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UN, 28 Banks Draft Global Impact Standards

Barclays Bank Fulwell Branch, Seaburn, Sunderland, England, August 4, 2009, Photo by Peter Richmond)

Barclays Bank Fulwell Branch, Seaburn, Sunderland, England, August 4, 2009, Photo by Peter Richmond)

By Sunny Lewis

PARIS, France, November 29, 2018, (Maximpact.com News ) – “The global banking industry is stepping up to the sustainability challenge,” said Satya Tripathi of India, UN assistant secretary-general, UN Environment. “I’m optimistic we’ll see a realignment of business practice – one that embraces the fact that green and socially responsible business is the best business.”

In August UN Secretary-General António Guterres announced the appointment of Tripathi as assistant secretary-general and head of the New York Office of the UN Environment Programme, (UNEP).

A development economist and lawyer, Tripathi has worked for the UN since 1998 in Europe, Asia and Africa on sustainable development, human rights, democratic governance and legal affairs. Since 2017 he has served as senior adviser on the 2030 Agenda for Sustainable Development at UNEP.

Tripathi’s role expanded, at least temporarily, as Secretary-General Guterres last week accepted the resignation of former UNEP head Erik Solheim of Norway whose spending on travel was deemed excessive.

In a bid to define the banking industry’s role and responsibilities in shaping a sustainable future, UN Environment Finance Initiative, UNEP FI) and 28 banks from around the world today launched the Principles for Responsible Banking for global public consultation at its biennial Global Roundtable at thePalais Brongniart in Paris.

The announcement came during the 4th Climate Finance Day and the UNEP FI’s Global Roundtable, which took place in Paris this week from November 26-28.

Finance for Tomorrow and UNEP FI co-organized their two flagship events into a major global rendez-vous this year for mobilizing the financial sector to deliver a sustainable financial system.

By developing the Principles, the 28 founding banks set out a clear purpose for the banking industry. It is intended to enable investors, policy makers and regulators, clients and civil society to compare banks and hold them accountable for their environmental, social and economic impacts.

The Principles require banks to be transparent and accountable. Banks are required to report publicly on the positive and negative social and environmental impacts of their investments, their contribution to society’s goals and their progress in implementing the Principles, and to engage with key stakeholders on their impacts.

The Principles are supported by an Implementation Guidance , which provides details of the rationale for each Principle and practical guidance on how banks can approach the implementation of the Principles.

The 28 founding banks developing the Principles for Responsible Banking are from five continents and 20+ countries:

Access Bank, Nigeria; Arab African International Bank, Egypt; Banco Pichincha, Ecuador; Banorte, Mexico; Barclays, United Kingdom; BBVA, Spain; BNP Paribas, France; Bradesco, Brazil; Commercial International Bank, Egypt; CIMB Bank, Malaysia; First Rand, South Africa; Garanti Bank, Turkey; Golomt Bank, Mongolia; Hana Financial Group, South Korea; Industrial and Commercial Bank of China, China; ING, Netherlands; Kenya Commercial Bank Group, Kenya; Land Bank, South Africa; National Australia Bank, Australia; Nordea, Sweden; Piraeus Bank, Greece; Santander, Spain; Shinhan Financial Group, South Korea; Societe Generale, France; Standard Bank, South Africa; Triodos Bank, Netherlands; Westpac, Australia; YES Bank, India.

Here is an overview  of what will be required of the signatory banks.

By committing to the new framework, banks will be aligning their businesses with the objectives of the UN Sustainable Development Goals, SDGs) and the Paris Climate Agreement.

The British multinational investment bank Barclays  is one of the 28 founding banks and has been part of UNFI for more than 20 years. Said Jes Staley, Group CEO, Barclays PLC, “Barclays exists to help develop sustainable economies and to empower people to build better futures. We are committed to playing our part to deliver the SDGs and we do this by helping our clients to raise billions of dollars of social and environmental financing, upskilling millions of people and helping to drive job creation.”

Hassan Abdalla, CEO, Arab African International Bank, said, “The current environmental and social issues pose a multitude of opportunities and threats for financial institutions. Banks can either seize the opportunities and grow, or ignore the threats and go under. The Principles for Responsible Banking allow banks to generate new revenue streams by genuinely connecting to the environment and the society.”

The Principles now enter a six-month global public consultation period before they will be implemented in September 2019.

To find out how you can take part in the global public consultation, click here.

By signing the Principles for Responsible Banking, banks will commit to being publicly accountable for their positive and negative social, environmental and economic impacts.

They agree to set public targets for addressing their negative impacts and scaling up their positive impacts to contribute to national and international sustainable development and climate targets.

Signing the Principles will be a serious commitment: banks that continuously fail to meet transparency requirements, set adequate targets and demonstrate progress will face removal from the list of signatories.

“The Principles for Responsible Banking align the banking industry with the Paris Agreement and with the Sustainable Development Goals, and they demonstrate a clear commitment from the banking industry to assume its defining role in creating a sustainable future,” said Christiana Figueres, convener Mission 2020  and former executive secretary of the United Nations Framework Convention on Climate Change, UNFCCC).

