-end weaving employing over a hundred people. Attracting international designers such as Jacques Grange, Peter Marino and Christian Liaigre with her exquisite furniture textiles, Aissa is perpetuating the skills of traditional Mandjaque weavers and the processing of local African cottons and natural dyes. Aissa’s graphic transformation of traditional patterns into fusion designs for the Western luxury market has brought economic transformation to her impoverished region.

Sustainable Luxury drives positive change through financially viable, culturally enriching and environmentally respectful business opportunities, empowering women from all corners of the globe to connect at all levels and create profitable (and memorable) ventures.

About Milena Cvijanovich:

Serbo-swiss architect Milena Cvijanovich holds a Masters in Architecture from Carnegie Mellon University in the USA. Founder of MCM Designstudio, an international architecture, design and sustainability consulting firm based in Switzerland, Milena lectures on sustainability and the luxury design world and is active in impact investment and gender equality projects. She is also the founder of the Ethnosphere trademark label to be launched end 2013 with the mission to drive change through design.

[Image credit: 123RF]

Empowering Women Through Impact Reaching a helping hand across the “Pioneer Gap”

by Marta Maretich, Chief Writer, Maximpact.com

Women’s financial empowerment has been a hot topic in recent months. There’s a definite (deserved) buzz around gender-lens investing and its potential to make more of impact capital. Yet, while the gender lens approach is an exciting step forward for women’s financial empowerment, it isn’t the whole story.

Impact investing isn’t an island anymore; it’s now becoming part of the financial mainland. By the same token, investing in women happens within the much larger context of the global financial markets on the one hand and the developing impact investing industry on the other.

Looking more deeply into the subject of women and the flow of impact capital reveals a number of areas where the practice of gender lens investing intersects with larger issues in the impact sector. One of these is the sticky issue of supporting impact businesses as they struggle through the”pioneer gap” the tricky mid-stage between startup and market viability.

It’s now clear that women business leaders are a good bet in both financial and impact terms. But when it gets down to choosing investments, practical questions remain: Which female leaders are we really talking about? And which businesses, at which stage?

Doing good vs. making money?

To make the right decisions when it comes to gender lens investing, investors and funds need to come to terms with the fact that the impact investing sector is still a divided marketplace. On the one hand are businesses whose main aim is to do good, especially for the poor; on the other are those whose central goal is market-rate returns. The gender lens, while it helps bring focus in many ways, may not pick up this fundamental difference.

So at which end of the spectrum should we put our capital if our goal is to empower women? The answer is both; plus more in the middle.

There are good options for female-centered investors who want their capital to have the most impact for poor and under served women. Veteran social financiers like Root Capital and Village Capital have reliable track records. Incubator programs, contests and honors for women social entrepreneurs have proliferated across the social benefit finance sector. The enterprises they work with are typically small seed-stage ventures, run by individuals or small teams. They often use microfinance models and with notable exceptions they are often based in the developing world.

On the other end of the spectrum are more impact investments in traditional areas like large-scale infrastructure, renewable energy, real estate and commodities. Today the majority of the more than $4 billion of impact capital is invested these kinds of businesses in developing markets. Very few of them are led by women (as a benchmark, women CEOs run only 4.2% of Fortune 500 companies; only 16% of directors are women). Some of the “new”impact industries, especially tech firms, are among the most male-dominated. And while these businesses may bring benefits to women in a broad sense, their positive impacts tend to by pass the poorest and neediest.

Targeting the missing middle

There’s nothing necessarily wrong with any of this;diversity is one of the strengths of the impact investing sector and the picture is always changing as we learn more. Yet the division points, once again, to a nagging sector-wide issue: the lack of mid-stage businesses with both strong impact credentials and growth potential. This is a crucial problem for female-friendly impact investors.

Recent research has identified some of the factors behind this “pioneer gap”. The main problem is that it’s very difficult for impact businesses to scale up,especially in developing countries where they lack basic market infrastructure, skilled workers and the right kind of capital. Often, there’s support from incubators at the seed stage, but this evaporates as the enterprise gets bigger and its needs become more specialized and complex. Entrepreneurs, whether male or female, struggle to provide leadership at this stage, often lacking key skills or access to expertise or networks that can help them. Many promising impact businesses die here.

For female-focused investors, there’s another issue. The abundance of seed-stage female-led businesses tends to divert attention away from the shortage of investable female-led businesses at the middle stage. The fact remains that many small seed-stage social enterprises, though worthy, will never scale up; some can’t, some simply don’t want to. Yet impact investors; those who are playing for real; need to place capital in businesses that grow, or at least have growth potential.

The disconnect between seed-stage social businesses and growth helps create a hole in the middle of the marketplace where some of the most dynamic investment opportunities should be. More importantly, it can mean that women-centered investments don’t have the transformational effect they should have. Investing in seed-stage women entrepreneurs may bring local benefits, but unless they go on to build organizations and scale their businesses, they will never enter the mainstream global marketplace or reach more beneficiaries. This limits their scope for impact.

Growth-friendly and female-friendly, too

The problem of the missing middle is slowing the development of the impact sector, but it also creates an opportunity for investors and funds. Those who want to focus their capital on women can multiply the benefit of their investments by targeting mid-stage female-led businesses with growth potential.

  • – Make supporting mid-stage impact businesses a priority in your woman-centered portfolio.
  • – Analyze the portfolio: How much investment is going to mid-stage businesses? How much capital is backing intermediaries and accelerators who work with mid-stage businesses?
  • – Partner with impact accelerators and intermediaries who specialize in supporting businesses in the pioneer gap; LGT Philanthropy’s Smiling World Accelerator Program is one example.
  • – Consider women-friendly investments with more modest financial returns: 5% per year or lower. Modest return goals mean mid-stage businesses can benefit from capital without being squeezed by investor expectations.
  • – Create a woman-centered fund backed by philanthropic capital. Rather than channeling philanthropy dollars away from good causes, use them as capital for supporting mid-stage businesses in the pioneer gap, as Acumen does.
  • – Build blended investment funds that combine capital with philanthropic or technical support funding for mid-stage businesses. Sophisticated impact funds, such as the Grassroots Business Fund, are increasingly using models that blend philanthropic with impact capital.
  • – Look outside the social benefit sector for scalable female-led businesses that have positive impacts. Mainstream investments in areas like health, renewable energy, accessible finance,education and biomimicry are all areas where women business leaders are making a mark as well as a contribution. Open deal sites like Maximpact have a range of different kinds of deals in different sectors.

Using gender lens goes some way toward encouraging investment choices that benefit women. By looking more deeply at the nature of these businesses; and meeting their needs at each point in their growth cycle; investors can do even more for women, especially those making the difficult shift from entrepreneur to organizational leader. At the same time they can help build the impact marketplace by nurturing businesses through the pioneer gap. It’s a win-win-win situation for women, investors and the marketplace.

[Image credit: 123RF]

Impactful Empowerment: UnitedSucces

Guest contribution by Yvonne Finch, Director of UnitedSucces

When exploring the words “impact” and “empowerment” it is easy to overlook the true depth of meaning behind the potential for the words when you combine them! Exploring how women throughout the world can be positively affected so that they feel the true benefit of impactful empowerment it is important to explore why women don’t succeed or don’t proceed as fast as expected.

In business it remains a fact that there are not enough women on Boards, that access to finance for a woman to grow her business is a consistent challenge, and acceptance that a woman can juggle the roles of mother, wife, and successful career woman are still questioned.

Getting to grips with why progress seems slow is the key to unlocking the potential of “what might be”. Questions asked of women about how to survive and climb up within the world of business world evoke interesting responses and are often not related to the predicted ones. Concerns about proving competency, even though this is unnecessary, and worrying about how to move to the next level, surface from those perceived to be successful and in all cases there is no proven reality to their thoughts.

So what is wrong? What should women do to bridge gaps? What is the real challenge?

Interestingly everything is fear based. Fear from the individuals of what might happen as a result of some action. If they speak up about development needs could they be seen as incompetent or weak, or if they share their years of knowledge will their job or business be compromised?

How can fear be circumvented? Acknowledging the emotion is the first step forward and once this is accepted it is a small step to find the courage to understand the basis for the fear and to address it. This is where the open and honest support from other women can provide a platform for personal growth.

Choosing a women’s organisation whose members understand the journey being undertaken and where those members are prepared to reach out and share their expertise, life journey or skill is a proven way to overcome some of the paralysis that fear can provoke. Mentoring programmes also add an alternative dimension to understanding and individual growth.

These interventions are based on women being able to access a place of trust. A trusting environment allows individuals to grow at their own pace, safely. And it allows for feedback to be given where barriers to acceptance are negated. Seeking creative solutions to challenges through the support of another has proven to have worth.

When women make the time to engage with each other and put budget aside to join an organisation that exposes them to women in other world geographical locations, they can more easily assess the true relevance of any negative self-talk they may experience.

They can meet women who could become their informal mentors or participate in a more formalised mentoring structure and they can become mentors for others. These actions allow for bench marking of achievements and women learn that it is OK to pat themselves on the back.

Women often live exceptionally busy lives, and are known to work longer hours than their male counterparts, so they will often put themselves at the back of the queue in the opportunity of self development, as they perceive that other commitments should come first. Yet wisdom states that the journey “forward” is far longer when started from the back!

So “impactful empowerment” or “strong liberation” will result when concrete steps towards eradicating fear are achieved, and positive self belief replaces negative self perception.

About UnitedSucces

UnitedSucces is an international business organisation of carefully selected ethical women entrepreneurs. UnitedSucces believes that economically empowered women, who have a support system they can depend on, have a significantly high impact on society, through investing in improved livelihood, health and education of their families and broader communities. By supporting the needs of emerging and established female entrepreneurs, and by sharing best practices of impactful and sustainable female-owned businesses, UnitedSucces aims to empower and support future responsible female leaders assisting them to make a lasting contribution to the communities and countries they operate in. For more information visit: www.unitedsucces.com

[Image credit: United Succes]

7 Key Impact Investing Vehicles Targeting Women

By Ana LaRue

Women’s empowerment looks to be one of the transformative economic trends of our time. There is a business case for gender inclusiveness and how investors can work with a gender lens to achieve their investment goals. A wealth of research shows how investing in women around the world produces powerful results that benefit families, communities and entire societies – and on top of all makes for good ROI.

While the flow of significant investment assets toward gender lens investing is still in its initial stages, success of those at the forefront is proving that this trend is here to stay.

In a previous blog post we discussed how to strengthen female leadership and career development across the impact investing sector. We now review what are some of the leading organizations when it comes to investing with a gender lens, where to look for opportunities and resources and what are some of the key investment vehicles specifically targeting women.

1. Female centered networking organizations:

  • 85 Broads – Global network of 30,000 women whose mission is to generate exceptional professional and social value for its members.
  • Catalytic Women – Membership based women’s network funding social impact, at any level and to every issue area.
  • National Council for Research on Women – Network of leading university and community based research, policy, and advocacy centers dedicated to advancing rights and opportunities for women and girls.
  • Empower women – UN’s open global community for knowledge mobilization, innovation and partnerships in women’s economic empowerment.

2. Women’s investing networks and organizations:

3. Organizations working to increase the number of women on boards:

  • 20/20 Women on Boards – National campaign aiming to increase the percentage of women on U.S. company boards to 20% or more by the year 2020.
  • Catalyst – The leading nonprofit organization dedicated to building more inclusive environments and expanding opportunities for women at work.
  • 30% Coalition – Organization that is committed to the goal of women holding 30% of board seats across public companies by the end of 2015.

4. Gender lens centered philanthropy, foundations and endowments

  • Women Moving Millions – Community of individuals who have made gifts and pledges of $1 million or more to organizations and initiatives promoting the advancement and empowerment of women and girls.
  • Women Donors Network – Through member-led Donor Circles, regional events and trainings, and network-wide strategic initiatives, this network gives members the opportunity to connect with key leaders in the social change movement and participate in strategic grant making opportunities.
  • High Water Women – Volunteer-driven organization working with nonprofit partners to identify significant volunteer and grant making opportunities to leverage the talents and aspirations of professional women.

5. Angel investors focused on women-led startups:

  • Pipeline Fellowship – Boot camp for women angel investors, working to increase diversity in the angel investing community and create capital for women social entrepreneurs.
  • Astia Angels – Global network of female and male angel investors that invests in women-led, high-growth ventures in high tech, clean tech, life science, health and wellness products.
  • 37 Angels – Community of female investors committed to funding early stage startups.

6. Investment firms that pursues above market returns through investing in women:

7. Microfinance institutions empowering women in developing countries:

Many microfinance institutions often channel a large percentage of their loans to women. Some examples include:

  • Grameen bank – World’s largest microfinance institution whose more than 90% of clients are women.
  • Women’s microfinance initiative – Microfinance program establishing village-level loan hubs, administered by local women, to provide capital, training and support to rural women.
  • Kashf – First specialized microfinance program in Pakistan to specifically target women.

Read more about Empowering Women through Impact.

Women’s empowerment is an important sector of Maximpact’s network. Log in now to search different Women empowerment focused projects, intermediaries and funds.

[Image credit: nexusplexus, 123RF]

Making the Most of Women Professionals in Impact Investing

7 Steps Toward Strengthening Female Leadership and Career Development Across the Sector

by Marta Maretich

Women are breaking ground in the field of impact investing. The prominence of female leaders such as Jacqueline Novgoratz, Hazel Henderson and Judith Rodin suggests that the field of impact investing will be more gender-balanced than was the case with traditional, male-dominated finance. A recent study demonstrates the value of “multilingual” leadership teams, signalling that diversity and collaboration may be the strongest model for impact leadership. All this is good news for women working in impact.

Yet the sector is young; there’s still far to go before it’s firmly established. As impact moves into a consolidation phase, how can female impact finance professionals (including fund managers, executives and board members) improve their performance and make more of a difference? Findings from a National Council for Research on Women report on women fund managers in traditional finance suggest some practical steps women in impact could; and probably should; take to make the most of their professional lives.

1. Recognize the need to mobilize all available talent. The world faces major challenges: food scarcity, health crises, depletion of natural resources, habitat loss, climate change; all areas impact investing targets. We must draw on the expertise and talent of women as well as men in order to find; and, in the case of impact investing funds, to finance; innovative solutions.

2. Strive for a “critical mass” of women in top jobs. Research in related fields has shown that a critical mass of women in leadership roles changes the dynamics, decision-making and culture of organizations for the better. Impact funds should strive for broadly representative gender mix at the executive, officer and board levels. In the longer term, the impact industry needs to determine what a critical mass of women should look like; and create quantifiable criteria, benchmarks and guidelines for bringing more women into the field. This may be a task for a group of industry leaders, or possibly an organization (not yet formed) for women impact investing professionals similar to Women in Banking and Finance or Women in Finance.

3. Build and expand professional networks.
Traditional finance now boasts a number of female-centered networking organizations including 85 Broads and Golden Seeds. Similarly, female philanthropists have the Women Donors Network and Women Moving Millions. It’s about time female impact professionals had one or more such professional body to support career development, provide mentoring, encourage peer support and facilitate learning. Opening more male-dominated impact networks to women, and inviting more men to participate in women’s networks, have been found to strengthen gender equity in other fields.

4. Promote female fund managers and woman-centered portfolios. Funds can do more to identify and promote successful female fund managers and woman-centered (or gender lens-based) portfolios. Funds should promote both to investors, highlighting research that shows that funds and businesses managed by women perform as well as those run by men when the playing fields are level. Impact investment portfolios aimed at women beneficiaries offer clients an added dimension of benefit. Reaching out specifically to female investors, as the group High Water Women does, is another way to find synergies between investors, female fund managers and portfolios centered on women.

5. Gather and share data on women in impact. Quantifying impact; and sharing fund performance information; are already central principles for the impact sector. Yet, apart from some findings included in ImpactAssets50, there is so far little information on the representation of women in top impact finance and leadership roles. Tracking, monitoring and reporting information about the gender makeup of impact funds will help develop the sector. On another level, collecting information about the performance of women impact executives, fund managers and women-focussed funds will clarify the contribution made to the sector by women; and provide information to improve career development and participation.

6. Nurture the next generation of female impact leaders.
Woman impact professionals need to reach out to the next generation of young female leaders. This means mapping the career path for women in impact, then actively encouraging girls in elementary, high school and higher education to pursue subjects, such as economics, math and business, that make it possible for them to succeed. Shining a light on successful women in the field and using the media to make impact careers more visible to young people have both been shown to increase interest. Mentoring, coaching and providing educational opportunities such as boot camps and internships, are effective, too.

7. Support and fund research. Research may not be a top priority for busy impact investing professionals, but it’s essential for the development of the impact sector; and for the successful participation of women in it. The current buzz around investing in women is in many ways the fruit of research and this should be a lesson for the community of female impact professionals. Research has the power to shape sector development; but research doesn’t happen on its own. Someone (could it be us?) needs to help identify research needs, fund the work and disseminate the findings. Women impact professionals need to step up to this challenge, just as women in other fields have done before them.

Conclusion

Impact investing has always held itself apart from traditional finance, pointing to the ethics, values and commitment to benefit that distinguish the impact movement. Yet as the sector grows and evolves, women impact professionals will confront some of the same challenges faced by their sisters in traditional finance. If they want to lead from the front; and research suggests it’s best for everyone if they do; then they will have to build networks, hone skills and cultivate the career self-awareness that characterizes true professionals in every field.

The impact investing sector supports women in many different ways. Now there’s a chance for it to demonstrate its support for the professional women who make impact happen.

[Image credit: mfrissen, Flickr]

View Women’s empowerment impact deals.

From Philanthropy to Impact Investing: The Role of Women Investors in Asia

By Weina Li

There is a historical gender-bias in investment and finance, with women often considered “too soft” and “not enough returns-focused”, whereas their comparative strengths in leadership positions and their importance as key consumer is often overlooked. This explains the extremely low proportion of women investors across the globe, and especially in Asia.

However, the trend is changing. This is in part due to the increasing number of female high net worth individuals; they are high breadwinners, entrepreneurs but also heirs of a considerable proportion of Asia’s wealth. Even more important, is the increasing number of educated women in Asia. According to a 2008 survey, more than half of women with business degrees out-earn their husbands. This is especially true in countries such as Bangladesh, where more and more women gain access to higher education, achieve higher income and bring the region one step closer to inclusive growth and sustainable development. What’s more, women have become savvy investors. Research shows that 70% of married women fire their financial professionals within one year of their husband’s deaths.

For impact investing in Asia, this is good news. IIX Shujog’s database shows that women investors are more socially-minded and tend to focus on more human-centric investments such as health and education, rather than technology-focused energy businesses. Most importantly, women’s strong relationship with philanthropy means that they tend to donate more of their wealth to philanthropic means than men. As the world’s attention turns towards the development potential of social capital markets in the region, this creates an opportunity of transferring large amounts of wealth from the philanthropy sphere into impact investing.

There are still a number of challenges. Studies show that at present, women investors tend to take money for impact investing from their traditional investment buckets instead of decreasing their philanthropy dollars. This is due to the limited knowledge and lack of confidence in impact investing, exacerbated by the lack of familiarity of traditional financial advisors in this new field. There is also a lack of tools to help investors decide how and where to invest.

To fully capitalize on the potential of women in impact investing, more effort is needed to help provide the information women need to become confident impact investors. Shujog and IIX are working together to translate this need into action in Asia through investor education, knowledge building and developing appropriate investment tools to help more women become key contributors of Asia’s social capital markets.