“This is the only future that is acceptable, and profitable for everyone. Every bank should become a signatory, and all regulators, investors, policy makers and civil society should support the banking industry’s implementations of the Principles,” said Figueres.

Said Daniel Wild, Co-CEO of RobecoSAM, the Swiss international investment company with a focus on sustainability investments, “The Principles for Responsible Banking will drive the banking industry’s alignment with the Paris Climate Agreement and the United Nations’ Sustainable Development Goals.”

“We are integrating part of the requirements of these Principles in the RobecoSAM Corporate Sustainability Assessment, CSA; the leading annual survey of companies seeking to benchmark their sustainability performance and competing for membership in the Dow Jones Sustainability Indices, DJSI;” said Wild.

“Banks that want to be best in class in the CSA and members of the DJSI should therefore seek to align with this new global standard,” he said.

Satya Tripathi, UN assistant secretary-general, UN Environment, speaking at COP21, the 21st session of the Conference of the Parties to the UN Framework Convention on Climate Change, UNFCCC COP21; where the Paris Agreement on climate was finalized unanimously by world leaders. Paris, France December 7, 2015., Photo courtesy Earth Negotiations Bulletin) Used with permission.

Satya Tripathi, UN assistant secretary-general, UN Environment, speaking at COP21, the 21st session of the Conference of the Parties to the UN Framework Convention on Climate Change, UNFCCC COP21; where the Paris Agreement on climate was finalized unanimously by world leaders. Paris, France December 7, 2015., Photo courtesy Earth Negotiations Bulletin) Used with permission.

Martin Skancke, chair of the Principles for Responsible Investment, PRI; said, “The PRI has helped drive the integration of environmental, social and governance considerations into investor decision-making. It is now time for the banking sector to step up in both assessing the risks they are exposed to, and the impacts of their financing activities in realizing the sustainable development goals.”

The Roadmap is available on the UNEP FI and PRI websites, as well as at Fiduciary Duty 21.

Banks and stakeholders around the world are invited to provide feedback and input to guide their further development, and to signal their support by becoming Endorsers of the Principles for Responsible Banking and help shape the future of banking.

Finance in France, the last in a series of market analyses from the Fiduciary Duty in the 21st Century program, was also launched Tuesday at UNEP FI’s 2018 Global Roundtable in Paris. It was presented to Brune Poirson, Secretary of State, Ministry for the Ecological and Inclusive Transition.

After extensive consultation with major French institutional investors, regulators and industry associations, Finance in France sets out recommendations for the French market to build upon its leadership position and achieve further progress in mainstreaming responsible investment.

Environmental, social and governance, ESG) are the three central factors in measuring the sustainability and ethical impact of an investment in a company or business.

While France is recognized as one of the leaders in sustainable finance, obstacles remain to the full integration of ESG issues into investment practice. Regulatory developments in France and Europe require actors in the financial sector to clarify their fiduciary duty and incorporate ESG issues into investment strategies.

“This project, driven by France’s leadership in sustainable finance and recent momentum in responsible investment, builds knowledge and shares experience among policy makers and investors,” said Eric Usher, who heads UNEP FI. “It provides guidance on how to fully integrate ESG factors into investment practice and align investment with the Paris Agreement and the SDGs, including encouraging analysis and measurement of the impacts of investment activities.”

Augustin de Romanet, chairman, Paris EUROPLACE  and Chairman and CEO of ADP payroll and HR services group said, “In this new international context, marked by the withdrawal of the United States from the Paris Agreement and by an increased involvement of Europe and new driving forces – China and India – in favor of the fight against global warming, it is today, more than ever, essential to increase the contribution of the global financial industry to these issues and to consolidate and promote the position of the Paris Financial Center as a world leader in green and sustainable finance.”

Image Source: Euros on a spreadsheet, November 14, 2018, Cologne, Germany, Photo by Marco Verce) Creative Commons license via Flickr


First Mover Banks Come Clean on Climate Risk

Mark Carney, left, and Michael Bloomberg are authors of the final recommendations of the G20 Financial Stability Board’s Task Force on Climate-Related Financial Disclosures. Carney is a Canadian economist who currently serves as Governor of the Bank of England and chairs the Financial Stability Board. American businessman, author, politician, and philanthropist, Bloomberg is a former mayor of New York City. His current net worth is estimated at US$50.4 billion, ranking him as the world's sixth richest person. (Photo courtesy G20 Financial Stability Board) posted for media use.

Mark Carney, left, and Michael Bloomberg are authors of the final recommendations of the G20 Financial Stability Board’s Task Force on Climate-Related Financial Disclosures. Carney is a Canadian economist who currently serves as Governor of the Bank of England and chairs the Financial Stability Board. American businessman, author, politician, and philanthropist, Bloomberg is a former mayor of New York City. His current net worth is estimated at US$50.4 billion, ranking him as the world’s sixth richest person. (Photo courtesy G20 Financial Stability Board) posted for media use.

By Sunny Lewis

LONDON, UK, July 18, 2017 (Maximpact.com News) – Eleven of the world’s most influential banks have committed to work with the UN Environment Finance Initiative (UNEP FI) to promote climate transparency in financial markets. The banks will develop analytical tools to strengthen their assessment and disclosure of climate-related risks and opportunities.

“The message from financial heavyweights is clear – climate change poses a real and serious threat to our economy,” said Erik Solheim, head of UN Environment, formerly known as the UN Environment Programme (UNEP).

“At the same time, there are enormous business opportunities in taking climate action,” Solheim said. “Transparency on how financial institutions mitigate the risks and seize the opportunities of a two degrees pathway is crucial to move international markets towards actively supporting a low-carbon and climate-resilient future.”

The “two degrees pathway” is a reference to the Paris Agreement on climate, which has near unanimous support among world governments, for its goal of holding any rise in the global warming to two degrees Celsius above pre-industrial temperatures.

UNEP FI, a partnership between UN Environment and the global financial sector created after the 1992 Earth Summit, works to promote sustainable finance. Over 200 financial institutions – banks, insurers and investors – work with UN Environment to understand today’s environmental challenges, why they matter to finance, and how to actively participate in addressing them.

Representing over US$7 trillion, the first-mover 11 banks are:

  • the Australia and New Zealand Banking Group;
  • the British multinational bank and financial services company Barclays;
  • Brazilian banking and financial services company Bradesco;
  • New York-based multinational bank and financial services company Citi;
  • Itaú Unibanco Holding S.A, the largest financial conglomerate in the Southern Hemisphere;
  • National Australia Bank;
  • Royal Bank of Canada;
  • Santander Group, which serves more than 100 million customers in the United Kingdom, Latin America, and Europe;
  • Standard Chartered, a British banking and financial services company operating more than 1,200 branches in 70 countries;
  • TD Bank Group, a Canadian multinational banking and financial services corporation headquartered in Toronto;
  • UBS, a Swiss global financial services company.

These banks’ commitments follow the publication late last month of the final recommendations by the G20’s Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD) .

The initiative will enable banks to follow the recommendations of the Task Force headed by Mark Carney and Michael Bloomberg. The Task Force recommendations were presented in Hamburg, Germany at the G20 annual meeting last week.

“Increasing transparency makes markets more efficient and economies more stable and resilient,” said Bloomberg in the Executive Summary of the Task Force report.

Key features of the recommendations are that they must be: adoptable by all organizations, included in financial filings, designed to solicit decision-useful, forward-looking information on financial impacts, and have a strong focus on risks and opportunities related to transition to a lower-carbon economy.

The Task Force presents the financial side of climate change, saying, “For many investors, climate change poses significant financial challenges and opportunities, now and in the future. The expected transition to a lower-carbon economy is estimated to require around $1 trillion of investments a year for the foreseeable future, generating new investment opportunities. At the same time, the risk-return profile of organizations exposed to climate-related risks may change significantly as such organizations may be more affected by physical impacts of climate change, climate policy, and new technologies.”

The banks not only welcome the Task Force’s recommendations but are the first from their industry to work towards adopting key elements of the unique framework.

Bank executives say that by improving their understanding of climate-related risks and opportunities, financial institutions are better placed to help finance the transition to a more stable and sustainable economy.

Ed Skyler, ‎executive vice president for global public affairs at Citi, said, “The scale and sophistication of climate risk and opportunity continue to grow, and the finance sector has an important role in shaping the path forward. Working together to refine our approaches to enhanced disclosure will help accelerate the transition to a low-carbon economy.”‎

The Financial Stability Board, chaired by Bank of England Governor Mark Carney, asked the Task Force to develop voluntary, consistent climate-related financial risk disclosures for use by companies, investors, lenders and insurers.

Jes Staley, CEO of Barclays PLC, said, “As a contributing member to the work of the FSB Task Force over the past 18 months, Barclays is pleased to be able to continue our involvement by joining this UNEP FI Working Group.  Putting the theory into practice – or exploring how best the Recommendations can be implemented – and creating greater transparency for all participants, is an endeavour we look forward to working on with our fellow Working Group participants.”

The Task Force warns in no uncertain terms about the dangers of continuing with fossil fuel business as usual, particularly after the Paris Agreement was adopted in December 2015.

“To stem the disastrous effects of climate change within this century, nearly 200 countries agreed in December 2015 to reduce greenhouse gas emissions and accelerate the transition to a lower-carbon economy. The reduction in greenhouse gas emissions implies movement away from fossil fuel energy and related physical assets. This coupled with rapidly declining costs and increased deployment of clean and energy-efficient technologies could have significant, near-term financial implications for organizations dependent on extracting, producing, and using coal, oil, and natural gas.”

“While such organizations may face significant climate-related risks, they are not alone. In fact, climate-related risks and the expected transition to a lower-carbon economy affect most economic sectors and industries,” the Task Force states.

Its recommendations are being welcomed by financial institutions and civil society alike, as the role of the finance sector in meeting the Paris Climate Agreement’s goals becomes crystal clear.

This first mover project to implement the recommendations puts the 11 UNEP FI members in the vanguard of this effort. Its results will be made public to encourage banks worldwide to adopt the scenarios, models and approaches developed.