About Weina Li

Weina Li is the head researcher at Impact Investment Shujog, a Social Enterprise seeking to foster growth, maturity and innovations to the SE and Impact Investment sectors of Asia. Weina has extensive experience working with SMEs and Social Enterprises across the globe. Among other projects, Weina has led an impact assessment project in the Peruvian Andes, working with Alpaca farmers to help them enhance their economic capabilities and setting up a women’s handicraft social enterprise. She is now spearheading Shujog’s research projects on women and impact investing. Weina has a BSc in Environmental Policy and Economics from the London School of Economics and a MSc in Environmental Change and Management from the University of Oxford.

This article was first published on The Story Exchange and is distributed with the permission of the writer.

[Image credit: 123rf]

Impact Investing 2.0 and the Rise of Multilingual Leadership Teams: An Interview with Jed Emerson

By Marta Maretich, Chief Writer, Maximpact.com

To mark the publication of Impact Investing 2.0, a watershed study of 12 successful impact investing funds, Maximpact talks to co-author Jed Emerson about “multilingual leadership” and why he thinks the very nature of leadership in impact organizations is changing.

Maximpact: At SOCAP13 you took turns with Cathy Clark, of CASE and Ben Thornley, of Pacific Community Ventures, to introduce different findings of your joint Impact Investing 2.0 report. You presented the part about “multilingual teams”. Why are multilingual teams so important to impact investing funds and why are they so interesting to you?

Jed Emerson: This is a really critical issue, first because all organizations need leaders and I think that there have been profound changes to the concept of leadership in the last ten to 15 years. In someways the Impact Investing 2.0 research is one more step forward in that progression and in other ways it’s a new way to think about leading impact organizations.

Maximpact: In Impact Investing, your seminal book with Anthony Bugg-Levine, you write about the need for a move from charismatic to collaborative leadership. Do you see evidence in this report that an evolution is taking place in fund leadership?

Jed Emerson: I think it’s clearly taking place! It’s interesting, because in 2000, when I published my first working paper on blended value during a faculty appointment at Harvard Business School, I talked about “mutant managers”. At the time I said we need these oddly genetically modified people that could play both/and rather than either/or in social investing.

The term “multilingual leaders” is probably a more accurate way to describe what these new kinds of leaders do; cutting across silos to draw connections between business and the social/development finance sectors.

For me this term holds special meaning because in some ways that’s the background I come out of. I started my career in social work and youth work and morphed from that into venture philanthropy, community development, sustainable private equity and then on into the areas I’m active in now, in impact investing. In an important sense, this is a very personal kind of observation for me.

Part of this insight was formed simply from watching the sector develop over time. I’ve spent the last 20 years observing both the field and its practitioners emerge into this “new” space. It’s been striking to see the finance-first people, who’ve come into the conversation with traditional banking and investment skills, needing to get up to speed with the social element of impact investing. Meanwhile, you see people coming out of the more traditional development backgrounds who are really sucking up the skill sets around investing and finance while recognizing that if your ventures are not sustainable on financial terms they won’t be sustainable in impact terms.

Whether you’re giving your profit to shareholders and investors or using it to build community equity, if you don’t know how to play this type of dual game you won’t be effective.

As we were going through the two-year process of first identifying the 12 funds we wanted to profile and then beginning the deep dive analysis and case study work, we did multiple interviews with investors and managers making use of the various products and strategies these funds were bringing to market. It was really interesting to see our research team as a whole realizing this issue of leadership was central to the success of the funds we looked at.

I was surprised myself because I think the focus of a lot of the discussions around impact investing in the last five to ten years has been “we need to improve our skill set around financial structuring”, or “we need people who have done deals who know how to invest”. We’ve heard a lot of this kind of rhetoric.

However, what we found during the course of the research was, no, in fact what funds need are more people who can play in the muddy middle, first, without losing track of the financial discipline that one needs and, second, without losing the focus on impact, which is the reason we’re applying those financial skills to begin with.

The research process reminded us what a lot of us already knew: that funds need both financial and impact discipline to be successful. On the other hand our research has shed new light on the idea of multilingual leadership. For us, at the level of fund investment teams, this means a kind of leadership that includes various individuals that speak the language of various parts of the practice.

The funds that have performed most effectively are those that have teams and individuals who can really play across perspectives and silos rather than coming in as representatives of a particular, individual perspective or silo.

Maximpact: Can you say more about how it works? Who is on the multilingual management dream team?

Jed Emerson: We speak of it as themes rather than directives in the report because in each case the constellation and makeup of the teams is different. Yet, at the end of the day, all of them reflect this multilingual orientation.

For example, you may have a fund with a leader who has more expertise on one side or the other but who has the ability to understand all the perspectives and the language of all the different silos he or she is drawing upon. The leadership team might be made up of individuals who are each fully multilingual, or be comprised of folks who come into the conversation with a deeper expertise in one or the other silos.

The important thing is that all team members have an understanding of the humility with which multilingual leadership comes forward. By that I mean an awareness of the fact that, though you may be really great in your area, you won’t be successful unless you’re able to take your expertise and marry it with that of the other experts in your team in an effective way. As individuals, it means seeing your own “blind spots” and working to establish a wider vision of where you yourself need to develop new skills and leadership language.

In the context of the funds we’re seeing, yes, there are individuals who are outstanding in terms of their work and expertise and skill set. But the success of the fund is a function of teamwork and integrated perspective and practice. It’s not the success of an individual, not the triumph of the charismatic leader. The charismatic leader may be able to hold the torch, but the light is shed by the team as a whole.

Maximpact: What are the core skills needed on a fund management team?

Jed Emerson: On the one hand, there are skills around being able to maintain financial discipline: analyzing deals, understanding the marketplace in which the deal will function, looking at various investors; perspectives on value creation in a possible deal. It’s having the skills needed in order to be a successful financial investor.

At the same time the management team needs to understand the impact context in which the investment will play out. For example, if your impact goal is job creation but you’re creating lousy jobs, then that’s not a successful strategy.

That financial discipline has to be complemented fully by an understanding of context and social opportunity. If you have both those things, you can then translate that social opportunity into financial metrics. In this way the impact investment process looks more like a DNA strand than a double bottom line. From this we derived the schematic for the Mission First and Last section of the report.

Maximpact: Does multilingual leadership reflect the multi-stakeholder nature of impact investing?

Jed Emerson: Definitely! It speaks to the idea that when you’re investing for impact there are multiple beneficiaries; as well as multiple actors contributing to value creation. You have various levels of financial return that come to shareholders and stakeholders alike. Those financial returns are in fact part and parcel of the generation of social and environmental impacts that grow out of being able to work on a sustainable financial basis. The multilingual team reflects that range of interests and outcomes.

Maximpact: Can graduate schools create the kind of multilingual leaders you’re talking about?

Jed Emerson: Not only can graduate schools create multilingual leaders, but they have to! I read a comment in a McKenzie report the other day that said business schools can no longer be teaching business as usual and the incoming classes are increasingly demanding schools give them the skills and tools needed to execute within this new context of impact generation.

20 years ago none of the graduate schools were doing anything like this. Then slowly things began to change. Harvard Business School started the ball rolling with its social enterprise initiative in the 90s. This was complemented by the work at Stanford Center for Social Innovation and Kellogg School of Management; I taught social entrepreneurship at Kellogg in 1999-2000.

We’ve seen this movement come forward over two decades; and now it’s been fully unleashed. I see the evidence everywhere. For example, I wasn’t able to attend the NetImpact conference this week but I was tracking the twitter feeds. Boy, could you feel the passion and enthusiasm coming through those posts and tweets! More than that, you could feel the sense of urgency and focused direction from the participants. To me, this is the driving force behind the need to train our future leaders in this multilingual way.

Maximpact: Are any grad schools doing it now?

Jed Emerson: A good example of a school taking up the challenge is the James Lee Sorenson Center for Impact Investing in Utah. Lewis Hower is their fund director. The interesting thing for me is that they’re using students to engage in the due diligence around impact investing opportunities.

When I first heard about this, honestly my reaction was, “Man, that’s got to be a recipe for disaster!” Because you’ve got these folks who are learning skills while they’re doing the analysis, so you might think maybe that analysis is going to have to be improved over time. Yet the work these students are doing with Center staff is evidently really strong. It’s very good analysis.

My other observation is that the students who are coming to learn at the Sorenson Center are not just business or economics students. They’re coming out of the humanities and much more traditional liberal arts backgrounds as well. Now, that is the future of impact leadership!

In my view, the Sorenson Center and others are creating an environment with the potential to produce the multilingual leaders of the future. No CEO can aspire to lead a global organization these days and not be aware of all the things beyond the balance sheet that will determine whether that organization is successful. As a matter of course, the leadership of these organizations will be looking to hire managers and team members who can come to the table ready to play on that basis. Business schools and graduate programs will have to provide their students with the education and the tools and the learning they need to be successful in this new market.

Maximpact: How can impact funds go about building these multilingual teams?

Jed Emerson: I work with a small set of family offices, one of which is currently recruiting folks to run a new impact fund. I wasn’t sure when we started recruiting what kind of candidates we would see. Truthfully, I expected a lot of candidates with very traditional private equity and venture capital backgrounds who had decided they were done making money and wanted to go “do good.” And I’m not such a big fan of the “do gooder” approach, so was kind of bracing myself;

But I was pleasantly surprised to see the number of folks that clearly fit our research team’s description of multilingual leaders. Yet the thing that really surprised and pleased me was the high caliber and solid quality of these individuals. The experience has validated my feeling we’re on the right track and the change is happening.

I’d like to point out that the Impact Investing 2.0 report doesn’t say, “This is what needs to happen”. It’s not prescriptive in that sense. What the report says is, “This is what is already happening in the most successful funds”. It describes what is currently the practice of the better organizations. As new fund mangers and new investors come up through these processes, I think we will begin to see the practices we identify in this report as the default operating process of the field. This will simply be the way we do business.

Maximpact: What happens to those poor charismatic leaders once the multilingual team takes over?

Jed Emerson: (Laughs) I think that the role of the charismatic leader will always be with us yet we’ll move beyond them being the focus. We need those individuals for movement building and for creating so many aspects of organizations. That said, you can’t build a successful organization on the back of an individual!

The most successful charismatic leaders will recognize this multilingual future. As opposed to the classic “founder-syndrome” individual who clutches on to power until the organization withers and dies, successful charismatic leaders will take on a new role helping position their teams for success.

The rise of multilingual leadership provides charismatic leaders with the option of an out, an opportunity to go back to developing new ideas, to be innovative, to be visionary; yet they will have to step aside. They’ll be able to pursue new avenues because they can be confident the teams they nurtured are shepherding their original vision; but taking it to new places and new levels of success.

I see “Leadership of the Whole” rather than leadership of individuals as the future of this sector. It’s a movement in many ways, but it’s also simply how you build effective sustainable organizations that are creating value over the long term; over multiple lifetimes and not individual careers. For me, this topic of leadership is really the crux of how we will all and each be successful over the long haul!

About Jed Emerson

Jed is widely recognized as an international thought leader on impact investing, performance metrics and sustainable finance. Originator of the term blended value, he has spent over two decades exploring how capital investment strategies may be executed to create multiple returns.

Jed has held appointments at Harvard, Stanford and Oxford business schools and has written extensively on impact investing, social return on investment, and related areas. He is co-author with Anthony Bugg-Levine of Impact Investing: Transforming How We Make Money While Making A Difference.

Jed is Chief Impact Strategist for ImpactAssets and chair of the ImpactAssets 50, a field-building strategy that promotes leading impact investing firms. He is a founding director of both Larkin Street Services and the Roberts Enterprise Development Fund (REDF), a founding board member of Pacific Community Ventures, and the first senior fellow at Generation Investment Management, among numerous other appointments.

Jed is currently a senior fellow with the Center for Social Investment (Heidelberg University) and senior advisor to The Sterling Group (Hong Kong).

You can follow Jed Emerson on Twitter via: @blendedvalue

Read the full Impact Investing 2.0 report.

Watch the video of Jed Emerson, Cathy Clark and Ben Thornley introducing Impact Investing 2.0 at SOCAP13:

[Image credit: Courtesy of Jed Emerson]

World Vision Projects Ready for Investment

Are you looking to put your investment dollars towards improving the lives of children and communities? If so, this recent addition to the Maximpact deal-listing portfolio may be of interest to you.

World Vision is an international humanitarian aid, development, and advocacy organization currently seeking investment with its handful of different projects. The organization is dedicated to the sustained wellbeing of children, especially the most vulnerable. By working with families, communities, and partners World Vision is able to overcome poverty and injustice and ensure that children enjoy good health, are educated for life and are cared for, protected, and participating. Various project, many of which are currently listing with Maximpact focus on community development and help break the cycle of poverty.
Today, World Vision has an impact on nearly 100 countries worldwide. If their initiatives relate to the type of impact that that you would like to create, here is a list of different opportunities to get involved with:

Strengthening of Pakistan communities through recycling: This initiative includes two projects, one focused on raising awareness about economic value of recyclable material and activation of recycling plants and the other on the establishment of a recycling unit at tertiary educational institute to increase awareness and mobilize private sector interest and investment.

Resilience building for Lesotho communities affected by climate change: This project is focused on reducing drought vulnerability. The initiative will introduce relevant adaptive measures, approaches, and interventions, reducing climatic risks and securing livelihoods, food and income.

Improving watershed management and rural livelihood of Kilimanjaro: A project to restore and protect the existing watershed and build the capacity of local communities and institutions to better manage natural resources in an effort to increase nutrition and food security from improved agricultural productivity.

Peace building project for children of Kosovo: An ongoing award-winning project that contributes to the development of child-led structures for peace and promotes tolerance and inclusion in five different municipalities of Kosovo. Its next implementation phase expands the program into four more municipalities.

Ethiopian community-managed reforestation project: The 6000-hectare project is designed to combat the environmental degradation associated with the farming and grazing practices currently employed on the project area, while providing local communities with the economic benefits associated with the sale of carbon credits. The project involves participation of local smallholder farmers whose livelihoods consist largely of subsistence production of food crops or cash crops and animal husbandry.

Improvement of health workforce in Kenya: Kenya faces a decline in the numbers of health workers in the public service. There are approximately 18 doctors for every 100,000 people with around 128 nurses per 100,000. The project will focus on distribution of the health workers and effective human resources planning, staff orientations, job descriptions and management in the health sector.

All of the deals mentioned above are currently seeking partners and investment of $25.000 to $5 million.

For more information about World Vision deals and projects and ways to get in touch please login to Maximpact.com and visit the deal section.

View other Maximpact spotlight deals.

 

World Vision’s global development areas of focus.

[Image credit: Courtesy of World Vision]

The IPCC Summary Report on Climate Change: What it Means for Impact Investing

By Marta Maretich

On 27 September 2013, the United Nations Intergovernmental Panel on Climate Change (IPCC) published the first of three volumes of its fifth Assessment Report (AR5). The long-awaited report summary emerged amid a flurry of media coverage and a volley of commentary, both pro and contra. Its main conclusions were clear, however: climate change is real, its effects are already measurable, and it is being caused by human activity.

AR5 Summary Highlights

– Human influence on the climate system is clear. This is evident in most regions of the globe.

– Warming in the climate system is unequivocal.

– Global surface temperature change for the end of the 21st century is projected to be likely to exceed 1.5°C relative to 1850 to 1900 in all but the lowest scenario considered, and likely to exceed 2ºC for the two high scenarios

– Projections of climate change are based on a new set of four scenarios of future greenhouse gas concentrations and aerosols, spanning a wide range of possible futures. The Working Group I report assessed global and regional-scale climate change for the early, mid-, and later 21st century.

Source: the UK government

The summary report has sparked controversy worldwide.

Some rushed to embrace the findings while others immediately set out to disprove the science and question the motives behind it. The world’s reaction is a measure of how emotive; and divisive; the issue of anthropogenic (human-caused) climate change has become for governments, businesses and individuals in the years since the first IPCC report in 1990. With passionate feelings on both sides, the controversy is set to continue.

Challenging times for believers

The report’s publication follows a rough period for those who believe that climate change poses a threat to life on earth. In 2001, the US, under the administration of George W. Bush, rejected the Kyoto agreement on global warming. Flaws in the AR4, IPCC’s 2007 report; among them the apparent claim that Himalayan glaciers would disappear by 2035; drew intense fire from critics and distracted attention away from AR4’s core findings. They provided more fuel for the so-called climate change deniers; those who hold that global warming is a hoax or a conspiracy to slow progress.

From 2008, the economic crisis prompted world leaders to put economic growth ahead of environmental protection, with many governments backing away from previous emission-lowering commitments. The worldwide carbon market, including the EU’s cap-and-trade scheme, essentially collapsed in 2012, leaving questions about its efficacy as a means to control emissions.

Against this background the summary report comes as a wakeup call from the most respected source of climate science the world has. The new report has been widely accepted as the most convincing body of evidence of climate change and the human role in it so far. For impact investors, it could have profound importance on many levels.

What does it mean for the impact investing sector?

It’s fairly safe to say that most of those involved in the impact investing sector are already convinced of the reality of climate change. Many already focus their investing activity on areas relating to climate change such as agriculture and agribusiness, food security, forestry, land and water use, waste management and reduction, clean and renewable energy, energy efficiency and cleantech. For this reason, it’s likely that impact intermediaries, impact investing funds and social entrepreneurs will take the IPCC report as a renewed call to action.


However, the new IPCC report will change the impact investing landscape for everyone. Impact investors will see the effects of changes in government policy, the attitude of big business and international public opinion.
What will be some of the main currents affecting our impact investing strategies?

Governments respond with policy

The release of the summary report was a huge event, but it’s only the tip of the iceberg when it comes to the IPCC findings. The 19th annual meeting of the UN Climate Change Convention will be held in Warsaw from 11-22 November. At this meeting, the IPCC will deliver further scientific evidence to diplomats in order to facilitate policy decisions. A new legal commitment with respect to carbon emission will then be drawn up, replacing the 1994 accord. This is scheduled to take effect by 2015.

In preparation for these events, governments across the world are already formulating their policy stances. There are questions about how individual governments will react in the face of the new evidence. Climate change remains highly controversial in some developed countries, notably the US and Australia where it has become an issue that divides the political left and right. India, China and other rapidly industrializing countries are also wary: they have so far been unprepared to agree emissions cuts unless more developed countries do the same. Meanwhile island nations like Tuvalu, and South Asian countries like Bangladesh, both highly vulnerable to the effects of climate change, argue for a robust international response.

For impact investors, one thing is certain: there will be a new legal framework guiding climate change policy worldwide in 2015. Whatever the shape of this framework, it will change the investing landscape in many countries and have far-reaching effects for impact investors in many parts of the world. Much will depend on the structure and extent of the new laws, which will be hotly debated by governments. Regardless of the outcome, things will change for impact investors. The direct effects will be felt through the policies, programs and incentives governments create in response.

Where governments take a lead

In places where government policy supports pro-climate investing there are likely to be more opportunities for collaborative investments working across government agencies, impact intermediaries, impact funds and private investors.

Collaborative cross-sectoral arrangements are already a characteristic of the impact investing world. In the UK, Sustainable Development Capital was awarded £50 million by the UK government’s Department of Business, Innovation and Skills to invest in energy efficiency infrastructure projects. Big Society Capital, an independent fund created by the government, invests in many climate-friendly initiatives, especially in cleantech, energy efficiency, and sustainable energy for disadvantaged communities in Britain.

The UK provides what is probably the best current example of a dynamic government-lead approach to market-based social investing. As other governments take action to meet new policy commitments, they will be looking for solutions and partners.