“Sustainable finance is about two imperatives – improving the contribution of finance to sustainable, low-carbon and inclusive growth, and ensuring financial stability in light of environmental risks such as climate change,” said Christian Thimann, group head of strategy, sustainability and public affairs at the AXA Group, and co-chair of UNEP FI and TCFD vice-chair.

“The TCFD framework emphasizes how achieving these two goals requires that financial and non-financial corporations provide more transparency on how they plan to address the risks and opportunities related to climate change,” said Thimann.

Denise Hills, sustainability superintendent, Itaú, and co-chair of the UNEP FI Steering Committee, said, “Our participation in this UNEP FI initiative strengthens our commitment to a global economy in transition. At the same time, it reinforces our purpose to be a transformation agent to add value for our clients, shareholders and society in an ethical, consistent and responsible way.”

“After the G20,” said Thimann, “the issue now is about implementation. How can the finance industry put the framework into practice and deliver disclosure that is meaningful? Through this and other industry-led working groups UNEP FI is helping the finance sector to do just that: move from awareness to action.”


Featured Image: The Citigroup Center in Chicago, Illinois (Photo by anokarina) Creative Commons license via Flickr.

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Impact Investing Offers Opportunity to Wealth Managers

42879484 - businessman running in money wheel on blue background

by Robert Rubinstein, Chairman & Founder of TBLI Group.

I have had many conversations with private bankers who manage wealth portfolios, and they all lamented the difficulty of getting HNW clients interested in Impact Investing. They all recount to me the challenges they face in getting HNW clients to become interested in Impact Investing. I have heard this excuse hundreds of times. It is getting boring. This is what I tell them now.

“The reason you can’t seem to convince your client about ESG or Impact Investing, is because you are not good at getting buy in”.” It is hard to convince clients of a new product when you were selling them past products that were the new wonder middle. CDO’s.” “With that track record, it is hard to win back trust and it appears to the client that Wealth Managers are not fully committed. The Private Bankers all seem to live in fear of their clients. They don’t lead them but follow them. How can you engage with your clients, if you are afraid of them (afraid them leaving), you don’t understand values based investing, and you don’t engage with clients on Impact Investing (illiquid investments with a story) that would provide a sense of fulfilment, and you still operate in a ghetto of limited information. The best part is when Private Bankers all tell me “Clients are not interested in Impact Investing”. I laugh my head off. One even went so far as saying “none of our clients (100%) are interested in sustainable investments”. I never encountered anything that has 100% success or failure rate.

Client Engagement

Asset owners who meet with their wealth managers are often confronted with the comment “sorry your portfolio is down, because interest rates are so low”. That conversation is a dead conversation.

It is not inspiring, joyful, or interesting. The liquid part of the portfolio often represents 80-90% of the portfolio. So hearing that 80-90% of your portfolio is down because of low interest rates won’t put a spring in your step.

The part that represents a very small percentage of the portfolio, alternative investments or illiquid investments is the part where wealth managers can really engage, particularly the part called Impact Investment. If you look at the 10-20% of a client’s portfolio and within that you might find a razor thin part that could be considered “impact investing”. It is that tiny part of the portfolio that wealth managers can really engage with the client, and get clients passionate, excited, and most of all a feeling that the wealth managers made the client’s day. Isn’t that something to which to aspire.

It is refreshing to see that most Wealth managers are in one form or another starting to introduce clients to Impact Investing Product. Now instead of saying that the client is not interested, the excuse is there are no quality products at scale. Another fallacy. There are plenty of quality impact investing product at scale. Just need to start exploring other neighbourhoods, and not only your Bloomberg terminal.

You can’t find 100% of anything anywhere who believe the same, unless you are a private banker. How about waking up, smell the roses, engage with your client, gain some fulfilment, and get your bonus?

For the number crunchers who still need convincing.


Robert RubinsteinRobert Rubinstein, Chairman & Founder of TBLI Group.

TBLI-Building A Global Community of Values Based Investors

For the past twenty years, Robert Rubinstein, through the TBLI Group, has been instrumental in integrating Values Based Investing (VBI) into the culture and strategy of international corporate business and investment companies. He has worked tirelessly in raising awareness and creating money flows into ESG (liquid assets in Environmental, Social and Governance investments and Impact (illiquid assets in sustainability). The work is akin to farming and not hunting. Using what he calls the Shawshank Redemption approach vs the Wolf of Wall Street. Continuously chipping away at the system for 20 years to break through.

What Challenges do NGO’s face and what are the solutions?

 

57622130 - ngo contribution corporate foundation nonprofit concept

MAXIMPACT BLOG March 20, 2017 Maximpact.com

Non-governmental organizations (NGOs) refer to highly diverse groups of enterprises engaged in a wide spectrum of non-profit activities. The focus of NGOs can range from humanitarian and rural development to assisting local startups and businesses. There are roughly 3.7 million NGOs worldwide with an estimated 2 million of them in India.

The first NGO dates back to 1945 when the United Nations was created. The UN made it possible for certain non-governmental organizations to be given permission to have observer status at its assemblies and some of its meetings.