Seasoned impact intermediaries and funds; of which there are a growing number; can bring specialist skills and knowledge to collaborative cross-sectoral arrangements for financing impactful businesses. They are also in position to benefit from government subsidies and tax incentives focused on meeting carbon reduction targets. For these reasons, the ability to work for and with government could prove essential for impact investors and the businesses they finance.

..and where they don’t

Where government leadership is lacking; and incentives such as tax breaks, subsidies and government co-investment are not forthcoming; global development agencies, philanthropic organizations, activists and impact investors will have to take the initiative in catalyzing the response to climate change. This may not be a bad thing: some commentators believe that private action, not government intervention, will be the key front in the fight against human-caused climate change. There’s already evidence that governments have been scaling back their commitments to climate change action and pushing responsibility onto NGOs and private companies, while private investors have been picking up the slack.

Many organizations and activists have been operating this way for decades and will continue to do so regardless of what governments do in response to the IPCC findings. The US provides many examples. The same country that rejected the Kyoto Protocol; and produced some of the most virulent and well-funded examples of climate change denial; has also given the world some of the most progressive models of local and state support for climate-friendly businesses and approaches.

This independence has made parts of the US leaders in areas like clean energy, energy efficiency, renewables, organic and sustainable agriculture and sustainable forestry. The States boasts some of the most mature markets in these new kinds of businesses, proving that federal government policy needn’t be an obstacle to progress.

The new markets remain volatile and, despite everything, still subject to the effects of government policy and subsidy (the rollercoaster of cleantech provides one example). Yet it looks as though these market areas will grow as communities and values-driven businesses, if not governments, look for new ways to react to climate change. This could be a growth area for impact investors and businesses.

Mainstream businesses go greener

Large multinational corporations and mainstream business will also feel the effect of the new climate change policies at ground level; and this will have a knock-on effect for impact investors and the businesses they capitalize.

All businesses will need to respond to the international regulations that grow out of the new IPCC report findings. More directly, they will need to meet national and regional standards set locally, and these too will be affected by the report. There also seems to be a feeling in the corporate sector that an upturn in the economy will leave them freer to take steps toward carbon emissions reduction. Many see a “green” profile as key to their corporate image. A growing number of organizations in the developed world are making sustainability a core value in their operations and employing sustainability professionals to help them achieve it.

All this will drive the market for services that support sustainability and carbon emission reduction in companies; for example, consultancies that help organizations shrink their carbon footprint and conserve resources. This will create a possible growth area for impact business-to-business providers, offering services that embed sustainability and carbon-thrift into corporate operations practice.

CSR, now a norm for business, will continue to play a key role in the business/government/climate change triangle. Already an important factor, CSR will become more central as the need for businesses to meet emissions targets increases under new regulations; and new, very real resource pressures anticipated by the IPCC report. A closer relationship between CSR and impact investing could open new avenues for corporations to use their considerable resources for good. Supports like the impact business CSR Hub, which helps track the effectiveness of CSR efforts, will help businesses hone their choices and give the public information about the real effect of corporate claims.

Beyond this, there’s a trend toward mainstreaming businesses that once were considered alternative. Words like sustainability, clean or green technology, renewable and clean energy; all important areas for lowering carbon emissions; already feature prominently in the reports of large multinational companies. General Electric invests in renewable energy projects, while ExxonMobile has programs for reducing its greenhouse emissions and innovating carbon capture technologies and biofuels made from algae. This is largely an effect of earlier government regulation on emissions. But it’s partly due to public pressure and, for some of the companies, canny strategic positioning for a future where business will have to be energy efficient to be successful.

The fact that these companies continue non-climate friendly business practices alongside these progressive ones leaves them open to the accusation of greenwashing from some quarters. Nonetheless, these examples are evidence of a mainstreaming of climate-friendly technologies and approaches in business. This trend suggests that the demand for them will continue and increase, especially as resources, such as fossil fuels, arable land and water become more scarce, as the IPCC findings seem to indicate they will.

This “greening” trend among multinationals could create opportunities for impact intermediaries, dynamic impact enterprises and engaged impact investors. Those who successfully bridge what’s been called the “pioneer gap” and manage to scale up socially and environmentally beneficial businesses to the point where they can join the mainstream, will be able to attract investment by multinationals and a wider pool of “neutral” investors; those for whom positive impact goals are not a motive for investment. This could increase the flow of capital into beneficial enterprises exponentially; and finally establish impact investing as a normal way to do finance.

Reducing Carbon Emissions: Key sectors for impact investment

(Maximpact Deal Listing)Agriculture

Agribusiness

Cleantech

Biotech

Renewable Energy

Energy Efficiency

Forestry

Waste Reduction

Land Remediation

Water

Sanitation

The public demands change

Another important consequence of the IPCC report will be its influence on public attitudes toward climate change; this too will have consequences for impact businesses and for the practice of impact investing.

Some recent surveys of public attitudes in developed countries have recorded a shift toward a more skeptical view of human-generated climate change. Pro-climate-change commentators put this down to the success of a well-organized media campaigns by special interest groups opposed to more government regulation.

But there is also a common-sense issue: people doubt the science when they don’t perceive significant climate change around them. Extreme weather events, such as the last year’s heavy snowfall in the US and the high temperatures in Australia, have been shown to produce large swings in public opinion in favor of belief in climate change. As events such as these become more common, as the IPCC report suggests they will, it’s likely that the climate will make its own case for action.

Still, there’s plenty of evidence that suggests that the public already accepts the idea of anthropogenic climate change and wants to see governments, businesses and individuals do something about it. The IPCC report will strengthen the convictions of many who already feel that we need to change tack. As impact investing becomes more accepted as a means of effecting positive change, this group will be supportive, buying products and services from impact businesses and providing funding, through micro-lending and crowdfunding platforms. The popular movement for divestment from fossil fuels could create a whole generation of small investors looking for more climate-friendly ways to deploy their capital.

People in developing countries; some of whom will be the worst hit by the effects of climate change; may need more convincing. As mentioned before, the governments of countries like China and India look on moves to limit carbon emissions as curbs to their growth by developed nations. Similarly, people in the developing world focus on the need for economic growth and view the talk of controlling emissions and resource consumption with suspicion.

There is some evidence that this is beginning to change. As in the developed world, people in economically emerging countries are beginning to see the effects of climate change for themselves; often in disastrous forms. Extreme weather events such as droughts and floods have the power to change opinions there, too. And there is anecdotal evidence that those who work on the land, farmers, are seeing the changes firsthand. These local observations, plus the hard lessons of extreme natural forces, may shift world opinion in time to make a difference.

For people in the developing world, the impact investing model could offer a middle way between economic development and climate stewardship. Its market-based approach encourages economic growth, while its commitment to positive impact has the power to channel that growth in climate-friendly directions. In this sense, the multiple bottom line of impact investing holds out hope for developed countries, too, who also need to find new ways to thrive economically without further damaging the planet.

Impact: a powerful tool to counter climate change

It looks likely that the IPCC report will generate a new groundswell of activity around the issue of climate change and this could be a boon for the growing, diversifying impact investing sector.

Impact investing’s pragmatic approach to finance, and its commitment to capitalizing impactful businesses, make it a powerful weapon in the fight to save the planet from the effects of global warming. Its market methods translate across borders and geographies, providing solutions for developed and developing countries alike. Its flexible techniques can be used in many contexts to support the kind of businesses, processes and technologies that can help minimize climate damage while supporting economic development.

All this means that it’s time to for the impact sector to get to work. There are still market infrastructure issues that need to be solved: impact metrics and the lack of exits are two important examples. More research is needed; investment models need to be tested, honed and replicated. Education for impact professionals, now in its early days, still needs to be developed as the sector expands, professionalizes and becomes, in time, part of mainstream finance.

However, if some of these limitations can be overcome, impact investing could play a key role in helping mankind develop an effective response to the threat of climate change. Let’s all hope the warning has come in time; and we are up to the job.

Better Names for Impact Investing (and other insights from Hazel Henderson)

by Marta Maretich

Hazel Henderson has never really liked the term “impact investing”.

“All investments have impacts,” she told us. “I pointed this out to the authors of the original paper published by the Rockefeller Foundation. Some of these impacts include blowing the tops off mountains and spilling oil in the Gulf of Mexico!”

Not mincing words is one of the characteristics that has made Henderson a thought leader in the ethical investing movement. Futurist, evolutionary economist, worldwide syndicated columnist, consultant on sustainable development and author of many books, articles and blogs, Henderson has turned her personal vision of a new kind of capitalism into a remarkable career spanning four decades.

Her CV is beyond distinguished, including 22 years of service on the Advisory Council of the Calvert Social Investment Fund and membership in the Social Investment Forum and the Social Venture Network. She founded Ethical Markets Media and won a slew of international honors for her work. She is the creator of the Green Transition Scoreboard, a tool that tracks the private financial system for all green sectors worldwide since 2007 (current total is $5.2 trillion) and measures progress “as defined by the triple bottom line of planet, people and profits”. Follow #greenscore on Twitter.

Taking a measured view of impact

This stellar track record speaks of Henderson’s lifelong commitment to positive change in the area of beneficial finance and socially responsible investing. It also makes her a hard person to impress. While the world gets more excited about the potential of impact investing to solve its many problems, her support for the practice is tempered with realism.

“While I applaud the approach and achievements so far of this kind of investing,” she says, “I don’t see it as a new “asset class” since it must operate within all the old and still failing models of mainstream investing. And, as I have discussed with many of impact investing’s best practitioners in our TV series Transforming Finance the term “impact investing” simply adds to the confusion! Why not call it “positive impact investing” and thus make its good intentions clear?”

She’s right of course

Henderson makes several important points here; ones borne out by the latest research into impact investing.

One is that impact investing is not a distinct new field of investing, or “asset class”, but an investment approach that spans asset classes. For Henderson, who has been at the forefront of the worldwide movement to diversify the financial methods that can be used to achieve social and environmental benefit, it’s only one tool in the larger toolbox that now (thanks to her and social benefit investment pioneers like her) includes a full spectrum of approaches: microfinance, social entrepreneurship, social impact bonds, venture philanthropy, catalytic capital, responsible investing, patient capital and so on.

Another of Henderson’s points is that not all impact is good impact: “blowing the tops off mountains,” as she puts it, definitely comes into the bad impact category.

The principle here is that intentionality matters when it comes to impact investing. Obviously, the idea is to avoid bad impacts; that goes without saying. But it’s not enough for good impacts to happen by accident, either, or as mere byproducts of doing business. To be authentic impact businesses, enterprises have to be built around the positive impacts they exist to create (along with profits).

And it’s not enough to cross our fingers and hope for positive impact without bothering to find out whether it’s really happening. Positive impact goals; and the metric processes that measure them; need to form part of the business plan of impact businesses. Otherwise, there’s nothing to distinguish them from ordinary businesses and no reason for impact investors (who currently complain of a shortage of good opportunities) to commit their capital.

Keeping sight of a higher purpose

Finally; and perhaps most importantly; Henderson’s comment reflects her belief that we need to do more than just tinker with the way world finance works.

Impact investing may be a good thing, but its dependence on the “old and still failing models of mainstream investing” mean that the approach is, after all, nothing so revolutionary as is sometimes claimed. More precisely, it’s an adaptation of what we’ve had in the past, using familiar techniques and market models, though in new contexts. As such, it doesn’t go far enough to satisfy Henderson, whose organization’s mission is: “to foster the evolution of capitalism beyond current models based on materialism, maximizing self-interest and profit, competition and fear of scarcity”. Henderson proposes to achieve this by reforming markets and metrics while growing the green economy worldwide.

Henderson’s vision for the future of finance is more radical than that of the elite group that gave impact investing its name. Where they hoped to harness the power of capital for good, Henderson wants to alter the very nature of capitalism, transforming it into something that better serves the needs of humanity and the planet. This higher purpose makes it unlikely that she will champion any single approach to changing the way we invest. In one example of her far-reaching strategy, Henderson has partnered with the company Biomimicry 3.8 to create a set of Principles of Ethical Biomimicry Finance, now available on license to responsible asset managers.

Henderson is well placed to take the long view of various social investing movements. Her comment serves a reminder that impact investing is just beginning to prove itself. The jury is still out, and it’s probably a good thing the early hype seems to be dying down. However keen we are on impact investing (and we are keen) it is not a silver bullet for solving the world’s problems.

At the same time, it’s a good thing that the sector is growing. More deals, more collaboration and more experimentation may serve to take us closer to a time when all businesses are, as Henderson would have it, positive impact businesses.

For more about Hazel Henderson see this interview in Green Money Journal.

Hazel has recently released Mapping the Global Transition to the Solar Age: From Economism to Earth Systems Science from the UK’s Institute of Chartered Accountants of England and Wales (ICAEW) and Tomorrow’s Company. It will appear soon in the US from Cosimo Publications, NY.

Building Bridges Between Impact Investors and Sustainable Forestry

photograph of trees in a woodGuest post by Alexander Watson, CEO OpenForests

My name is Alexander Watson, I am a forestry scientist with a background in Social Banking and Social Finance and founder of OpenForests, a consulting company with the mission to finance and develop social and biodiverse forestry projects.

The challenge

The annual worldwide deforestation is about 13 million hectares, predominantly in the tropics. We believe that reforestation is one opportunity to counter deforestation. At the same time it can help to satisfy the increasing demand for timber, which is estimated to grow by 50 percent by 2050.
This is why considerable investments in the forestry sector are needed to effectively combat forest exploitation. Responsible investments in the forestry sectors of the emerging countries are still limited due to uncertain market environments and a low level of investment experience.

Lessons Learned

The goal of OpenForests is to understand these barriers and deliver services to overcome them and unleash the existing investment potentials. But how do we do this in practice? In this article I am going to share our experience working with project developers and investors and present tools of which we think are useful to build strong bridges between investors and projects.

In recent years we have been working in Latin America, Europe and Asia and conducted various feasibility studies and developed sustainable forestry and agroforestry investment projects. We found that the major limitation for project developers to scale up their operations was a lack of sufficient funding. As reforestation projects are very capital intensive in the beginning, project developers often need of seed funding. This is especially true in the case of sustainable reforestation with long rotation cycles.

But why do some projects obtain funding and others not? On the project level we found common patterns that kept investors from funding these projects.

The Power of Data Management and Reporting

First, we learned that the data management and reporting was often insufficient. Although in many cases project developers have shown a high level of experience in managing their forest assets, forestry projects often needed to improve the consistency and timeliness of their forestry data.

A plausible, consistent and complete project documentation is required in order to make projects attractive to investors. Such documentation has to include financial data as well as social and environmental performance metrics. Only by understanding project processes it is possible to improve performance while facilitating a transparent project insight for investors. At OpenForests we improve project management and documentation by providing a customized Forest Information System, a centralized geo-database to organize and share project information amongst all participants.

Investors Need Better, More Transparent Information

Now turning to the investors’ side. When working with investment groups from the U.S. and Europe they revealed their great interest in extending their investment activities to emerging forest investment countries in Latin America, Africa and Southeast Asia. This interest is mainly due to the higher returns that can result from the relatively higher forest growth rates and lower land and labor costs, than it would be feasible in developed countries.

However, investors hesitate because of the lack of high quality information about the forestry sectors of these countries. Furthermore forest investment markets are often poorly organized and non-transparent which makes it difficult to source investment opportunities.

To help investors get the information they need, we developed services and tools like a set of risk assessment guidelines, a marketplace for sustainable forest investments and drone-based remote sensing system, to help investors to assess risks more accurately. Using modern information technology, the complexity and heterogeneity of forest ecosystems, management and market environment can be captured and understood more easily. Equipped with these tools, investors are able to explore high potential emerging forest forest investment markets more securely.

With our work, we wish to reinforce and unleash the potentials of the emerging forest investment markets and make Impact Investing for Sustainable Forestry a strong force countering deforestation.

For more about OpenForests and to source forestry deals.

See more forestry deals on Maximpact.com. Not a member? Register today.

Saving our forests from the effects of climate change

By Ana LaRue

Most people are still navigating through the data of the latest Intergovernmental Panel on Climate Change (IPCC) report, but it’s overall message is clear: anthropogenic (or human-made) climate change is already taking its toll on the life on this planet.

In a series of blogposts, Maximpact will be looking at what the IPCC’s findings mean for different parts of the impact investing sector. In the first of the series, we focus on forestry.

What do the findings mean for our forests?

Global warming is the best-known consequence of climate disruption, and its effects will probably intensify other global problems including damaging the health of our forest ecosystems. Forests play a key role in the mitigation of climate change but they are also highly affected by the stresses that result from it. Deforestation creates a vicious cycle: increased deforestation leads to increased greenhouse gas emission and increased climate change, which in turn poses additional threats to forest ecosystems.

The IPCC report covers several aspects of climate change that impact directly on forests.

Increases in CO2 emissions:
With no doubt, concentrations of CO2 and other greenhouse gases in the atmosphere have increased to levels that are unprecedented in at least 800,000 years. This may not necessarily be a negative thing for our forests. Given sufficient water and nutrients, increases in atmospheric CO2 may enable trees to be more productive in mitigating climate change.

However, given the substantial role forests play in the global carbon cycle, there are other considerations. Deforestation and forest degradation through agricultural expansion, conversion to pastureland, infrastructure development, destructive logging and fires account for nearly 20% of global greenhouse gas emissions. According to a United Nations initiative that uses market and financial incentives to combat deforestation (Reducing Emissions from Deforestation and Degradation), the world’s forests are disappearing at the alarming rate of one football field’s-worth every few seconds. This means that meeting the UNFCCC’s (United Nations Framework Convention on Climate Change) target of 2 ºC rise will be practically impossible to achieve without also reducing emissions from the forest sector.


Changes in precipitation:
The IPCC predicts the contrast between wet and dry regions will continue to increase, with wet areas getting wetter and dry regions growing more parched. This will likely change the availability of water, altering forest growth cycles due to higher drought in some areas and extreme precipitation and flooding in others. Although forests can be resilient to some degree of change, more pronounced episodes could wipe out more sensitive local tree species. Variations in precipitation can also lead to natural disasters such as monsoons, extreme winds, floods, cyclones or extreme droughts. This could make ecosystem recovery even more challenging.


Increases in temperature:
Twelve of the warmest years in recorded history occurred during the last fifteen years; and the IPCC report predicts that it will only get more intense. When it comes to our forests, variation in temperatures can alter growing seasons and shift geographic ranges. Forests facilitate food, water and air production, help to minimize storm damage and produce a wide range of natural medicines. A shift in the growing seasons could mean extinction of certain tree species that could no longer adapt to these changing conditions. Changing temperatures may also be responsible for additional threats to forests, such as pest outbreaks, fires, and drought.

What can we do today?

While some people still question whether IPPC’s prognosis is 100% on track, we can no longer argue about whether the human race plays a role in climate change. It seems sure we’re all heading for a period of global change and uncertainty. What seems less sure is what we can do about it.

Government policy will be highly significant in determining the response to the threat of climate change. However the wheels of government turn slowly; and there is still significant reluctance on the part of some governments to acknowledge the reality of climate change at all. For a quicker, more committed response, it will necessary to look elsewhere: toward private investors, philanthropic bodies and corporate certification schemes.


Impact investing –  forestry:
Impact investors, funds and intermediaries are increasingly attracted to business incentives that involve sustainable forestry, but they often have a hard time locating deals. Collaborative platforms like OpenForests and Maximpact can provide different sector-specific opportunities to locate attractive deals and collaborate towards making a measurable impact.