So, What is the Goal or Objective of NGOs?

The goal of NGOs can vary widely depending upon the specific focus, objective and mission of the organization. From improving human rights in a geographic area to providing education about environmental issues to supporting the arts, the goal or objective of an NGO can cover just about any topic related to improving a region, country or the state of the world in some way.

What all NGOs share is the desire to further their vision and mission, whatever it might be. Individuals and groups who form NGOs tend to have a passion for their beliefs. They are usually coming from a place of altruism and care for the human race and for the future of our world. To that end, the goal of NGOs is to improve the human experience by lending their efforts to a specific and specialized cause.

What Are the Main Challenges NGOs Face Today?

The main challenges to the missions of most NGOs are as follows:

Lack of Funds

Many NGOs find it difficult to garner sufficient and continuous funding for their work. Gaining access to appropriate donors is a major component of this challenge. They may have limited resource mobilization skills locally, so instead they wait for international donors to approach them. Current donors may shift priorities and withdraw funding. The NGO might suffer from a general lack of project, organizational and financial sustainability.

Absence of Strategic Planning

Many NGOs suffer from the lack of a cohesive, strategic plan that would facilitate success in their activities and mission. This renders them unable to effectively raise and capitalize on financial support.

Poor Governance and Networking

A lack of effective governance is all too common in NGOs. Many have a deficit of understanding as to why they must have a Board and how to set one up. A founder may be too focused on running the NGO for their own purposes; however, governance is foundational to transparency.

Poor or disorganized networking is another major challenge, as it can cause duplicated efforts, time inefficiencies, conflicting strategies and an inability to learn from experience. The more NGOs communicate with one another, with International Non-Governmental Organizations (INGOs) and with the community at large, the more effective all of them can be. However, many NGOs perceive INGOs as hindering or even threatening to their goals and missions.

Many NGOs do not maximize the use of current technologies that could facilitate better communication and networking. More effective use of technology can assist NGOs in staying abreast of important regional, national and global concerns.

Limited Capacity

NGOs often lack the technical and organizational capacity to implement and fulfill their mission, and few are willing or able to invest in training for capacity building. Weak capacity affects fundraising ability, governance, leadership and technical areas.

Development Approaches

Many NGOs favor a “hardware” approach to development through building infrastructure and providing services instead of empowering people and institutions locally. Overall, their development approaches are not as flexible, sustainable and relevant to the community as they could be.

What are the solutions to those challenges?

Grant Funding

In order to receive grant funding, an NGO must do the following:

1. Locate Opportunities. Find an appropriate grant and funder for their focus and mission.

2. Solid Concept Note / First Round Application. NGOs must answer all criteria and provide all of the information the donor/funder requires. Not following the guidelines will result in immediate disqualification.

3. Proposal. Once an NGO passes the first application state, a proposal will be requested. The proposal must be well-written and error-free. Most importantly, it must contain all of the necessary elements to show the donor that the NGO has a strategy and high-quality team members.

Challenges such as poor governance, a lack of strategic planning, and poor networking can all be addressed through:

Capacity Building

Capacity building and training can help to provide crucial new skills. NGOs can then more readily train staff and cultivate the necessary skills within the organization to address challenges going forward.

On-Demand Advice From Experts

The ability to reach out for needed advice and guidance whenever required during a project or to optimize NGO operations is extremely valuable. Access to qualified experts will inspire confidence in donors and contribute to the project’s success. NGOs will naturally become more efficient, streamlined and effective.

Information, Communication and Technology

All NGOs should be using a minimum of Internet, email, a basic website and relevant social medial platforms.

Income Generation

NGOs with assets can use any surplus to help generate income. Renting out buildings, offering training, providing consultancy, creating and selling products and trading on your name are just a few examples.

If your NGO is facing any of the challenges described above, Maximpact can help. We offer training and capacity building to strengthen your organization and assist you in meeting your goals.


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How Maximpact team is tailoring capacity building services
Maximpact assists organizations by identifying and/or implementing the capacity building needs. Some organizations already know what skills and capacity their organizations lacks in and some have not yet identified them.

Once the capacity development need is identified, Maximpact selects the right expert(s) to provide customized capacity building service to the client. Maximpact believes that transferring knowledge is not the only thing you can do. Therefore, it’s main objective is to ensure practical usage of knowledge attained through its capacity building program.
It’s extensive pre-qualified global consulting network, and broad partnership network makes Maximpact perfectly equipped to match the right expertise efficiently, maximizing cost-benefit outcome for all clients. All consultants and experts within the network are assessed against set of professional capacity criteria to ensure their qualifications are in line with specific requests of Maximpact partners.

Fintech Goes Green

By Sunny Lewis

NAIROBI, Kenya, February 7, 2017 (Maximpact.com News) – A UN-backed app is transforming green finance. At the World Economic Forum in Davos in January, the UN Environment Programme and Ant Financial Services Group, the Chinese online and mobile financial services provider, unveiled the Green Digital Finance Alliance, a joint initiative to stimulate the advancement of digital technologies in green finance.