Philanthropy – forestry:
I
ndividuals can choose to directly donate to foundations that support forestry initiatives such the David and Lucille Packard Foundation and the WWF. Philanthropic donations can minimize specialized knowledge needed when deciding how to maximize impact in a specific sector.


Global certification standards:
Companies can also work with different certification programs that guarantee the product they are choosing is made with wood from a certified sustainably-managed forest. To help consumers and companies know which products come from sustainably managed forests, several certification schemes have emerged, most notably those by Forest Stewardship Council (FSC) and Sustainable Forestry Initiative (SFI).

The IPCC prognosis is also clear in one more thing: there is still time to do something about climate disruption. Forests provide us with valuable resources including clean water, recreation, wildlife habitat, carbon storage, and a variety of forest products including medicine. Climate change is a threat and what we are able to do today will have a direct effect on the forests of future generations.

Interested in forestry deals? Login or Register now.

[Image credit: Morgue File]

How to Find Impact Investors to Finance Your Sustainable Business

By Marta Maretich

Originally posted on the OpenForests blog. OpenForests is a consultancy specializing in sustainable forestry projects.

So, you’ve written the business plan. Congratulations! (And thanks to OpenForests for their useful guide to writing a business plan for a sustainable forestry enterprise.) Now you’re ready to look past the trees and focus on the forest; the wide world of impact investment. It’s time to go out and raise capital. But where do you start?

Decide what kind of investment you’re looking for

Capital is capital, right? Not exactly. There are many different ways of structuring finance and many different ways a business can relate to its investors. Writing your business plan has given you an idea of the amount of investment you need. Now it’s time to think about the kind of investment you’re looking for.

Are you looking for debt or equity? How long will you need the money for? Do you want partners who will offer more than just capital, who will give you advice and contacts, for example? Do you need pure capital, or a blend of capital and grants?

To find out which model might work for you, tune in to the wider world of impact investing and learn about your options. Find projects similar to your own and research how their funding is structured and who their investors are. Websites and company reports can help you form a picture of what’s out there and develop more knowledge about funding choices.

Build impact measurement into your business plan

In the world of impact investment, impact measurement is as important as financial return. Impact investors look for financially viable businesses that have clear, defined and above all measurable social and/or environmental outcome targets.

To succeed with impact investors, impact metrics need to be prominent in your business plan and your pitch. You’ll need to decide which measures will mean success for you, then define how you will measure and report them. This blog by Jonanthan Kuo shows how important metrics are to Acumen, a successful impact investing pioneer.

How do you know which metrics to include? There are several systems on offer right now but IRIS, from the GIIN is a good starting place for those new to impact metrics. This standardized system offers a broad range of metrics that can be adapted to suit the needs of your business. The key is to choose metrics that are realistic, practicable, fit into your operations and serve your strategic goals. For more on the best way to “do metrics” see my recent blog post for Maximpact.com.

Research investors

The range of impact investors is growing and so is their spectrum of approaches. Some impact investors simply provide capital, others mix catalytic capital with grants to promote growth. Still others work as venture philanthropists, bringing hands-on expertise and networks to help businesses grow. Getting familiar with the different types of investors will help you target the ones that can help you most.

Conferences like SOCAP are a good place to learn about and meet potential impact investors; and if you can’t be there in person, they make videos of many of their discussions and panels available on the web.

Industry blogs like OpenForests, media streams like FastCoexist or Huffpost feature stories about impact businesses and the investors that support them. Our impact deal portal, Maximpact.com, hosts all of these types of investors on it, all of them actively looking for deals. Do your groundwork and understand your options.

Types of impact investors

  • Accelerators, Hubs and Intermediaries
  • Angel Investors
  • Venture Philanthropists
  • Enterprise Capitalists
  • Large corporations with sustainability agendas
  • Foundations
  • Family offices
  • Governments
  • International development agencies

Cultivate relationships

Business, like life, is all about relationships. Cultivating good relationships with a number of potential investors will pay off now and in the future.

Make a short list of impact investors to approach with your business plan and research them carefully before you set up a meeting. Identify their impact mission- do they want to stop deforestation, protect indigenous communities, promote synergies between agriculture and forest habitats?

Find out what investments they’ve made in the past and learn the names and backgrounds of key personnel; impact investing remains a sector where personal values matter, even at the highest levels.

Once you understand your investor, you can speak to their interests and demonstrate how your project will help them meet both their financial and social or environmental impact goals.Be prepared for a two-way dialogue. Your investors may have strong views about your business model and impact goals. Keep an open mind and be prepared to negotiate.

For more insights into how impact investors think about business, see this post by Tilman Ehrbeck.

Find out more about Maximpact.com or list a deal on our global platform.

[Image credit: 123rf]

Big Investors, Small Investors, All Investors

by Marta Maretich

A handful of visionary investors, social thought leaders, philanthropic organizations and foundations gave impact investing its start. These were typical early adopters, open to new ideas and confident enough to take the risks necessary to find out if they worked.

Now impact investing is beginning to prove its worth. Its reach is extending to include smaller investors on the one hand and large, mainstream investors on the other. Recent work by The World Economic Forum Investors Industries and ImpactAssets gives a sense of this dual trend.

Small is beautiful

Impact investing has a natural appeal for small and grass-roots investors, but until now there have been few ways for them to put their money into the market. The popularity of crowdfunding platforms like Mosaic and Crowdfunder give a sense of the potential in this investor group and more organizations are looking for ways to tap in.

Recently launched by ImpactAssets, the Seed Ventures Platform helps unlock the potential of smaller donors. As President Tim Freundlich explained in his presentation at SOCAP 13, ImpactAssets set out to “crack code on seed-stage investing into social enterprise, especially investing into for-profits.” They wanted to lower the cost of due diligence and other deal costs which meant impact investing funds had to be big (around the $20 million mark) and do large volumes of deals to be viable.

Their answer was to create a a platform within ImpactAsset’s donor-advised fund (DAF), the Giving Fund, to aggregate smaller amounts of capital. A DAF is a philanthropic vehicle that offers many of the advantages of a private foundation without the expensive set-up fees or administration. Initial donations are tax-deductible and can start as low as $5000.

Democratizing early-stage impact investing

The Giving Fund is at the heart of the Seed Ventures Platform, a new investment option that gives both investors and donors access to seed-stage businesses needing capital. The Seed Ventures Platform offers a “dim sum menu” of select social investments backed by trusted accelerators such as Village Capital and Hub Ventures.

Freundlich: “Folks will be able to log into their online platform; and see a menu of 20, 30, 40 ventures; all early-stage, handpicked (by accelerators) and able to use tiny investments from the accounts aggregated by this fund.” Investors are able to create a personalized portfolio that aligns with their mission and financial goals. The portal allows to allocate grants, too, and to track both investments and grants online.

ImpactAssets is now testing the Seed Ventures Platform with larger donors, but if it works, the model could open up seed-stage impact investing to everyone with a social conscience and money to invest. The model is designed to be replicable: ImpactAssets has plans to share the software with other organizations. Freundlich envisions a future where tiny investments of as little as $25, managed through a smartphone app, could create huge impact in areas like agriculture, cleantech and renewables.

On the large side

While there’s evidence that small investors are eager to get involved in impact investing, the same can’t be said for large ones.

Despite its success in recent years, impact investing accounts for only a thin slice of the global asset cake. The majority of impact investors are still among the development finance institutions, family offices and high-net-worth individuals that were its early advocates. Altogether, these groups own only 2.5% of global assets. Compare this to the percentage of assets held by mainstream investors; sovereign wealth funds: 9%, insurance companies: 39%, pension funds: 48%; and it becomes clear why impact investing needs to reach out to big institutional investors.

So far the impact investing movement has hardly touched the mainstream, according to the recent report by the World Economic Forum (WEF), From the Margins to the Mainstream. Client demand for sustainable and responsible investing (which are different but related approaches) suggests impact investing could be popular among mainstream investors. Yet with some exceptions like Credit Suisse and Deutsche Bank, few of the big players are taking up the challenge.

The WEF’s survey of US-based pension funds gives a snapshot of the reasons why: Confusion about what impact investing is and does; skepticism about its viability and problems related to the immaturity of the impact marketplace are among the obstacles for the biggest investors.

Obviously a lot more needs to be done to convince these mainstream institutional investors to put their money behind impact investing. The WEF report makes number of recommendations for impact investment funds, foundations and philanthropists, intermediaries, governments and the impact enterprises themselves. It also offers a useful checklist for institutional investors who want to get started with impact investing. Download the full report.

Working both sides

The WEF report provides valuable first step toward involving the mainstream in impact investing. Engaging small investors may prove easier in the short term. They have more flexibility, more autonomy and can take risks that most institutional investors would shy away from. But given the threats of climate change, food shortages, population growth and environmental degradation, it seems urgent that all investors become impact investors right now.

To find live impact investing deals log in to Maximpact. Not a member? Register now.

[Image credit: alphaspirit 123rf]

Notes from the Sharp End

By George Watson, Head of Finance for SEFA

Two recent articles in the Stanford Social Innovation Review and the Huffington Post concerning the value of impact investment have brought to the surface the often-dormant debate as to the true outcome of impact investment. Having spent many years at the sharp end of impact investing, here are some thoughts:

The impact goes beyond the investment

For me and for many people there is the clear understanding that the greatest impact of impact investing is at one remove from the investment itself. The impact of creating a good job is not just in the job itself but in the spin-off benefits: the investment of the job holder into the community economy, the creation of support services for any enterprise which is the subject of investment and the ability of beneficiaries to access fundamental service like education and healthcare that result from the investment. Any real discussion and any analysis of the impact have to take account of that.

Don’t look only at funds

The analysis in these two articles is of funds. Funds tend to be part of a wider portfolio such that there can be a cross-subsidization of costs and returns. Direct investors whose sole function is impact investment don’t enjoy that luxury. To understand impact,we also need to apply the criteria of impact set out in these papers to direct investors whose sole function is impact investing.

Sustainability is key

The world of microfinance has engaged in the debate between sustainability and developmental impact. Sustainability has become the keyword. Those practitioners who have sought financial and institutional sustainability are those who survive and flourish. That debate hasn’t really taken place in impact investing. It still needs to happen in a serious way.

Distinguish between “charitable” donation and sustainable investment

This is necessary if we want to adequately assess the success of impact investment. Sustainability must mean market returns because surely impact investment seeks to be a sustainable investment class itself.

Define the risks

There needs to be definition of the nature of the risks that constitute impact investment. Is simply filling the gaps in an under-developed or under-resourced capital market really impact investment? For me impact investing goes where no-one has gone before, where conventional funds are unwilling to go because of risk and then to successfully manage that risk. Many of the examples given in the two articles seem to be the product of more sophisticated markets intervening rather than taking risks and managing them.

Seek scalability

Scalability is the holy grail of impact investing, I believe, and we need to develop platforms and models that enable growth and hold down the excessive costs. The microfinance industry has to some extent achieved this and the remainder of the impact investors need to do the same. In doing so we also need to consider the size of each end user investment.

Define to measure impact

The definition of impact investment is wide and various, and needs closer definition, not just in terms of objective, impact and return, but also in terms of who it is that impact investors seek to ultimately serve. Until that is done it will be hard to measure impact.

In my opinion impact investment works, but is still in its infancy and still too much a by-product of mature markets. It needs to develop its own range, products, goals, results, and orientation. By doing the things laid out in this post, impact investing will have a chance to realize its true potential.

About George Watson George Watson is a lawyer with more than 40 years of experience in micro, small and medium enterprise (MSME) finance. He worked first in the UK and later in South Africa where he built a number of businesses,the last of which was sold to Small Enterprise Finance Agency (SEFA). He is now head of credit at SEFA, specializing in start-up and early-stage owner-managed businesses with strong developmental impact. He works with clients at the very high-risk end of the market, those who aren’t able to access conventional funding sources for economic or social reasons, lending without collateral and to people lacking business skills.

About SEFA SEFA’s mandate is to foster the establishment,survival and growth of Survivalist, Micro, Small and Medium Enterprises and contribute towards poverty alleviation and job creation. SEFA has a regional footprint of nine offices around the South Africa.

[Image credit:123rf]

Spotlight Deal: Composting Adds Value for Mali Farmers

In the rural areas of some developing countries, bio-waste is a problem and so is the degradation of arable land through soil erosion and moisture loss. A new deal on the Maximpact platform offers a solution to both of these challenges for farm communities in rural Mali.

Working with the Malian government, Transcarbon, a consulting firm that advises on sustainable development, has come up with a plan that will allow farmers to add value and increase production by transforming bio-waste into fertilizer.

It consists of a program to construct small-scale, efficient, low-cost composting stations to treat waste that is normally left to decompose without control or recovery. The compost can be used to restore soil fertility, increase crop yields and reduce consumption of chemical fertilizers while at the same time improving sanitation in the villages.

The economic benefits to Malian rural communities include job creation – an average of five jobs will be created in each village; and increased incomes through selling the compost. There’s also potential to earn carbon credits from methane reduction.

For private sector investors, the outlook is also positive. The per-feasibility analysis carried out by Transcarbon shows that the project carries a low technical risk, has both strong commercial viability and value proposition, and has solid potential for replication and scalability. Desk and field due diligence are complete and the detailed project proposal has been finalized.

For more information, log in to Maximpact.com and use the Deal Search function to find deal D000461. Not a Maximpact member? Register today.

[Image credit: michelealfieri / 123RF Stock Photo]

Where Are the Opportunities for Impact in Agriculture?

The big corporations, governments and NGOs will continue to be active in agriculture, but there are still opportunities for impact investors.

Scaling up existing models

Impact investing already has a track record of success in agriculture. Over years of experience organizations like Root Capital have developed models that have proved their effectiveness in providing impact finance to key rural smallholder communities. Now these methods are ready to be brought to scale, applied to new parts of the world and extended to new crops and new markets. GEXSI, Toniic and Total Impact Advisors are some of the intermediaries currently listing smallholder finance deals on the Maximpact platform now.

This could be an important avenue of growth for impact investing and for world agriculture with a ready-made demand for capital, a group of experienced financiers and proven models for making the finance work. And, because these seasoned financiers are good at sharing their knowledge, possibilities for replication and franchising make more impact possible.

Pioneering longer-term finance

These providers are also taking their investing into new territory and this could be another area to watch for investors. So far, most of the tried-and-true models have provided short-term finance for specific agricultural activities. Yet there’s a need for longer-term finance for a greater range of activities.

Some experienced lenders, including Triodos, are beginning to establish longer-term funds for just these cases. The buzz is that we may see other organizations joining forces and coordinating their efforts to create a bigger impact in the sector. This is a riskier approach,yet it has the potential to catalyze food production in many parts of the world and have an impact beyond any seen so far. Watch this space.

Moving from “alternative” to mainstream

The taste for sustainably produced,responsibly sourced and organic and Fair Trade certified food is growing in all parts of the world, as is the interest in locally produced food. Banks in many places are still reluctant to lend to small and mid-sized producers on terms they can afford.

This creates another area of potential profit for impact investors. Some already have a track record of providing finance to small and medium-sized, local producers of high-quality food. In the US, Iroquois Valley Farms is one example of a company tapping into this part of the market. Iroquois ValleyFarms buys land then leases it on a long-term basis to mid-sized local and organic farming businesses. In New Zealand, Agro-Ecological offers a range of supportive finance for organic and sustainable producers, while in Canada Investco Sustainable Food Fund does the same.All these companies currently have live deals on the Maximpact deal site.

Embracing agribusiness

Impact investors should look beyond farmers to find opportunities in agribusiness in its widest sense. The term agribusiness embraces every aspect of commercial food production, from growing, to processing,to market delivery. It includes new and high-tech methods and equipment as well as services to producers, including financial ones. It links agriculture with rapid growth areas like cleantech, renewable energy, water technology, bio-technology and sustainable forestry.

This broad sphere provides multiple opportunities to invest for impact a snapshot of Maximpact’s platform demonstrates this with its range of agribusiness deals: a business that caters to the information management needs of coffee farmers; an off-grid cold storage system that allows farmers to get their perishable produce to market in good shape; a eco-lodge that combines sustainable cocoa production with tourism. Several deals combine forest stewardship and agriculture; and important theme for impact. Agribusiness even extends into the ocean, with a deal for Hawaiian company innovating new ways to produce seafood.

For more information on any of the deals mentioned here, log in to Maximpact and navigate to the deal platform. Not a Maximpact member? Register now.

One Year of Maximpact by Tom Holland

Maximpact.com has been in operation almost one year. And what a year it’s been for impact investing and for us.

The last twelve months have seen impact investing; in fact all forms of social and sustainable investing gain significant ground. We saw the Impact G8 in London and heard the buzz around impact grow louder. Some of the main infrastructure issues such as measurement and exits have begun to be addressed. The US has launched a huge impact investing initiative. Social Impact Bonds are beginning to prove their worth. And all over the world, new educational programs have been launched to train the impact professionals of the future.

Impact investing is on its way to becoming mainstream; and the range of opportunities for investors and businesses has never been broader.

For Maximpact it’s been a year of discovery. Recently someone asked me what the highlight of Maximpact’s first year has been. That’s a tough question in a 12-month period that’s seen us doing so many new things for the first time. Yet I suppose the highlight has been all the support we’ve had from all parts of the various sectors. We see this support very directly from the number of individual funds, intermediaries and funds listing on the deal site. And we’ve heard it through the user feedback, which has been very positive both in person and through our social media channels like Twitter and LinkedIn.

Users from many sectors including impact, sustainability, eco and green are telling us Maximpact is useful for networking, finding deals,identifying collaboration partners and securing investment. They also say it’s a good way to find new ideas and technologies and a way to deploy existing technologies for new uses. Our Newsstand resources feature has proved very popular. We’re also having more approaches from organizations and funds who want to collaborate with Maximpact; the EVPA is one example we’re proud of.

Surprises, good ones

This is everything we hoped for when we started out a year ago. Yet in some ways, the experience has been one big year-long surprise. I mean, we thought that our big tent approach would help the markets increase volume and gain momentum. Bringing CSR, eco and green, cleantech and sustainable investing all onto one platform was a strategy designed to open up the market and create more impact. We believed in the idea completely, but no one had tried it before and there’s always that fear that your brilliant concept won’t work in practice.

I’m very glad and relieved to say it does work. The industry has taken to the idea. There are signs that some of the old barriers are coming down, opening up the way for more investment, more impact. Now, with this year behind us, I can confidently encourage more people do what we’ve done: to innovate, to collaborate, to encourage collaboration and to accelerate change.To dive in and do their part.

That’s not to say there isn’t a lot more for us to do. There are quite a number of people that see the good in what Maximpact is doing but are still sitting on the sidelines. There are still whole parts of the sector that haven’t yet recognized the extraordinary potential in this kind of investing. We continue to try to draw these players in, to get them to try the platform and join the open community. The truth is that impact investing and other forms of sustainable investing need many approaches and innovators. We are doing it one way, but there will be other ways. We welcome this diversity.

What’s on the horizon

Anniversaries naturally make you look back; they also force you to look forward.

For the industry as a whole, we think the next growth phase is going to be very interesting. Responsible and sustainable practice is becoming the expected norm in all aspects of business, in all industries. Businesses that once made their “green” and “social” credentials a selling point, for example, now hardly even mention them. And yet in practice they may be more”green” and “social” than ever. These values are now almost taken for granted by the public as part of a new contract between business and society.

This revolution is being driven by public demand and by governments who see the benefit of a more sustainable approach. As an important part of this larger trend, the view of finance is also changing. We’re all heading toward socially conscious financing and investment. Philanthropic organizations are finding more synergies between market practices and mission goals. They have hugely valuable intellectual property and knowledge, which gives them an edge for pioneering some of these new models. All this will have a dramatic effect on the size of the social benefit, impact and eco and green investing markets in the coming year and far into the future.