Erik Solheim, executive director of the Nairobi-based UN Environment agency, formerly UNEP, says the new endeavor will rely on “fintech,” the evolving intersection of financial services and technology.

The Green Digital Finance Alliance is a unique partnership,” said Solheim, “ensuring that we can align tomorrow’s fintech-powered global financial system with sustainable development.

AllianceFounders

At the Green Digital Finance Alliance launch in Davos, Switzerland, from left: Erik Solheim, Under-Secretary General and Head, UN Environment, Doris Leuthard, President, Swiss Confederation, Eric Jing, CEO, Ant Financial Services Group, January 19, 2017 (Photo courtesy Green Digital Finance Alliance) posted for media use

Through market innovation, collaborative action and public awareness, the initiative aims to drive environmental risks, opportunities, incentives and choices into decision-making across the financing value chain.

Ant Financial Services is the first Chinese company to drive a global public-private partnership. Currently, there are 72 million users participating in Ant Financial’s app, called Alipay.

Alipay is a digital financial platform that provides users with a carbon account in addition to their credit and saving accounts.

Ant’s 450 million users can benchmark their carbon footprint and earn “green energy” credits for reducing their footprint, for example, by taking public transit instead of driving.

In addition, Ant Financial has integrated this function into a social media experience, as well as committing to a complementary, tree-planting carbon offset program.

The app is proving to be wildly popular. The number of people that signed up on the day preceding the Green Digital Finance Alliance was nearly the equivalent of the entire population of Switzerland.

Every day tens of millions of users go to their Ant Forest to grow their virtual trees while reducing carbon emissions.

UN General Assembly President Peter Thomson of Fiji told a Davos audience at the launch that his office is organizing a series of events aimed at bringing international discussion of sustainable finance into the United Nations.

Given the trillions of dollars that will be needed to finance the Sustainable Development Goals, initiatives like this are essential to ensuring technological developments contribute to the greening of the global financial system, and to achieving a sustainable future for humanity,” said Thomson.

Innovative partnerships like this, which align UNEP’s cutting-edge research with Ant Financial’s expertise in providing inclusive financial services, are central to global efforts to scale up implementation of the 17 Sustainable Development Goals,” Thomson said.

Thankfully,” he said, “the transformation towards a sustainable financial system is already underway, with many governments, regulators, central banks, institutional investors and private companies starting to align their operations with the principles of sustainability.

Such efforts need to be scaled up. Digital technologies have the potential to accelerate this transformation – particularly for low-income countries, and small and medium enterprises,” he said.

To this end, in April I will be convening an SDG Financing Lab in New York which will examine existing financing mechanisms for the Sustainable Development Goals, and how they can be best applied to each goal.

We are already seeing fintech disrupt traditional practices in the banking, insurance and microcredit sectors, open new markets in energy, agriculture and health, and contribute to enhancing transparency and accountability,” Thomson said.

Ant Financial CEO Eric Jing said, “Ant Financial is a strong believer in green finance. Several of our products and services have been contributing to sustainable development.

Leveraging mobile Internet, cloud computing and big data, we can encourage our hundreds of millions of users to participate in a green lifestyle. We hope that the Green Digital Finance Alliance will contribute to shaping and accelerating this development.

Getting finance at the right price to the right people at the right time will be critical in both securing clean energy access for all and meeting the climate change challenge,” said Rachel Kyte, a former World Bank executive, who is now CEO of the UN Decade for Sustainable Energy for All, Sustainable Energy for All (SE4ALL).

Digital finance can be a powerful tool for unlocking barriers to investment and empowering people to meet the challenge and seize the opportunity of clean, affordable future,” said Kyte. “This Alliance will I hope help to catalyze finance so that we transform lives, create jobs, clean air, provide energy, and restore landscapes at the speed and scale needed.

Swiss President Doris Leuthard said, “This is just the beginning!

The Green Digital Finance Alliance is tentatively scheduled to release its first round of global digital green finance practice reviews at the International Monetary Fund annual meeting in October 2017.

The Ant Forest Program will combine the early tests of UNEP’s carbon emissions measurement and the innovation of carbon abatement incentives and present the results to global alliance members to start interaction.

Ant has been able to encourage hundreds of millions of users to participate in a greener and greener lifestyle using technology such as mobile Internet, cloud computing and big data.

The Ant Financial Services Group, the parent company of the global mobile payment platform Alipay, directs its efforts towards serving small and micro enterprises, as well as consumers.

With the vision of bringing “small and beautiful changes to the world,Jing says Ant Financial is dedicated to “building an open ecosystem of Internet thinking and technologies” while working with other financial institutions to support the future financial needs of society.

Businesses now operated by Ant Financial Services Group include Alipay, Ant Fortune, Zhima Credit and MYbank – and this year, Ant is expanding its network with the acquisition of the the publicly-traded Texas-based company MoneyGram, a global provider of innovative money transfer services.

Valued at approximately US$880 million, the transaction announced January 26 will connect MoneyGram’s money transfer network of 2.4 billion bank and mobile accounts and 350,000 physical locations with Ant Financial’s users.