For Maximpact, the challenge is to keep ahead of this fast-moving trend. This means continually streamlining our deal platform, making it more efficient, adding more users and more deals and doing everything we canto make it the most lively marketplace in the industry.

We’re also adding new services: video pitches that allow users take their deals directly to potential investors; software that gives enterprises the tools to become investment-ready; a boutique fee-based service to provide specialized professional expertise to the sustainable and social investors. And so much more; we’re rolling out new software products in just a few weeks, a move we’re all excited about.

What we’re building around Maximpact is a solution center for the whole industry. It’s all about putting vision together with the skills and tools of finance. We think the coming year is going to be even more exciting than the last; and we’re looking forward to it.

Mike McCreless Reveals the Secrets of Root Capital’s Success

Root CapitalBy Marta Maretich

Root Capital is one of impact investing’s success stories.This nonprofit social investment fund grows rural prosperity in poor, environmentally vulnerable places in Africa and Latin America by lending capital, delivering financial training, and strengthening value chains for small and growing rural businesses. Since 1999, Root Capital has disbursed more than $500 million in loans to more than 425 borrowers representing nearly 750,000 farmers and artisans in 40 countries in Latin America and Sub-Saharan Africa while maintaining a repayment rate of 98% for borrowers and a 100% repayment rate to investors.

But what lies behind this impressive record? Mike McCreless, Root Capital’s director of strategy and impact, talks to Maximpact about the importance of agriculture, the secrets to Root Capital’s success and what’s coming for agricultural impact investing in the future.

Maximpact: Why is agriculture such a key sector for impact investing?

Mike McCreless: The first reason is that the need is so great. There are 2.6 billion people living on less than $2 a day, which is the international poverty line. 75% of these people live in rural areas and most of them are involved in agriculture. If you want to reach these people, agriculture is a good place to start

The second reason is that agriculture has been a neglected area for decades in international development circles. Beginning in the 80s and through the 90s there was a trend of disinvestment in agriculture. Foreign aid for agriculture dropped from 18% in 1979 to 3% in 2004. Root Capital began work in1999, when investment in agriculture was near its lowest ebb.

Today, investment in agriculture is making a resurgence. Foreign aid agencies and commercial capital are getting back into the picture; the New Alliance for Food Security, Feed the Future and World Bank Global Food Crisis Response Program are some examples. Policymakers are beginning to realize the power of agriculture to both to achieve food security at a national level and to transform livelihoods for the rural poor. At the same time, it’s becoming clear that any approach to mitigating climate change must involve agriculture given its large carbon footprint, especially as practiced in many developed countries. Finally,better agricultural practice is needed to feed a global population that will reach 9 billion by 2050.

Maximpact: You say the funding picture is improving for agriculture. Is there still a role for impact investors?

Mike McCreless: The funding, both public and private, is beginning to come back. However, the private capital is drawn primarily to the bigger deals, for large-scale commercial agriculture. Most of that money is not reaching down to the 2.6 billion living on $2 per day, mainly smaller farmers with one to four acres of land. This means there’s still an important role for impact investors to play.They can place their money with the agricultural businesses that engage directly with those smallholders who may not be benefiting from the large-scale influx of agricultural monies.

Maximpact: There are many ways of doing impact investing. How does Root Capital do it?

Mike McCreless: We invest in emerging agribusinesses that have the potential to connect smallholder farmers to markets but cannot access loans locally because they are considered too small, too risky, and too remote by commercial banks. Many of our clients are cooperatives, owned and managed by the farmers themselves. Others are private businesses that source product from smallholders or sell them agricultural inputs such as seeds.

In most cases, the businesses we invest in aggregate the harvests of 100, 1000 or even a few thousand farmers. With access to credit,they can purchase more volume from farmers and more reliably supply their buyers, which often leads to larger purchases the next year and, over time,price premiums tied to improved quality. When farmers can connect to markets in this way they’re able to get a higher share of the end price than if they sold to a local trader.

We don’t establish new agricultural businesses ourselves. Rather,we build on the strength of pre-existing, locally-driven initiatives. Where there is already momentum for change and a market-based approach but a financing constraint, we can unlock latent potential with our loans and financial management training. We have found that capital by itself is often not enough. Fledgling agricultural businesses also need support in managing cash flows, assembling financial statements, and building a credit history, and our financial advisory services team helps businesses to these things.

Maximpact: What are the special challenges for impact investing in agriculture?

Mike McCreless: There are a lot of not very glamorous specifics that are key to making it work. There’s a lot of technical knowledge related to agricultural risk and small-scale farming; harvest cycles, perish ability, quality standards in the market. An investor needs to understand these.

You also have to be able to scope the whole agricultural value chain from the farm to the end buyer. You need a good feel for who the buyers are and for the relationship between buyers and a given agricultural business. Likewise, you need a sense for the strength of the relationship between the agricultural business and the smallholder farmers whose harvest it purchases. This informs how much of that product it makes sense to finance and how to structure the finance to support the business and mitigate risk.

Maximpact: Root Capital has been very successful as an impact financier. What are the keys to your success?

Mike McCreless: Honestly, the financial tools are not complicated. The key for us is choosing the right businesses to invest in. The way our model works from an impact and finance perspective is that we are able to identify clients in an early-stage sweet spot, where they’re ready for external capital but not yet able to access it, and we provide the capital they need to grow. We look for agricultural businesses that really can’t get a loan anywhere else because they’re too small or because local banks often don’t lend to agricultural businesses. Then we give them that first loan that helps them achieve their potential.

Having the right personnel is also key. A lot of our loan officers, our founders and early employees came from backgrounds as farmers. Others came out of a farmer cooperatives or agribusiness, often in the finance function. Their expertise makes it possible for them to assess the risks and the credit worthiness of agricultural businesses. Today we still hire loan officers who have that combination of agriculture and finance backgrounds. We favor people who grew up in the country where we’re operating, who have local knowledge, know local languages, and are familiar with the agricultural businesses in that region.

There’s been an interesting evolution over the course of the last several years where intuitively “knowing how to pick-em” has been translated into formal systems and processes that can guide people how to do that on a larger scale.

Right now we’re trying to formalize and crystallize the process of how to pick businesses to invest in. We’ve developed a social and environmental due diligence process that is embedded into our credit evaluation process. Our social and environmental due diligence is based on what our most mission-driven and perceptive loan officers knew intuitively to look for, buttressed by additional research and consultation with outside experts. We are preparing our first issue brief on the topic.

Maximpact: What’s in the future of impact investing for agriculture?

Mike McCreless: We think there will be a formalization of what’s been happening in this sector over the last ten years, a re-emergence of a formal sector around agribusiness investing and smallholder agricultural finance. For instance, just last year the Dalberg Group published an important report that suggests several paths forward for this sector. This report has gotten great traction and we anticipate that increased collaboration will follow as a result.

We also see an extension of impact investing to new frontiers such as longer-term investments linked to increasing productivity. An example: coffee rust in Central America is wiping out coffee crops. This is a bigger problem than Root Capital can tackle alone so we’re working with a range of partners that can bring different types of expertise to address the problem.

Fundamentally, the idea is to provide finance for farmers to”renovate” their coffee farms or replace aging and often sick plants with young, healthy ones. Although many of Root Capital’s loans are for one year or less, we are increasingly offering long-term loans, for instance for major capital expenditures. Coffee renovation loans would be even longer-term investments because it takes three years for a coffee tree to start to produce coffee, and longer to reach full productivity.

A lot can happen in that time. It’s a riskier but a higher impact investment, because without renovation the farmer would eventually be left without any income from coffee as the trees age and die. To stay on the leading edge we need to find new ways to bring financial tools to meet new challenges. Even as we keep on offering familiar products in familiar sectors, finding the next frontier of unmet needs is key for the sector.

Maximpact: Who do you admire in this sector?

Mike McCreless: Good question! Financiers such as Root Capital can always improve practice by learning from organizations on the sourcing and production side. We learn a lot from organizations like Catholic Relief Services who have been very active in tackling the coffee blight. They understand the cutting edge of best practice in terms of production methods, processing and farmer engagement. They are finding new ways to help farmers re-invest in themselves and contribute the time and the money to capitalize their cooperative for long-term success. These are all things we need to understand to be successful.

We also admire; and learn from; many of our buyers. For this reason identifying the buyers that deliver benefits to smallholder farmers is the way forward. Good buyers are, for us, the best value chain partners.

As for buyers we admire? One company that springs to mind is Theo, an ethical chocolate company. We admire their progressive sourcing programs and ways of engaging with farmers. Green Mountain Coffee Roasters has led the way in raising awareness of the problem of chronic hunger among coffee farmers, and in investing in programs to address the problem. Sustainable Harvest has done a lot to strengthen the livelihoods of farmers it buys coffee from. Falcon is doing great work sourcing from difficult, often post-conflict environments. And of course, folks like Equal Exchange and Coop Coffees were at the front of the ethical sourcing movement. Engaging with buyers and other partners in the value chain is always an educational opportunity for us.

Find out more about Root Capital and how their approach works.

For impact investing opportunities in agriculture, login to Maximpact and navigate to Deal Search. Or register today.

Cultivating Change: Why Agriculture Needs Impact Investing

By Marta Maretich

There’s a global food crisis looming, according to many commentators. The food price crisis of 2008 spooked world markets and gave us a taste of what may be to come in the future: commodity prices went through the roof and people in many parts of the world panicked. This lead to a reappraisal of food and agricultural policy in many quarters,spurring international aid organizations to action and attracting private investment to agriculture. This changed the agricultural investment landscape; but not enough. There remains an urgent need for impact capital in agriculture today.

The lay of the land

One thing is certain: agriculture is a sector set for growth it has to be. Global populations are rising and adopting new dietary patterns as income levels increase in developing countries. Researchers predict that by 2050 the demand for crop foods will increase by 100% by 2050 and for animal foods by110%. Yet food stocks in many countries are dropping to some of the lowest levels yet seen and food production is not increasing fast enough to meet future demand.

Other related factors are driving change. Rising oil prices continue to exert an upward pressure on food prices while at the same time the diversion of cropland for use in growing biofuels is limiting the amount of land used for producing food. Political and economic in stability in some regions, changing weather patterns and plant diseases, such as the coffee rust now affecting Central America, are contributing to a sense of scarcity that is driving food prices higher; and fuelling markets in agricultural futures, agribusiness and land.

Large investors buy in to agriculture

As a result, agriculture is very much on the map for large multinational corporations and traditional investors. One indicator is that agricultural ETFs (electronically traded funds) such as MOO, PAGG and CROP have been hot property in recent months. These funds are typically populated by agricultural giants such as Monsanto, Syngenta, Cargill and Deere. Multinational corporations such as these have been actively expanding their agribusiness holdings and penetrating new markets, especially in developing countries, in preparation for a future where food is in more demand than ever before.

The actions of governments, arguably the biggest buyers of food, are still extremely important in this sector. Food supplies are a political issue across the world and many governments maintain stores of staples as a matter of policy; a factor not set to change in the foreseeable future. Beyond this, many developing countries are also investing more in agriculture in a move to increase production: China for example upped its agricultural budget 27% in 2007, 38% in 2008, and about 20% in 2009. At least some of this money is going into increasing production outside of China in countries such as Africa, further turning up the heat under agriculture as an investment.

The Global Food Crisis

This heated market activity is not necessarily good news for a hungry world. In 2007-2008 high market volatility driven by the export policies of some governments and commodity speculation resulted in a global food price crisis. Prices for staples such as corn and rice shot up by as much as 217%, sparking food riots in several countries. The complex reasons for the crisis are explored in this podcast from NPR’s Planet Money. One of its effects was to galvanize the international aid community to action.

After “decades of disinvestment in agriculture” (to use the words of Root Capital’s Mike McCreless) agencies such as the Food and Agriculture Organization of the United Nations (FAO) and the World Bank and others hurried to establish a slew of new aid programs to support agricultural development including the Global Agriculture and Food Security Fund, the US government’s Global Hunger and Food Security Initiative, Feed the Future, and US AID’s Investing in Sustainable Agriculture program. According to Official Development Statistics, aid for agriculture rose 19% between 2005-2010, and this trend toward more investment is continuing.

Yet the need for impact investment remains

Given this increased global interest in agriculture by governments, international agencies and multinational corporations, is there still a role and, importantly, are there still opportunities for impact investors?

A majority of impact investing thought leaders think the answer to both questions is yes. The establishment of GIIN’s Terragua working group, whose membership includes the IFC, OPIC, WK Kellogg Foundation, Omidyar Network, the Tony Emelelu Foundation, Calvert, Accion, IGNIA and many more serious impact players, is one indication of the continued importance of sustainable private investment in agriculture. Terragua’s focus is agriculture in Africa, but the principles behind the need for impact investing are similar in other parts of the world.

Toward a healthier marketplace

When it comes to creating global food security there are indications that the markets, at least as they stand, may not be our best tools. Government food policy and commodity speculation were widely blamed for the food price crisis of 2008; and these have not gone away. With all the drivers still in place, further volatility is predicted with some commentators predicting another full-blown food crisis for 2013. The stage is set for more instability in the food markets and more serious global consequences as a result.

The fickle nature of the markets is not helping. The recent vogue for agriculture and agribusiness investing seems to be fading while the problem of food security persists. According to an article in the Financial Times, many private investors didn’t see the big profits they were lead to expect from agriculture and are now getting cold feet. Forbes recently declared those agriculture ETFs mentioned earlier to be “oversold”.

And it’s important to point out, that while the levels of investment in agriculture went up, there’s little evidence that global food production increased significantly. That seems to indicate that the private investment money pouring into the market has done little to change the reality of food availability in the world. Clearly, this capital did not reach the places where it could make a real difference, a fact that highlights the need for a more sustainable market-based approach.

Tapping the potential of the poor smallholder

Another serious failing seems to be that the recent boom in agricultural investment has hardly touched the world population of rural poor. This group makes up 75% of the 2.6 billion people living on less than $2 per day, the international measure for poverty,according to UN figures. Some 80% of them live by farming or farming-related activities. A2012 research report by the Dalberg Group estimates that there are 450 million poor smallholders worldwide.

Large multinationals tend to invest in only the largest and most profitable farm businesses in the developing world.They also tend to acquire only the best land, leaving the less productive farmland to the locals. This means that these poorer farmers, tilling the poorest patches, are excluded from the commercial equation. Also left out are those who can’t afford the products sold by the big multinationals. For many corporations, the goal in the developing world is simply to increase the market for their western-style products; for example equipment (such as harvesters) and inputs (such as seed and herbicides); to those farm businesses that can afford them.

Yet ignoring these rural small holders may prevent us from solving the bigger problem of food security on both local and global levels. Rural smallholders represent an untapped, underdeveloped resource that has the potential to change the global food picture. There is evidence now that multinationals are looking to smaller producers to source commodities, especially sustainably produced and certified ones. Yet small holders won’t be able to connect with this global marketplace if they can’t increase yields, improve the quality of their produce and get their products to buyers. To do this they need capital; the Dalberg report estimates the demand at $450 billion, now largely unmet. And, to be effective, that capital has to be the right kind of capital, and it has to reach the right places.

Keeping sight of the big picture

Development agencies and NGOs have long known that agriculture holds the key to more than just food supply. A healthy agricultural economy has the power to transform rural prosperity, strengthen social stability, empower women, protect health, and nourish economically productive urban centers. The right kind of agricultural development can also provide a means of improving environmental stewardship (for example fighting deforestation) making it a powerful tool in the struggle to adapt to climate change. This is as true in the developed world as it is in the developing one.

Many of the multinational corporations now active in agriculture are making the right noises in these areas. The growing global demand for sustainable, responsibly sourced and organic and Fair Trade certified food products, has lead a number to make commitments to sustainable sourcing. (The top five chocolate manufacturers have all publicly committed to sourcing sustainable cocoa, for example.) Recent statistics from the Rabobank, a Dutch agricultural lender, say 70% of US farmers now report using sustainable methods.

There’s hope that this heralds a new approach to investor responsibility among big agribusiness corporations.Yet it’s unlikely that multinationals will ever put social and environmental benefit on par with profit in their investment strategies. At the same time, international aid agencies and charitable NGOs are putting social and environmental benefit first, but their grant-based, philanthropic approach may not be enough to turn the tide of a global food crisis. More capital and smarter, more sustainable capital; will be needed to change the future of food.

All of these factors mean the time is right for impact and sustainable investing in agriculture and its broader category, agribusiness. The need for a new approach is evident. The tools, at least some of them, are in our hands. Meanwhile, a global community of impact investors and social benefit investors of all stripes are finding new ways to put those tools to work. But we’d better hurry. Our peace and our survival depends on getting it right.

Find out more about to find the investing opportunities in agriculture and agribusiness.

Search agriculture and agribusiness deals on Maximpact.com. Not registered? Register today.

New Biomimicry Deals Seeking Investment

Biomimicry, a design discipline that seeks sustainable solutions by emulating nature’s time-tested patterns and strategies, is an emerging field that is increasingly catching interest from impact investors and social businesses.

According to The Global Biomimicry Efforts: An Economic Game Changer report, biomimicry-based goods and services could account for approximately $300 billion of U.S. GDP by 2025. The sector could also provide another $50 billion in terms of mitigating the depletion of various natural resources and reducing CO2 pollution.

Many established and emerging biomimicry companies are now looking for organizations that could fund, invest in, and support their operations. At Maximpact, we are excited about this trend because we believe biomimicry is here to stay and will represent an important part of future social business innovation.

Below we list three new biomimicry impact deals currently seeking investment on Maximpact platform. A complete list and contact details can be viewed when you register:

Water treatment technology inspired by aquatic plant systems

This company is a leader in natural, cost-effective, and sustainable water treatment technologies. It designs, builds and operates an all-natural, sustainable technology by harnessing nature’s power to restore polluted lakes, streams, and estuaries.

Its products have already been demonstrated on pilot and commercial scales. Clients in the pipeline include a well-known mining company and an environmentally responsible mixed-use real estate development company.

Wastewater and water pollution treatment inspired by biological processes that operate in nature

The company has over 30 years experience with natural wastewater treatment design, general aquatic management, and project supervision. Its design harnesses the biological processes that operate in nature taking the form of an engineered treatment system to successfully meet discharge standards and permitting requirements.

The company is a pioneer in the use of natural systems for the removal of chemicals, petroleum hydrocarbons, endocrine disruptors, and other detrimental water pollutants. They envision the remediation of impaired natural water bodies and soils as a major part of their future work.

Fans inspired by the whale’s fins

This company produces fans and turbines and makes extensive use of digital technology which extends from design specification, through CNC machining and fabrication. Their one of a kind fans use a new kind of airfoil which is more energy efficient and much quieter.

The performance of the fan’s blades is ideal for a product that can save operational energy consumption while reducing heating and cooling costs significantly by de-stratifying and mixing the different layers of air in rooms. The company is now ready to take the product to the next level, instead of just designing fans and turbine elements they also want to move into manufacturing and sales.

For further resources on Biomimicry we highly recommend reading the book Biomimicry: Innovation Inspired by Nature by Jamine M.Benyus, seeing her TED talk or visiting Maximpact’s newsstand which holds additional industry resources.

[Image credit:123RF Stock Photo]

19 Ways to Find Funding for Impact!

By Ana LaRue

Across the globe, the spectrum of innovative financing solutions for social impact is broadening. It is becoming clear that the sector is no longer just for funders and companies as new investing possibilities have evolved rapidly over the last five years.