Moneygram will leverage Ant Financial’s global presence and existing network to serve more than 630 million users, including 450 million with Alipay and 180 million with India’s leading mobile payment provider Paytm.

The transaction will help expand Ant Financial’s business in new global markets following its recent partnerships with Paytm in India and Ascend Money in Thailand.

The acquisition of MoneyGram is a significant milestone in our mission to bring inclusive financial services to users around the world,” said Jing. “We believe financial services should be simple, low-cost and accessible to the many, not the few.

The combination of Ant Financial and MoneyGram will provide greater access, security and simplicity for people around the world to remit funds,” said Jing, “especially in major economies such as the United States, China, India, Mexico and the Philippines.

The Green Digital Finance Alliance will be part of all this growth. The Alliance is in the process of establishing a Steering Committee to be co-chaired, at first, by its founders, and will have a secretariat to support its work. In the first instance, UN Environment, based in Nairobi, will act as the secretariat for the Alliance.

Dr. Patrick Njoroge, Governor, Central Bank of Kenya is looking forward to the challenge. “Innovations in financial technologies (fintech) offer the greatest hope for aligning the world’s financial systems with the urgent twin objectives of sustainable development and deepening financial inclusion,” he said. “Further progress requires the close cooperation of all-innovators, regulators, financial institutions.


Featured image: A happy user of the Ant app Alipay (Photo courtesy UNEP) posted for media use

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US$100 Billion to Finance Climate Triage

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Clever Kanga works for the Foundation for Irrigation and Sustainable Development in the central African country of Malawi, working to install solar powered irrigation projects, April 2016. (Photo by Trocaire) Creative Commons license via Flickr.

By Sunny Lewis

WASHINGTON, DC, November 3, 2016 (Maximpact.com) – Finance is always a hot button issue at the UN’s annual climate negotiations, and this year’s 22nd Conference of the Parties to the UN Framework Convention on Climate Change, COP22, will focus even more intently on financing – this time to support the first global greenhouse gas limitation pact, the Paris Agreement on Climate Change.

At COP22 in Marrakech, Morocco, taking place November 7-18, nations are expected to continue strengthening the global response to the threat of climate change, with the central focus placed on enhancing ambition, promoting implementation and providing support, especially financial support.

The process is energized by the unexpectedly rapid entry into force of the Paris Agreement on November 4, just before the opening of COP22.

The Paris Agreement was adopted at the UN climate conference in December 2015. To enter into force, at least 55 Parties accounting for at least 55 percent of global greenhouse gas emissions were required to join the pact, which enters into force 30 days later.

On October 5, those thresholds were reached. Countries joining the Agreement include the biggest and smallest greenhouse gas emitters, as well as the richest and the most vulnerable nations.

The Paris Agreement is clear that all finance flows – both public and private – must become consistent with a low-emission and climate-resilient development path.

Several new studies make clear that meeting the agreement’s central goal of holding temperature rise to well below 2 degrees C (3.6 degrees F), and aiming for 1.5 degrees C (2.7 degrees F), requires quickly shifting investments from fossil fuels and other high-emissions activities towards clean energy, green infrastructure and climate resilience.

In the United States, 2016 is the first year that investment in renewable energy sources has outpaced investment in fossil fuels, said John Morton, director for energy and climate change for the National Security Council, speaking to reporters today on a conference call.

At COP 22 in Marrakech, work to develop the rules that deliver on this goal continues.

Here are five key climate finance issues to watch as outlined by the World Resources Institute, a global research organization that spans more than 50 countries, with offices in Brazil, China, Europe, India, Indonesia, Mexico, and the United States, where it is headquartered in Washington, DC.

1. Pathway to US$100 Billion

In Paris last December, developed countries were asked for a concrete roadmap for mobilizing US$100 billion in climate finance for developing countries by 2020. This roadmap – which can help build trust that developing countries will be supported in taking urgent climate action – is now being finalized, with the aim of presenting it at a “pre-COP” gathering of ministers next week.

In Copenhagen in 2009 and in Cancún in 2010, developed countries committed to jointly raising $100 billion annually from 2020 to 2025 to help developing countries cope with climate change by building low carbon and climate resilient economies. This pledge was re-affirmed in the Paris at COP21.

This sum may come from bilateral or multilateral, public or private sources, including innovative financing, for example, the French contribution to the financial transaction tax.

Public financing may take several forms: multilateral funds such as the Green Climate Fund; multilateral or regional institutions such as the World Bank; government contributions; and bilateral institutions such as the Agence Française de Développement, the French Development Agency.

The $100 billion in funding should not be confused with the Green Climate Fund; only part of this sum will pass through the Fund.

On October 17, developed countries released a Roadmap for how they will mobilize climate finance between now and 2020.

The Roadmap “aims to provide increased predictability and transparency about how the goal will be reached, and sets out the range of actions developed countries will take to meet it.

An analysis of the Roadmap by the Organization for Economic Cooperation and Development (OECD) finds that by 2020, developed countries are expected to have mobilized between $90 billion and 92 billion of climate finance, depending on how effective public finance is in mobilizing private finance.