A central feature of Maximpact’s platform is the ability to list impact deals and seek collaborative opportunities with others. What a first time visitor, who is still considering registration, does not see is the complexity of Maximpact’s deal search and its deal listing opportunities.

At Maximpact we are very proud of being the first platform to offer a very broad spectrum of funding options. Our registered members can choose among 19 different funding possibilities that include:

funding optionsSo whether you are interested in debt, equity or anything in between, listing your deal with Maximpact allows you to examine the potential of either opportunity.

Future of innovative social impact financing

In the future, we believe the different types of stakeholders participating in impact investing will broaden even further. New intermediaries and traditionally secular players will bridge the gap between financing need and investment reality.

And as more actors join the impact investment discussion, newer and even more innovative financing options will inevitably be created and implemented.

At Maximpact we are firm believers that open collaboration, co-investment and more funding options are needed to increase deal flow and foster sector growth. We promise to follow these trends with the mission to increase the flow of capital so that our members can continue to focus on solving the world’s most pressing problems.

The New Role of Impact Intermediaries

By Marta Maretich

The impact landscape is changing fast and progressive impact intermediaries are changing with it, as shown in a recent article by Willy Foote for Forbes.

Foote spoke to Antony Bugg-Levine, head of the Nonprofit Finance Fund (NFF) about some of the current challenges facing impact investing intermediaries. This pair know what they’re talking about: Foote is the founder of Root Capital, one of the leading proponents of impact investing in farming and agriculture in the developing world; Bugg-Levine is a former Rockefellar Foundation director and co-author of Impact Investing: Transforming How We Make Money While Making a Difference, with Jed Emerson. He now leads the NFF, which provides investments and advice to mission-driven organizations.

It emerged that both of these pioneering intermediaries are facing different versions of the same problems at this point in their development:

  • – a shortage of best-quality impact investment opportunities;
  • – more competition from mainstream lenders and foundations;
  • – a rise in risk as their clients face adverse market forces and decreased government support.

As practitioners with long track records, Root Capital and the NFF can be seen as bellwethers for the emerging sector. That they are both seeing the same problems is significant—as is the fact that some of these problems (specifically increased competition) are the result of the growing popularity of impact investing, a movement they helped create. Significant, too is how both intermediaries are changing the way they do business in response to these challenges.


Applying more, better expertise

Both leaders stressed the importance of doing more to help clients to become investment-worthy:

Willy Foote: “At Root Capital, we invest heavily in financial management training and, where necessary, supply chain integration (e.g., between natural product buyers, third-party certifiers, local technical assistance providers, and other social lenders) for both pipeline development and to prepare our clients for long-term, sustainable growth in volatile agricultural commodity markets. While time intensive, our approach bears fruit as these earlier-stage businesses tend to grow, expand their impact, and take on successively larger loans.”

Anthony Bugg-Levine: “We are also increasingly finding in our work that impact investing needs to be understood as one part of a broader “complete capital” solution. The complete capital approach recognizes that enabling organizations to navigate this challenging environment often requires them to fundamentally adapt how they run their operation. This requires not only financial capital (impact investments and grants), but also intellectual capital (the right ideas about what needs to get done), human capital (the management skills and tools to do it) and social capital (the ability to bring different partners to the table). We have built a national consulting practice that provides some of this to our clients alongside our lending capabilities and partner widely to bring the skills we do not have in-house.”


A deeper, broader skill pool

The idea of intensive investor engagement is not new. Venture philanthropists, like members of EVPA and the AVPN have been doing it for years, as have traditional venture capitalists.

What is new is the depth and extent of the expertise now held by some impact intermediaries, the fruit of years of doing deals in the real world and building their pool of skills to meet the needs of their clients. Judging by what Bugg-Levine and Foote are saying, these skills have now reached a high level. They are being strategically cultivated by intermediaries and by educational institutions now establishing courses to train the impact professionals of the future. What’s more, this highly specialist expertise forms an increasingly important part of what intermediaries see themselves bringing to the impact equation.

New role for intermediaries: helping other impact investors
And that’s not all: In another part of the interview Bugg Levine describes a brand new role for intermediaries: deploying their expertise to support other impact investors.

“We also see great opportunity in helping the new group of impact investors do deals themselves,” he says. “Instead of worrying about competing for deals with these foundations, private bank clients and family offices, we are partnering and advising; we are drawing on our experience and track record of making investments to help them be smarter and more efficient in their investing.”

His comments struck a chord with us at Maximpact. Part of our mission is to bring new investors into the impact arena; another part is to strengthen impact investing practice. So we think this evolution in impact intermediaries is a positive step with the potential to broaden the uptake of impact investing among new investors; and make impact outcomes more effective. By honing their expertise and, crucially, making it available to other impact investors, highly-skilled intermediaries can do even more accelerate the pace of impact investing. And that, in our eyes, can only be a good thing.

New Educational Opportunities for Impact Investing Professionals

by Ana LaRue
Increasing numbers of emerging business professionals are seeking careers in impact investing, trying to merge the gap between finance and sustainability, a trend that anyone working in the field should be proud of. Young professionals are increasingly concerned about doing something meaningful with their careers, including students in the financial and business fields.
The topic of educating emerging impact professionals is lively among popular forums and social media networks such as LinkedIn. This reflects the growing popularity of the sector and shows how eager young professionals are to prepare themselves for careers in impact investing.
BAs, MBAs and Masters programs have generally had a history of sending graduates into more traditional corporate careers; something a growing number of these graduates are becoming skeptical of. How can they be sure that their education will allow them to learn about investing for profit and social or environmental impact?

At Maximpact we examined the opportunities available to aspiring professionals looking for a career at the intersection of sustainability and finance. Our list includes top business schools whose programs cater to the field of sustainability and impact investing:

Below are additional resources we found useful listing MBA programs in terms of their sustainability focus:

  • Beyond grey pinstripes: A database informing prospective students about social, ethical and environmental impact management curricular programs. The database ranks schools that are providing training in social and environmental skills as part of business decision making.
  • Bloomberg Business week MBA Rankings: An article listing top Business Schools according to their Sustainability focus.

Finally, we believe it is important that future graduates examine whether their chosen programs treat sustainability and social entrepreneurship as an integrated part of their business curriculum or as a complement to the traditional business tracts. These are important factors influencing one’s ability to receive deep and specific knowledge, merging investing for profit and social or environmental impact.

Feel free to share other educational opportunities in the comments.

Coca Cola teaches ColaLife how to turn profit points into healthy babies

 New collaborative models in social impact delivery are springing up all around us, sometimes in surprising places. At Maximpact, when we see them, we like to celebrate them. One encouraging example is the story of ColaLife.

The founders of ColaLife had a brilliant idea: using Coca Cola’s extensive distribution network to get anti-diarrhoea medicines into the remotest parts of rural Zambia. The goal was to improve infant mortality rates in a country where as many as 1 in 9 children die before their fifth birthday from preventable causes like dehydration from diarrhoea.

ColaLife’s innovative design for packaging the medicine to fit into Coca Cola crates won product of the year design award from the Design Museum. But it wasn’t until they began talking to the people at Coca Cola that they began to understand what would really make their plan work.

This podcast by BBC broadcaster Peter Day is an excerpt from one broadcast in From Our Own Correspondent aired 18th July. It tells the story of how ColaLife learned the secret of successful distribution from Coca Cola.

At first, they were floored when Coca Cola personnel asked them a simple question: “What is the value chain of your product?” But they responded by changing their model; and changing their minds about the best way to deliver their mission. Now ColaLife is taking Coca Cola’s market lessons to heart, exploring more ways to use market methods to deliver health benefits in Zambia.

For more on how they’re adapting business practices to deliver mission, see their inspiring website.

To hear the entire 18th July episode of Radio Four’s From Our Own Correspondent click here.

Moving with the times: Example of a ColaLife Crate

Changing the Way We Measure Impact

by Marta Maretich @maximpactdotcom

measuring 302x302Let’s face it: metrics are a pain. Even impact investors, committed to the principle of measuring social and environmental impact, find them so.

While it’s true that the art and science of impact performance measurement have made strides in recent years (GIIN’s IRIS now gives the impact investing sector standardized tools to work with; projects including ImpactBase and the open platform WikiVOIS are beginning to aggregate data) impact investing organizations are still finding it difficult to “do metrics”; that is, to build impact performance measurement systems that produce reliable, meaningful and above all useful data.

Frustration about metrics is common in the sector, as is skepticism about their value. Many organizations find impact measurement expensive and time consuming, draining resources that could be put to better use. Investees complain that reporting is burdensome, especially when their time could be spent developing core aspects of their businesses such as management, financial processes and governance. Even when impact investors successfully collect performance data, they often don’t know how to analyze or make use of it.

With all these difficulties, are impact performance metrics really worth the trouble? Are they there merely to satisfy funders or as window dressing? Or do they have a more central role in the long-term success of impact investing?

The rubber hits the road— at last

These questions were explored by the participants of Aspen Network of Development Entrepreneurs (ANDE) Metrics Conference. ANDE has been at the forefront of establishing impact performance measurement standards and practices from early days. In June it convened a group of seasoned impact investors including Grassroots Business Fund (GBF), GIIN and Village Capital among others to explore the reality of impact metrics as they are today and consider their future. ANDE Executive Director Randall Kempner wrote about his experience in this recent post for Forbes.

The key message emerging from this conference is that the sector’s understanding of impact performance metrics is moving to a new level. In 2009 when ANDE held the first metrics convening, “the bulk of the conversation focused on standardization and this new metrics taxonomy called IRIS”, writes Kempner. Today, real-world experience is bringing a deeper understanding of the value of metrics to developing impact businesses. The rubber, as they say, is hitting the road and inspiring a re-evaluation of the practice of evaluation.

Impact metrics that work in the real world

At Maximpact we believe that the only way for all of us to get better at impact investing is to do more impact investing: to get involved, make deals, build businesses and, crucially, to share what we learn. As the sector grows up, moving from theories of how impact investing should work to an understanding of how it really works,what should effective impact measurement look like?

Simpler: As GBF Director Harold Rosen pointed out in this interview, recent years have seen a push toward more and more sophisticated measurement, applying an ever-greater number of standards, calling for ever more data. Yet in practice this approach is burdensome for impact investors and investees alike. According to Rosen, the multiplication of performance measures runs the risk of creating “scaffolding as opposed to substance” that is, building a complicated superstructure of metrics over a void of meaning. It might look impressive, but it achieves nothing.

A better way, suggested Rosen, is to cut back on the number of measurements and make them count more. GBF has scaled its data gathering down some 80%. Where they once used 8-10 indicators per project, they now use 2-3. The key, he says, is choosing the right impact measures for the particular investment. But, of the dozens of performance metrics offered in the IRIS catalogue, what would those be?

Strategic: Performance indicators should be tied to business development strategy, said Rosen an opinion confirmed by other ANDE conference participants. The IRIS catalogue’s broad range of standards means planners can choose those measures that will feed their businesses; strategic needs. They can be identified during the due diligence process and built into the strategic plan for the business. In this way, the business gets the benefit of the metrics; and the metrics make sense to investees and investors alike.

This approach delivers a double benefit: it provides data for use in developing the business while demonstrating the value of metrics to investees. Most successful businesses invest in metrics as a way to garner strategic information and maximize learning. The same opportunity exists for impact businesses even when they use metrics in a much more limited way. When metrics are strategic, the process of collecting and analyzing data and applying the lessons learned from performance measurement becomes normal a part of doing business.

Light touch: Measurement takes time and costs money; the outlay can go as high as 5-10% of total assets invested for some businesses. Using fewer, more select metrics is one way to bring down the cost as well as the burden to businesses. Another is to establish measurement processes that use a light touch and dovetail easily into the day-to-day operations of the business.

GBF employs asocial metrics expert shared across a number of impact businesses in the same region. This professional becomes a part of the staff for impact businesses,supporting their data collection efforts and easing the workload. Randomized sampling, using good survey design and high-quality professional analysis,means that a smaller amount of data can provide most of the strategic information the business needs.

Tailored to fit: The ANDE conference reflected a move away from standardization in metrics. Participants largely agreed: one size does not fit all. Each business in an impact fund portfolio will have different strategic development needs so each will need to measure different aspects of performance. Choosing metrics with an understanding of the special needs and context of each investee requires skill.But it means that impact reporting helps rather than hinders growth; and it maximizes positive impact.

Client-led: Impact investing produces social and environmental returns, not just profits. To find out if these “soft” returns are happening, businesses and the impact investors that finance them need to look to the beneficiaries. Several participants at ANDE including Root Capital stressed the importance of collecting client data and feeding it back into the metrics loop. Well-designed surveys and random sampling were key to the success of this approach on the ground. Verifying the accuracy of this data is essential and should be built into the reporting process.

Consistent: The impact investing arena is broad; and getting broader every day. Today there are many different kinds of impact investors in the field: philanthropists, intermediaries, pure financiers. These investors have different philosophies of impact and different expectations when it comes to outcome. This is reflected in the way they apply metrics.

It’s natural that different kinds of impact investors will require different metrics from the businesses they finance. However, the consistent application of impact performance metrics is key to establishing impact investing as a legitimate asset class. This is one argument for using standardized tools, such as IRIS, which will eventually allow comparisons between businesses and projects. But a diversity of systems can be valuable, too. For impact investors using their own measurement systems (for example some foundations) the onus is on sharing their methods and their data with the broader impact community. Only by aggregating data and experience will the sector move forward with impact performance metrics.

Transparent: The ANDE conference demonstrates that the practice of impact measurement has advanced,yet it still has far to go. Definitions remain fluid, making transparency an issue: it’s not unusual for IRIS-compliant partners in a single impact project to come up with very different numbers for the same IRIS measurement. This undermines the value of metrics and erodes confidence. To improve, the sector needs to keep working toward clear, shared definitions.

And then there’s the question of inputs versus outcomes. Many impact investors support businesses using range of methods, often providing grants or expertise in addition to pure impact finance. Smart subsidies of this kind are an effective way of building capacity in key areas; not least in metrics; but their effect needs to be accounted for when it comes to reporting impact outcomes. By building transparency and consistency, the sector is building up a system of metrics that allows comparison and aids learning.

So, does impact investing need metrics?

The answer emerging from the ANDE conference is yes; with conditions. Impact investing is defined by its commitment to demonstrating social and environmental impact. Arguably, the only way to do this is to monitor, evaluate and then share, social and environmental performance data. This is the best case for why the whole sector needs to keep measuring,even though its not easy.

It has to be the right data, of course. And it has to be used in the right way. The ANDE conference shows how committed impact investors are working to refine their measurement practices, including systems like IRIS, and find ways to make them better serve businesses, client groups and investors alike.

Further metrics resources

ANDE 2013 Metrics Conference videos and resources

When Measuring Impact, We Need to Move Beyond Counting by Mike McCreless for Forbes

Impact Investing’s Three Measurement Tools by Margot Brandenburg for the SSIR

How to Measure Social Impact by Melissa Ip for Social Enterprise Buzz

Inspirational Summer Reads from Maximpacts Newsstand

post-featured-newsstandBringing you the latest in impact sector resources.

CleanTech Nation From Ron Pernick and Clint Wilder, the authors of Clean Tech Revolution, comes the next definitive book on the clean tech industry. Clean Tech Nation shines a light on the leaders at the forefront of a growing movement. USA Today called Pernick and Wilder’s groundbreaking first book, “one of the few instances in this genre that shows the green movement not in heart string terms but as economically profitable.” Clean Tech Nation expands on their original idea to provide concrete analysis on the efforts of the U.S. and other countries in this area, and provides a clear way forward for the U.S. so that it can lead the pack as it competes with the rest of the world.

Green Deen: What Islam Teaches About Protecting the Planet Islam calls believers to praise the Creator, take care of each other, and take care of the planet. But the deep and long-standing convergences between Muslim beliefs and environmentalism aren’t widely known by other religions, in secular society, or even among many Muslims. In this groundbreaking book, author and Muslim community organizer Ibrahim Abdul-Matin brings us the first book to show how strongly the tenants of Islam support and promote environmentalism. With dozens of examples of what Muslims can do; and are already doing; to promote ecologically sound practices in their communities, Green Deen draws on scripture, research, and viewpoints of Muslim scholars and community leaders to trace Islam’s historical and contemporary preoccupation with humankind’s collective role as stewards of the Earth.

The Future Makers Searching for sense and meaning in your work? Want to be successful but expect fulfillment, not just a salary? In this inspirational new book, impact thought-leaders Wolfgang Hafenmayer, managing partner of LGT Philanthropy, and Joanna Hafenmayer Stefanska, managing director of MyImpact, offer 23 encouraging responses to those questions. From an American financial market specialist to a group of tree planters in Africa; from Japanese environmental experts to dancers in Argentina, The Future Makers tells the stories of people who are making the world a better, more beautiful and livable place for current and coming generations. The book is also a practical toolkit with guidance on how you can too can become a future maker, forging a satisfying career that has a positive impact on the world.

Biomimicry:Innovation Inspired by Nature If you haven’t read this groundbreaking book by the person responsible for bringing biomimicry into the public sphere, you’ve missed out. Biomimic scientists are revolutionizing how we invent, compute, heal ourselves, harness energy, repair the environment, and feed the world: biomimicry is driving green and sustainable innovation. Biologist, science writer and founder of the influential Biomimicry3.8, Janine Benyus names and explains this phenomenon. She takes us into the lab and out in the field with cutting-edge researchers as they stir vats of proteins to unleash their computing power; analyxe how electrons zipping around a leaf cell convert sunlight into fuel in trillionths of a second; discover miracle drugs by watching what chimps eat when they’re sick; study the hardy prairie as a model for low-maintenance agriculture; and more. Eye-opening.

For more, login to Maximpact and navigate to Newsstand.

Impact Investing and CSR

7978415_sImpact investing and Corporate Social Responsibility (CSR) have much in common. Both are founded on a belief that business can be used to affect positive social and environmental change. Both use market mechanisms and harness business expertise, though in different ways. And both are reflections of a global trend for aligning the goals of enterprise and with the needs of society.

These similarities are bound to make impact and CSR natural allies in the years ahead. Yet the two sectors have important differences, too. And in these differences lie opportunities as well as challenges for both sectors.

THE BENEFITS OF MATURITY

Impact investing is still the new kid on the block while CSR, with its origins in the corporate culture of 1950’s America, has been around for some time. With decades to mature, CSR has had time to grow its infrastructure and consolidate its working models to a degree impact can only dream about. Its workforce of CSR managers and consultants has professionalized. This body of professionals has honed the practice of CSR, helping to integrate it into day-to-day business processes worldwide.

Crucially, these professionals have also developed the art of communicating about CSR to a range of stakeholders including the public. Corporations, especially large ones, have become adept at using CSR to manage reputation. At the same time the public and government have come to expect them to have comprehensive CSR programs. In a paradigm shift that has seen the practice of CSR move from fringe to mainstream, CSR today forms an integral part of corporate culture.

THE CORE DIFFERENCE

This widespread acceptance marks a triumph for those who believe in CSR’s social aims; and it should be an inspiration to a young impact sector, which has yet to reach this level of recognition. Yet there is a fundamental difference in the way they relate financial and benefit goals.

For all its popularity, CSR remains voluntary and self-regulated. This means that businesses define “social responsibility” for themselves and practice CSR in very different ways. There is a movement toward establishing CSR standards based on sustainability, and some companies are already reporting their results using guidelines such as those provided by the Global Reporting Initiative (GRI). One Maximpact-listed company, CSRHub, has created a research tool that aggregates information about CSR ratings for some 15,000 companies. Yet most companies don’t use any such standards and most don’t report. It’s also the case that many keep their social benefit activities (like employee volunteering or philanthropic grant making) entirely separate from their profit-generating ones.

This is where CSR differs significantly from impact investing. By definition, an impact investment must demonstrate a social as well as a financial return. This means that benefit is, at least theoretically, hard-wired into every impact deal. Admittedly, metrics remain an issue for the sector and questions will persist until some measurement methods prove their reliability. Yet the principles of yoking social and financial impact, and demonstrating outcomes with metrics, have been central to impact from the start.

THE CSR/IMPACT OPPORTUNITY

For the CSR sector, this innovative way of delivering benefit using market mechanisms presents an opportunity. Many businesses have already shown an interest in early-stage social enterprises through their CSR programs, for example those who work with venture philanthropy intermediaries like Impetus. Impact investment is a logical next step for such companies, especially those who would like to support later-stage development. With a wide array of sectors, new technologies and geographical areas to invest in, impact opens up a world of possibility for CSR capital.

For businesses whose CSR work has meant hands-on mentoring and grants-based philanthropy, a blended approach to impact is also possible. As recent studies suggest, a combination of grants with mentoring plus impact capital, each applied at the right time, can be just what a young venture needs to grow beyond the startup stage and become a viable business. With deep pockets and expertise to spare, corporations have all the elements needed to bring enterprise potential to fruition. With aims aligned tightly with a defined social mission, impact provides a new way to use all CSR resources for good.

It’s clear that CSR capital could bring much to the impact sector. Impact also may have something to offer the more mature CSR sector. Its triple commitment to profit and benefit and metrics provides a template for thinking about how business might do more to bring benefit. Ultimately, the tools developed for impact measurement may prove a boon for all types of social business projects, including those pursued by CSR programs. By taking impact’s cues and integrating their business goals with their social mission, CSR programs could take a huge step forward in creating a positive impact.

Equitable Origin: An Eco-label for Fossil Fuels

 

post-featured-frog

Imagine a Fair Trade-style eco-label for fossil fuels. A glance at the logo tells customers buying this fuel – or products made from it – that it’s produced using the highest environmental standards and in a way that helps rather than harms local communities. This is the idea behind Equitable Origin, the first and only independent certification and certification trading system for oil and gas production. It’s now seeking impact investment on the Maximpact deal site.”

The buzz in cleantech circles may be about renewable energy, but fossil fuels are set to be the world’s main energy source for decades to come. Demand is projected to rise 7% by 2020 and 28% by 2035 due to industrialization of countries such as China and India. And not only will the environment suffer from this increased push for production, so will many indigenous communities. Some 60% of the world’s proven oil reserves are located in emerging economies; countries that lack national standards for responsible production or the incentives to enforce them­.

David Poritz, Equitable Origin founder and co-President saw the impact of these problems first-hand. He spent a decade working with indigenous peoples in Ecuador, a nation rich in fossil fuels where local communities struggle to protect themselves and their lands from the negative consequences of extraction. Through this experience, he began to see an urgent need for a market-based mechanism to incentivize oil and gas companies to operate with the highest levels of social and environmental performance.

Equitable Origin Logo

Poritz developed the Equitable Origin system through extensive consultation with the oil and gas industry, NGOs, indigenous communities and governmental agencies. The result is the EO100 Standard, a comprehensive standard for oil and gas exploration and production as well as a certificate trading system and ecolable program.

The EO100 Standard provides metrics and performance targets that address the social and environmental impacts of oil and gas production. It rates a company on six principles: corporate governance and accountability, human rights and social impact, fair labor, indigenous rights, climate change and environment, and project life-cycle management. Companies that score above a certain minimum level of performance and in these areas are granted certification.

Certification can then be converted into tradeable certificates that can be bought by consumer-facing brands wanting to green their supply chain and offer a choice to support responsible production. The Equitable Origin logo can be attached to products made from certified fuels, rewarding oil and gas industry for applying the highest standards of environmental and cultural care to their work while allowing customers to support better production practices with their choices.

Equitable Origin has built an impressive cross-sector team around this idea including experienced petroleum industry professionals and environmental, sustainability and stakeholder involvement experts. It is now seeking investment to scale its operations into more markets in oil-producing countries including Ecuador, Brazil, Peru, Bolivia, Venezuela and Mexico.

Impact Meets Cleantech at the Crossroads

by Tom Holland, CEO and founder of Maximpact.com

Impact investing and the cleantech sector are both at a crossroads.

For impact, the outlook is positive. We’re expanding, entering the mainstream and becoming a widely accepted approach to doing business and doing good. The recent Impact G8 in London is one measure of how far impact has come in just a few short years. The sector is growing at a fast rate and new players are getting involved every day. Maximpact’s portal reflects this movement. It now hosts more deals and a wider variety of deals than ever before and we look forward to continuing to grow with the sector.

The story is different for cleantech. Despite amazing success over recent years that sector is facing a much tougher financial landscape. Investment is down, capital is harder to come by. There are bright spots, like the success of Tesla. Yet many cleantech companies are finding it necessary to retrench or change tack. Some are going out of business. Many more are looking for new markets and new sources of finance.

At Maximpact, we’re in two minds about this change of fortune. On the one hand, we don’t like it because we think cleantech holds the key to a cleaner, healthier and more sustainable future for the whole planet. They’re coming up with solutions to problems we share and showing the kind of creativity that should have us all excited. Renewable energy, biomimicry, 3D printing: these things are going to reshape industries, revolutionize business models and change the way we live our lives for the better. We don’t want to see cleantech’s progress slowed or stopped by financial fluctuations.

On the other hand, the sobering of the cleantech market presents opportunities for impact and sustainability investors. This, we like.

“At Maximpact we think cleantech holds the key to a cleaner, healthier and a more sustainable future for the whole planet.” Tom Holland

From the beginning, Maximpact was designed around a broad definition of impact that specifically included cleantech, eco and green. The idea was to bring cleantech, eco and green together with other sectors including philanthropy, venture philanthropy and CSR. The aim was to break down silos and encourage collaboration and investment across sectors to accelerate the pace of change.

Maximpact was always intended to be a hub for aggregating and finding new applications for technology. We intentionally made the platform transparent so users can observe how others are applying technologies to solve problems. This allows people to see what technologies are available out there. It gives them the opportunity to find ones they can adapt for their own uses and deploy them in different parts of the world, multiplying the force of their impact.

Given the situation of the sector today, I believe that is the perfect time for investors to get behind cleantech. They should do this for several reasons:

  1. The first is purely financial. Despite the cooling of the market, many clean tech companies are promising from a business standpoint. They’ve proven they can scale and there’s evidence that they will continue to gain ground in the mainstream of business. It’s certain that well chosen clean tech investments can help impact investors meet their goal of achieving a sustainable financial return.
  2. The second reason is altruistic: clean technologies have the potential to bring a better life and a cleaner environment to all of us. Clean tech’s products have applications in every country and at every social level from the bottom of the pyramid to the top. Cleantech also helps emerging economies and regions to start off with the tools that will provide a more sustainable future from day one.
  3. The benefits clean tech can bring; preserved eco-systems, more efficient use of energy, more sustainable economies; align with the impact ambitions of many investors and are the best reason to get behind clean tech and help the sector grow.

So impact and clean tech meet at the crossroads. Here at Maximpact, we’d like to see them join forces and continue along the same path.

Impact and Cleantech: A Winning Combination

impact and cleantech a winning combinationby Marta Maretich

Impact investing and cleantech seem to be made for one another. The ethical attraction is obvious: impact puts capital behind businesses that generate social and environmental benefit; cleantech comes up with innovative solutions to some of the world’s most pressing problems.

Savvy impact investors spotted the synergy early on. An altruistic pedigree combined with potential profitability made cleantech a natural choice for ethical investors. Many funds; like Alpha Mundi and Chain Capital on the Maximpact platform; have already furnished their portfolios with investments in companies delivering cleantech products and services. A 2012 McKinsey’Co report projects up to $1.2 billion of investment in solar energy alone over the next decade, a chunk of which is impact capital.

Yet, recent turbulence in the market has changed the investing landscape for all kinds of industries, not least cleantech. This leaves many investors asking: Is cleantech still a good investment for impact?

GETTING THROUGH THE ROCKY PATCH

The past two or three years have been challenging for cleantech. 2012 saw industry layoffs and high profile bankruptcies including Odersun and Soltecture. US-based venture capital investment contracted for the first time in three years, a drop of 26% according to Clean Edge, a cleantech research and advisory firm. Worldwide, cleantech venture capital (VC) was down 33% from the previous year and global cleantech investments beyond VC fell 11%, partly due to lower prices for solar and wind technology exerting downward pressure on investment volumes.

There’s no denying the sector is under pressure, yet there’s a silver lining. This year Tesla, a manufacturer of luxury electric vehicles, paid off its US Department of Energy loan 9 years early and saw its share price rocket, proving that cleantech can be profitable. Cleantech stocks are creeping up again. Meanwhile, big corporates like General Electric and Siemens are busily ramping up their investments in cleantech for strategic purposes: cleantech venture deals with corporate involvement went up 12% between 2006-2011 and the trend continues.

STRONG DRIVERS

More importantly for the future, the drivers toward cleantech remain strong. Issues such as resource constraints, population growth and climate change are not going away. Governments continue to back cleantech even in these pinched times, often seeing it as a source of new jobs and an alternative means of service provision: just this year the US government eked out a surprising $12 billion dollar subsidy for wind power while teetering on the brink of the fiscal cliff.

Public opinion, too, continues to drive corporations and governments in the direction of cleantech. There’s a widespread belief that technical innovation is capable of providing the answers to global challenges. Ordinary people are putting their money where their principles are and contributing to crowdfunding initiatives to finance clean energy projects, such as those offered on the online platform, Solar Mosaic. So far, this may be a drop in the investment ocean, but these distributed financing models are widely thought to have potential; and their success is an indication of the strength of public enthusiasm for cleantech.

Clint Wilder founder of Clean Edge and co-author of two successful books about the cleantech sector, shares the view of a bright future. He has good reason: Clean Edge’s First Trust NASDAQ Green Energy exchange traded fund, QCLN, was chosen by Forbes and others as one of the year’s top two best-performing ETFs.

.Clint-Wilder-A2“Clean Edge’s philosophy has always been that, regardless of whether you’re interested in impact or social responsibility, cleantech is a good business to be in,” Wilder explains. “These are the companies and businesses that are producing the products and services that the world needs today and is going to need more of in the future. Clean renewable energy sources, energy efficiency technologies, greener materials, clean water: these industries have the technology solutions to the big problems the world faces. We certainly support philanthropy, it goes without saying. Yet we want to emphasize that if you’re purely interested in making money, cleantech is something you should look at.” 

READY TO CATCH THE THIRD WAVE?

This chimes with the view of Richard Youngman from the Cleantech Group, an industry analyst based in London, who sees a solid future for cleantech. In a recent report on the top 100 cleantech companies, he writes of a “third wave” of cleantech investing. According to Youngman, waves one and two culminated in “hundreds of cleantech companies founded, billions of dollars invested (and) optimism in abundance”: a boom, in short, but one he believes will produce lasting effects.

With wave two petering out in the wake of the economic squeeze, the third wave will be characterized, Youngman writes, by companies that can be more “capital light because the railroads, so to speak, have largely been laid; the manufacturers exist; value chains are more developed and costs are on a downward trajectory.” This could bring advantages for smaller, more focused investors. He also points to the adoption of cleantech businesses by corporates to indicate that cleantech solutions are becoming the norm; “offering a customer economic and resource efficiency will no longer be seen as different but standard.”

MORE ATTRACTIONS OF CLEANTECH

Youngman’s words point to one attraction of the sector for impact investors: its increasing maturity and size. The sheer volume and variety of cleantech opportunities now on the market is impressive. Maximpact’s portal provides a cross section of deals from kitchen table startups to sophisticated investment vehicles combining groups of cleantech companies. Areas of focus range widely from renewable energy systems to new materials designed to clean up oil spills. Given so much choice, impact investors can find the deal that meets their precise financial and non-financial needs. (See our articles Shine On, Pyrum Innovations and Cleantech Cleans Up for more details or login to Maximpact.com.)

Choice and profitability are two reasons why impact investors should look to the cleantech sector, but it has other advantages. One is that it is borderless: new technologies lend themselves to bringing change on an international basis, an appealing quality for impact investors with a global focus. Another is that new technologies can act as social levellers: all parts of society can benefit from them; and the poor and underserved may be the greatest beneficiaries of all. Cleantech products and services naturally touch many different parts of the altruistic agenda, too: health, environmental preservation, poverty alleviation. This means they can be neatly aligned with other impact programs designed to bring benefit.

All these qualities help cleantech fit the bill for many impact investors. With impact sector development still hampered by lack of deal-flow, investing in clean tech could make a huge difference to the amount of capital placed strategically in businesses that create positive change.

CLEANTECH NEEDS YOU

A less examined part of the equation is how cleantech can benefit from the involvement of impact investors. The recent rise in cleantech’s fortunes is a positive sign, but the sector remains volatile, vulnerable to insufficient investment and fluctuations in government commitment. For every triumphant Tesla there are many smaller, less developed cleantech companies struggling to stay viable. For them, getting through the build-up phase can be tricky. It often requires longer-term investor commitment; commitment they are finding harder to come by in the current marketplace.

Impact could be a vital new source of capital for cleantech businesses, especially those whose products have applications in developing economies and with low-income customers. In their article, Closing the Pioneer Gap, authors Dichter, Katz, Koh and Kramchandani point out the need for targeted early- and mid-stage capital (along with more realistic expectations of returns) to foster the early growth of businesses that deliver social and environmental benefit in the places that need it most. Driven by a blend of social mission and financial pragmatism, impact investing could provide cleantech businesses with the right kind of capital during the crucial development stages.

GUIDING THE CHANGE

Impact also has a potential role in fostering and guiding the deployment of clean technology solutions in emerging economies. While such economies were ignored by business for decades, philanthropic organizations have long been active there, serving impoverished populations, for example, or protecting eco-systems.

Today, emerging economies are seen as growth markets. They already form a focus for cleantech businesses looking for customers and new sources of financing. Yet many companies are hampered in their efforts to enter emerging markets by lack of local knowledge; knowledge that impact investors with a local track record may be able to provide.

In addition to capital, impact investors can bring the benefit of their experience working with specific governments, populations and geographies; as well as a sharp focus on desired social and environmental outcomes. Cleantech may have the power to transform lives and change the fate of the planet but it will do so only if the technology is deployed where it’s needed most. The involvement of impact can help cleantech partners identify new applications for technologies and establish effective strategies for deployment; for example making use of cleantech products in existing programs. Admittedly, not all impact investors will want this level of engagement with their investees, but collaboration has the potential to focus the positive impact of cleantech on the parts of society where it can make the most difference.

All things considered, cleantech is still a good investment for impact investors. In fact it may make more sense than ever. Indications are that the sector is experiencing a shakeout rather than a meltdown. Overheated investing in some areas, especially solar, may have cooled off, but new areas of activity are coming to the fore. Cleantech companies are refocusing on emerging markets and deployment of existing technologies. Meanwhile the retreat of VC leaves smaller cleantech companies seeking new sources of capital and strategic partnerships. All this is good news for impact investors who have much to gain from the success of cleantech both financially and in altruistic terms.

Maximpact: Bringing the Impact Sector Together

At Maximpact,we pride ourselves on our inclusive approach to impact investing. An important part of our mission is to strengthen the sector by providing a place where a wide range of impact players can come together and make impact deals. To make this happen more effectively, we’ve adopted a very broad definition of impact investing, creating a “big tent” that invites a diverse range of players under the same roof. The chart above shows how different types of impact actors are able to come together on Maximpact.

Our strategy seems to be working. Today, Maximpact welcomes funders, intermediaries and entrepreneurs from every part of the world and every corner of the impact sector. Some are veteran funders and intermediaries who have supported the idea of impact since the beginning. Others are new to impact and just discovering its potential. The chart also shows some of the new types of players that are entering the field, notably from the corporate social responsibility (CSR), eco and green technology, and the philanthropy sectors.

For Maximpact, this is good news. We believe that a greater variety of players in the impact arena will lead to better deal flow and a faster pace of innovation. In the meantime, we do our best to maintain the “big tent”, making sure all our users are discovering a world of new impact possibilities on our ever-expanding global platform.

The Maximpact Collaborative Approach – How it works

At the time of registration, users will be asked to identify them selves with a sector group (impact, philanthropy, CSR or eco; green) then select a user group(entrepreneur, intermediary or fund). Different types of users have different rights and levels of access to the Maximpact platform.

Definitions

  • Entrepreneurs:Entrepreneurs and companies
  • Intermediaries: Angel investors, social enterprise accelerators,incubators, venture capital groups, social venture networks and others
  • Funds: Investment funds, family offices,foundations,organizations, NGOs, companies, asset managers and others

Every registrant is vetted by Maximpact and best efforts are made to certify and qualify each applicant before access is permitted.Password access enables registered users to list and search for deals and ventures according to their access rights.When a deal or venture is listed, the listing party has an opportunity to identify the kind of funders they wish to attract (impact, philanthropy, CSR and/or eco & green). This allows users to filter and find like-minded funding matches more easily. However, it does not exclude deals from being searched by other types of funders that were not selected.

The hope of Maximpact is that all users will at some point reach out beyond their group and seek collaborative opportunities with others to create the biggest impact for us all.

Spotlight Deal: Wello WaterWheel

spotlight deal wello waterwheel

The case of the Wello WaterWheel, now listed on Maximpact’s Intermediary Portal, shows how fast a good idea can catch on, attracting enthusiastic users, collaborators and investors from an early stage.

WaterWheel is an innovative water delivery system that provides a way for people to transport large amounts of drinking water with much less effort. Rather than lugging heavy containers by hand, users push the WaterWheel’s 50 liter barrel in front of them using a convenient handle. The device was designed through an immersive, human-centered design process involving target users and experts in the field. The result is a robust, adaptable system that makes it easier for people, especially women and children, to convey needed water cleanly and efficiently, even over rough terrain.

The WaterWheel is designed to deliver more than water. By giving people easier access to potable water the device frees up valuable time, removes barriers that prevent children from going to school and empowers women to engage in more productive activities. The WaterWheel is also a potential income-generating tool for its target users, giving them a way to help lift their families out of poverty.

After nine months of extensive research and field testing,the latest model of the WaterWheel is now in production. Wasting no time in its efforts to get this technology into the hands of the people who need it, Wello is currently busy raising funding to deliver its technology on a broader scale. Investors have been quick to recognize the WaterWheel’s impact potential, both in social and financial terms: Wello is now just short of meeting its fundraising goals; yet it is still looking for funding to unlock a secured matching grant.

Wello is also using its Maximpact listing to reach out to collaborators. “We’re in the process of building Wello’s board right now,” says founder and CEO Cynthia Koenig. “We’d love to hear from people with expertise in the following fields: legal, finance and accounting, advertising and marketing, mechanical and industrial engineering, fundraising, and working with large international NGOs and other institutions. I’m also looking for business mentor who can provide high-level advice and guidance as we expand.”

For more information about Wello and the WaterWheel, please login to Maximpact.com and visit the deal section. You must be registered with Maximpact to view this information. Go to site.

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Findings of the G8 Social Impact Investing Task force

by Marta Maretich, Chief Editor @mmmaretich

A webinar with Sir Ronald Cohen and Rosemary Addis gave a taste of what is to come from the full report of the G8 taskforce for Social Investing.

Convened by David Cameron at last year’s Impact G8, the taskforce was given the brief of informing “governments and the worlds of finance and industry about what needs to be done” to develop the impact market. It consists of representatives from the G7 nations (no longer eight due to the exit of Russia) plus Australia.

The taskforce’s final report is due September 15, 2014, but in the meantime participants logged on form all over the world to hear Cohen, head of the task force, and Addis, from Impact Investing Australia, present highlights of the findings so far. The results were encouraging for the growing impact sector. Here are some key points.

Setting objectives for social and environmental impact will change everything
Some 40 years ago, Cohen pointed out, businesses learned the art of setting strategic objectives, a practice that led directly to a huge boom in corporate success. Setting strategic goals for social and environmental benefit for business, will lead to a similar upsurge for social impact organizations.

A trillion dollar marketplace is achievable—soon
Social impact investing is racing ahead on strong tailwinds from young millennial investors, the “gray wave” of responsible older investors and, with huge effect, governments seeking new ways to finance social programs. There are currently some $10 trillion now committed to SRI and CSR investing. This gives some indication of the appetite among investors for socially responsible investing and suggests impact investing may be able to scale quickly.

Impact investing has “uncovered a new set of opportunities for investors”
Impact investing is more than just a nice idea, according to Cohen. Products like Social Impact Bonds and Development Impact Bonds behave differently from other instruments in the marketplace—they don’t go up and down with the market, for example—and this makes them valuable assets in a diversified portfolio. Cohen compared the advent of impact investing with the early days of tech investing, which led to an explosion of new ways to invest as well as new approaches to finance.

The ecosystem around impact investing is all-important
The size and success of the social impact investing sector will be determined by the ecosystem around it, said Cohen. The taskforce looked at the regulatory and policy landscape in each of the eight participating countries and found that factors such as legal constraints on nonprofits and social benefit organizations can stop the growth of impact investing while incentives, for example tax breaks, help it flourish. The taskforce will make general recommendations for ways governments can strengthen the impact ecosystems in their countries.

Quantitative information will transform the sector
We now have information we didn’t have before. Though the science of social impact measurement is still young and imperfect, many social issues can be counted and the social outcomes quantified and costed. (The UK government has already published some early figures for the cost of some public services. data.gov.uk ) This information “will bind this marketplace together”, according to Cohen, and provide the key to creating a vibrant sector that harnesses impact capital to address social issues in an effective way. Ideally the discipline of social data gathering and metrics will spread out into the business and philanthropic sectors, too.

Different countries will come up with different solutions
No country on the taskforce has social impact investing “nailed as yet”, observed Addis. While there is much to learn from experience so far, all need to do more for the sector and all will come up with different solutions for building the marketplace. Geography, tradition and political climate are important. In addition to the main taskforce report, individual reports will be published for each country. For an early look: the US has already published theirs.

Ideas of charity are changing
In response to questions about the future role of philanthropy, Cohen had this to say: “There’s a shifting perception of charity now. It’s moving away from the act of giving and toward social outcomes.” He pointed out the example of Heron Foundation, who have pledged to dedicate their entire investment portfolio to impact. Philanthropic bodies also have an important role in addressing the social constraints, such as health and literacy, that stop economic development, he said.

This is just a taste of what’s to come from the G8 taskforce but one thing is already clear: the group’s findings will be influential as the sector grows and gains momentum. While it can be tempting to keep our focus on the purely business side of impact, it’s good to be reminded that much still depends on government policy, regulation and the measurable outcomes achieved by the sector. Watch out for further briefings on the progress of the taskforce, including future webinars from the Global Learning Collaborative and publications from the Impact Investing Policy Collaborative.

Keep up with taskforce events and publications The Global Learning Exchange offers a wide range of webinars, events and resources for the impact sector: Find impact investing deals.

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Interview with Uli Grabenwarter, Head of Strategic Development-Equity at the European Investment Fund

By Marta Maretich

How did you get interested in impact investing?

I was responsible for the Venture Capital investment business line of the European Investment Fund up until 2010. While I was doing that, I started to see impact investing as a natural extension to the venture capital activity we were doing. At the same time I felt impact offered an opportunity to do more value creation.  I thought we were too focused on creating “unrealizable” financial value—profit—and that we needed to focus more on creating real, tangible value for the stakeholders in the market.

What do you mean by real, tangible value?

If you look at the economic model we were all running up until 2008, you have to admit that the value we were creating in the private equity market was borrowed from the future. In the crash of 2008, we “lost” $28 trillion in market capitalization on the US stock markets. At the time I asked myself, were did all that money go? If it was “lost”, why isn’t anybody out looking for it? The answer was that this so-called “value” was never really there in the first place. It was virtual value, not real or tangible.

What are you doing with impact investing today?

In 2010 I had an offer from the IESE University of Navarra in Barcelona and The Family Office Circle Foundation based in Switzerland to participate in a two-year research project on impact investing. We studied seventy-five of the largest single family offices worldwide to learn about their approach to impact investing and consider whether it’s possible to have societal value with financial return.

I completed this research and returned to the European Investment Fund in 2012. In 2013 we launched the Social Impact Accelerator, which is the first pan-European fund-of-funds structure in impact investing. This quarter we’ve gone mainstream with €350 million under management for social investing in Europe.

What do you think is impact investing’s greatest challenge?

Our biggest challenge is our mindset. Despite the growth in the sector, we still have the idea in our heads that societal and financial returns are opposed to one another, that there will always be a tradeoff between them. Our entire financial system is based on this type of faulty reasoning. Look at corporate legal structures, for example. There are hardly any that allow the coexistence of societal and financial value creation. Most of the legal forms for social enterprise actually prohibit for-profit investment.

I consider this the most significant challenge to impact investing. It’s not just that we need to redefine the cutoff point between philanthropy and investment. We need to get into our heads that both social benefits and financial return are necessary for creating value.

Unconsciously we make choices about risks, financial return and also social impact in every investment we undertake. The fact that impact investing makes our choices transparent doesn’t make the dilemma of investment choices any better or worse. So why is it that in making impact-conscious investments we feel like we have to choose between opposing values? Are we just uncomfortable with it because introducing this level of transparency makes evident the extent to which financial values are virtual ones, not real or tangible at all?

Finding a method for pricing social value will be key to solving this problem because it will allow us to integrate societal values into economic decision-making at every level.

What is your vision for the future?

A world where social impact is seen as an opportunity rather than a constraint to business development. A world with a totally new concept of innovation, one in which enterprises aim to solve societal issues permanently so that for them being “successful” means that the social issue disappears—along with the need for their business model. Successful social enterprises will be obsessed with working to put themselves out of business and constantly re-inventing themselves to meet new and changing needs.

If the non-impact investment world thought about business that way, our economic system could function in a very different way. We would derive financial value from ensuring the sustainability of our socio-economic system rather than from the concept of linear growth and consumerism that rely on resources we will run out of within the time horizon of less than a generation. Actually, in a way we would end up paying for consuming less—and find that great!

About Ulrich Grabenwarter

UGcasual 302Uli Grabenwarter is Head of Strategic Development-Equity at the European Investment Fund and the president of European Impact Investing Luxembourg, a think-tank and network promoting concepts and proposals for regulatory and policy action in support of a prospering market environment for impact investing in Luxembourg (www.eiil.lu). From 2010 he conducted a 20-month research project on impact investing in collaboration with IESE University of Navarra in Barcelona and the Family Office Circle Foundation. Previously, Uli was Head of Equity Fund Investments at EIF after having worked at the European Investment Bank and at Price Waterhouse Coopers in corporate finance, project finance, finance consulting and auditing. Uli is a visiting Professor for Private Equity and Venture Capital at IESE University and teaches the module on Alternative Investments for the Post Graduate Programme of Sacred Heart University.

Further reading:
Exposed to the J-curve: Understanding and Managing Private Equity Fund Investments (Euromoney Books, 2005)

In Search of Gamma: An Unconventional Perspective on Impact Investing” (IESE Publishing, 2011).

Trading Social Impact: the Schizophrenia in Pricing Social Value

By Uli Grabenwarter, Head of Strategic Development-Equity at the European Investment Fund

Social impact investing has made it to the forefront of the debate about financial markets and how they can more responsibly serve the sustainable development of society. In June 2013 the G8 Summit in London identified impact investing as a possible means to overcome major societal challenges at national level, in dealing with the aftermath of the global financial crisis, and also as a means of addressing global social disparities.

The emergence of impact investing has set in motion actors along the entire chain of social action, from philanthropists to charities and foundations to social sector organisations, NGOs, public sector actors, social sector financial intermediaries and asset managers and, last but not least, the emerging community of social enterprises.

At the core of the debate among those various stakeholders is no longer the question of what precisely is to be understood by social impact investing, even if differences in the definition of this market space continue to exist. Consensus has emerged that social impact investing seeks to realize concrete societal objectives and requires transparency and accountability from the various actors along the social value creation chain.

Impact metrics that drive decision-making

The debate has therefore moved on to the means of ensuring transparency and accountability, which ultimately converges in the requirement for meaningful social impact metrics. Also in this area of impact measurement, substantial progress can be noted despite the still prevailing disagreement on specific impact metrics to be used. Whatever system and metrics approach is taken, stakeholders increasingly agree that the relevance of performance indicators for a specific social action must not be sacrificed for the sake of a pretended comparability or aggregation of social impact performance across various projects, activities or sectors.

An important sign of the progress in this debate is reflected in concrete examples where impact metrics go beyond being mere tools for transparency and become genuine drivers in economic decision-making and the related distribution of financial value:

  • First investment vehicles have been launched where the financial performance incentive for the investment manager is linked to social impact performance metrics alongside the financial performance;
  • New corporate structures that link the pay-out of dividends to shareholders to the social performance of the business have entered the legislative process;
  • And an increasing number of payment-by-results structures such as social impact bonds are using social impact metrics for defining the payment streams between a commissioner of social services, the executing social sector organisations and an investors community providing the funding.

Moving on from metrics to pricing social value

This extended use of social impact indicators in the economic decision-making and performance-monitoring process has revealed a new dimension that so far has not been addressed in a conclusive way: the pricing of social value.

If social action moves away from a philanthropy-based funding approach (where impact metrics at best serve the monitoring of efficient capital allocation in pursuit of a given social goal) and enters the space where social impact becomes the substance of economic trade, the question of how to attribute economic value to social impact becomes central.

The debate on this topic has so far been largely avoided. Social-impact-inclined stakeholders such as philanthropists, charities and foundations have dodged it, possibly because it feels ethically uncomfortable to attribute financial value to social benefit. The basic assumption in a socially focused mind-set is that social value is beyond the notion of money.

On the other hand, stakeholders seeking the benefits from social service delivery (such as commissioners of social impact bonds) were happy to avoid a debate on the pricing of social value because doing so resulted in cost savings, offering an easy and not to say cheap way to propose social value in lieu of financial return to investors investing for social purpose.  Under the pretext of a new form of investment return concept, investors were invited to look at the combined return of social outcome and financial profit rather than just at financial profit alone.

The true cost of failing to price social value

This thinking may well be what we aspire to in terms of a new financial market logic, but in order to arrive at this ideal, it must be accepted along the entire social value creation chain. If one looks at the cost structure of payment-by-results instruments, for instance, it cannot be ignored that the financial return component paid to investors in social impact bonds issued to date is marginal compared to the fees incurred for the structuring, placement, monitoring, performance management and other costs associated with these instruments.

It is strange to observe that investors in the social impact space are urged to look at their combined return aggregating social and financial value creation when other stakeholders in the ecosystem still refuse to do so.

How else can we explain that the pricing of social value used in social impact bond structures is still almost exclusively based on the cost structure of the social sector organisation delivering the underlying social service and largely dismisses any fair financial return expectations of investors funding such activity?

The viability of a social impact bond structure, at least from the perspective of the public sector commissioner, is still predominantly judged on the cost savings potential for the state budget rather than on the social value it creates. Isn’t it counter intuitive that we accept it when “traditional” markets trade goods and services at their market value (rather than at a price equivalent to the cost incurred by the supplier) yet fail to apply a similar value-based logic when contracting social goods and services?

A cynic might say that public sector commissioners who adopt such cost-based approaches are looking for investors who are ready to submit to double taxation. Having paid a first layer of tax on income with which the public sector was supposed to provide a given social service in a welfare state context, investors then shoulder a second layer of tax by incurring an opportunity cost in being asked to forgo an appropriate risk-adjusted return on their investment. If that’s the case, the approach is not only questionable from a political point of view, it is also potentially counterproductive to the development of the social impact investing space.

Finding new alliances between the public and private sectors

With the fallout from the financial crisis affecting state finances, it has become clear that the concept of the European-style welfare state cannot be upheld in its pre-crisis shape. If we want to maintain the concept of community solidarity we must find new alliances between the private sector and the public sector in the delivery of social services.

This shift in social service delivery requires a new understanding of the various stakeholders in their respective roles, including that of the public sector. The public sector can no longer be a tax-funded provider of social services but needs to embrace a new role as a market participant in a social impact market. Being a market participant, however, requires that public service commissioners move beyond considering only the cost of a good or service and instead accept the idea of paying for its value.

Of course, the debate about what exactly is the value of a social service is ongoing, as is the debate about what counts as a “fair” return for social impact bond investors.  But the principle must be accepted that (i) execution risk, (ii) the risk on outcomes and (iii) the funding of social services must all be taken into account when determining the return structure of social impact focused financial instruments. In other words, if we accept that the cost of capital for a social sector organisation is part of the “production cost” of the good or service it delivers, linking this to common sense market logic can’t be too big a leap to take.

The benefits of pricing social value

It appears that the public sector hasn’t fully comprehended the spectrum of opportunities it can leverage by taking this step: By allowing social value pricing that enables a fair remuneration of investors in social activities, the public sector, through the superior efficiency of private social sector organisations, will unleash a great saving potential in providing social services. Additional economic and social benefits can also be realised by capitalising on the generally prevention-based approach of social sector organisations as opposed to the symptom-driven reactive approach to social issues in a public-sector welfare state approach.

But the strongest argument for the public sector to accept its new role is in the scaling potential for this new form of public-private partnership. Unaddressed societal issues grow at a faster pace than the philanthropic money available to cure them. Hence, new funding sources are needed to address these challenges. In the absence of new philanthropic resources and in the light of a virtually disappearing margin of manoeuvre in public finance, the future of our welfare state system depends on the ability to attract private sector investment into this space.

Such a shift is unlikely to happen by converting the institutional investing community into philanthropists. However, the increased consciousness in financial markets of the need for a social equilibrium as a prerequisite for economic prosperity offers an opportunity for a new economically sustainable welfare state concept. At this very moment there are important choices to be made by the public sector on how to assume its role at the interface of the key stakeholders in the social impact investing space. These choices will prove decisive for the scale of the social impact investment space going forward.

We have spent decades blaming the financial markets for their lack of responsibility towards society by mono-dimensionally focussing on financial return. Now that financial markets are finally starting to comprehend social impact as an integral component of economic life by accepting economic risks linked to social outcomes, we cannot respond to the dawn of this new market logic by an equally short-sighted and mono-dimensional attempt to shift responsibilities for no reward.

There is a wealth of insight to gain from impact investing when defining a new financial market logic if we stop procrastinating in the perceived contradiction between financial return and social value. If the wisdom of dividing financial return from social benefits has left us with the 2008 crisis as a result, we might as well take our chances and try an approach that seeks to reconcile the two going forward.

Does the G8 Taskforce Report Really Get to the Heart of Impact Investing Markets?

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By Marta Maretich, Chief Editor @maximpactdotcom

We were waiting for it. Now, at last, it’s here.

The report of the Social Impact Investment G8 Taskforce hit the media on September 15 provoking a small flood of news stories and reaction pieces from governments, development agencies and third-sector bodies.

At 51 pages not including the eight individual country reports, The Invisible Heart of Markets is a hefty document in more ways than one. It was authored by group of heavyweights including government ministers and the heads of impact organizations from around the world, led by prominent social finance advocate Sir Ronald Cohen. Its editor, Matthew Bishop, is a respected writer for The Economist.

Even Pope Francis apparently lends his support to the project with a bullish opening quote.

Everything about the report signals its significance not only to the social investing sector but also to the worlds of finance, philanthropy and public policy, all of which will be touched by its far-reaching recommendations.

It gathers together what has been until now a scattered picture of the many strands and branches and offshoots of impact, and brings a practical focus on where we all need to go from here.

Accordingly, commentators from various parts of the sector are beginning to weigh in on the report’s ramifications in areas like development ,the role of government, the future of philanthropy and even crowdfunding.

All this makes the taskforce report a success. Its ambition, its scope, its polish — not to mention the evident political clout that lies behind it — are further signs that impact has arrived. It is a milestone in the evolution of our sector and its effect will be significant and lasting. Sector watchers (myself included) will be mining its rich content for months to come, as well as tracking the progress toward the goals it dares to lay out.

Where change really comes from

And yet, in the dazzle of the report’s many authoritative recommendations for governments, policymakers an impact sector leaders, there’s a danger of overlooking a vital detail: real change doesn’t come from institutions or governments, nor does it come in the form of policies, manifestos or even laws. These things are necessary for the growth of our sector now, as the report neatly demonstrates, but they are just expressions of a more profound shift that will be needed if impact is to fulfill its potential.

Because real change comes from people, from the things they believe — their values — and from the decisions they make as a result of those beliefs. In organizations, whether businesses, foundations or ministries, significant change happens when those who are accountable for making strategic decisions, such as top managers, management teams and trustee boards, change the way they think.  In public life, change arises when many individuals alter their thinking along with their voting patterns.

It is to these incremental, individual shifts of belief that we owe the progress of the social investing movement so far. Its early advocates, including Cohen, have been persuasive, even charismatic, and the taskforce report is a measure of how far they’ve brought things in just a few years. Its agenda is ambitious and, if we realize its vision, there’s no doubt that impact investing will move into the mainstream and become more widely practiced.

But will it really mean anything? Will anything really have changed as a result? That depends.

Change is what impact investing is all about. It is market finance with a transformative social purpose. The top-down measures proposed by the taskforce report are needed, but without a corresponding change in the attitude of the decision-makers inside many organizations, they aren’t enough to turn impact into the force for global change we hoped it could be. And without more public engagement by small “retail” investors, impact investing is destined to remain the hobby of a small financial elite, rather than become, as it might, a true evolution of market finance.

The heart of the matter

The report acknowledges this in some measure and its recommendations, such as clarifying the fiduciary responsibilities of trustees, could really help. But the questions remain: How do we change minds when it comes to impact investing? How do we convince a skeptical financial sector (and it still is skeptical, despite positive noises) that impact is more than just the flavor of the month? How do we empower business leaders and governing bodies to embed their values permanently in their strategy and give them the support they need to follow through?

These questions can’t be fully answered through better policy, more data or even good regulation, although those things can help create a climate where answers can be found.  To get to the heart of the impact market we have to find ways to touch its human sources, to change the minds of people and the dynamics of decision making groups.

This won’t be simple.  We’ve only started down the road toward a new financial future and there’s still a long way to go. But its good to remember that the hardest part of the journey will not be creating new market systems and infrastructure (though that won’t be easy). Rather, it will be changing the way we all think about finance and the way it can be used to create beneficial outcomes for the people and the planet. If we can manage that, realizing the rest of the taskforce’s vision will seem like a piece of cake.

To read the full taskforce report and all other related reports, visit the IIPC website.
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