By comparison, the overall total for mobilized public and private finance in 2014 was $62 billion.

The OECD analysis predicts that the $100 billion goal will be reachable for 2020, due to increased leverage ratios for private finance.

2. What Counts?

Determining progress towards the $100 billion goal is tricky, say WRI analysts, since countries have never agreed on what counts as climate finance.

After considering this issue at climate negotiations earlier this year, countries agreed to hold a workshop in Marrakech to advance progress on the Paris commitment to develop modes for accounting of climate finance.

Consistency in finance reporting will help all countries to accurately track progress on commitments and ensure improved quantity and quality of climate finance flows.

3. Rules for Reporting Finance

Countries will be developing formats for how finance will be reported, based on these reporting mandates:

  • Developed countries must report projected levels of finance they will provide to developing countries and finance they already have provided to developing countries. Other countries providing finance are encouraged to report voluntarily.
  • Developing countries should report on finance needed and received.

These requirements build on earlier rules, but have the potential to be more comprehensive and systematic. Countries need to ensure the reports provide useful information for the global stocktaking process under the Paris Agreement that will assess progress every five years.

4. Scaling Up Adaptation Finance

The Paris Agreement called for a balance between support for adaptation and mitigation, but there remains some way to go.

Adaptation refers to making changes in the way humans respond to changes in climate.

Mitigation refers to controlling emissions of greenhouse gases so that the total accumulation is limited.

Developed countries’ most recent reporting to the UN shows that 14 percent of bilateral funding went to adaptation in 2014. An additional 17 percent went to both adaptation and mitigation.

In Paris, countries called for increasing adaptation finance. A clear commitment for how adaptation funding will be increased up to 2020 would bolster confidence that the most vulnerable countries’ most urgent needs will be supported.

Proposed options include a 50:50 allocation between mitigation and adaptation, a doubling of the current share of adaptation finance and a doubling of the amount of adaptation finance from current levels.

5. Adaptation Fund, Renewed?

One mechanism for channeling adaptation finance to developing countries is the Adaptation Fund, which was created at the 2001 COP in Marrakech, to serve the Kyoto Protocol. With the Kyoto Protocol’s commitment period ending in 2020, the Fund’s future is uncertain.

Countries are considering whether and how the Adaptation Fund can support the Paris Agreement.

The Adaptation Fund has a good niche in supporting relatively small-scale adaptation projects and prioritizing direct access to funding. It can provide money directly to national institutions in developing countries, without going through international intermediaries.

Creating a mandate for the Adaptation Fund to serve the Paris Agreement in Marrakech would give it a new lease on life to continue supporting vital adaptation efforts around the world.

What is Being Done Today?

Financial institutions have already been busy finding and allocating funding to climate projects.

The two operating entities of the UNFCCC Financial Mechanism, the Green Climate Fund (GCF) and the Global Environment Facility (GEF) approved more than two dozen projects in recent meetings.

Water provision in Ali Addeh camp in Djibouti. A combination of high food prices, water scarcity, climate change and reduced pasture has increased food insecurity. This year’s El Niño has led to even dryer weather. Humanitarian funding from the European Commission provides refugees with access to clean water and sanitation as well as shelter, protection, nutrition and health care. May 2016 (Photo by European Commission DG ECHO) Creative Commons license via Flickr.

The GCF Board approved funding proposals for 10 projects, totaling US$745 million, and the GEF Council approved its Work Program, comprising 16 project concepts and three programmatic frameworks, with total resources amounting to US$302 million.

In addition, the Adaptation Fund Board approved two new projects totaling US$7 million,

World Bank Head Calls for Slowing Down Coal Finance

Speaking at the World Bank-International Monetary Fund Annual Meetings 2016 Climate Ministerial meeting in October, World Bank Group President Jim Yong Kim called on ministers to accelerate the transition to low carbon power sources, noting that the Paris Agreement goals cannot be met if current plans for coal-fired stations are implemented.

Kim called for concessional finance that is well targeted and “follows the carbon,” is leveraged and blended to crowd in the private sector, and is available quickly, at scale and easily deployed.


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Paris Climate Pact ‘Unstoppable’

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Celebrating the adoption of the Paris Agreement, from left, then UNFCCC Executive Secretary Christiana Figueres, UN Secretary-General Ban Ki-moon, French Foreign Minister Laurent Fabius and President of the UN Climate Change Conference in Paris (COP21), President François Hollande of France, December 12, 2015. (Photo courtesy UNFCCC) posted for media use.

By Sunny Lewis,

NEW YORK, New York, October 6, 2016 (Maximpact.com News) – The Paris Agreement on climate change is set to enter into force on November 4, less than a year after it was adopted by world leaders. With the ratifications deposited Wednesday, enough countries have approved the landmark accord to bring it to the emissions threshold that will trigger its implementation.

 “What once seemed unthinkable, is now unstoppable,” said United Nations Secretary-General Ban Ki-moon as he accepted the latest instruments of ratification that pushed the agreement over the threshold.

Strong international support for the Paris Agreement entering into force is a testament to the urgency for action, and reflects the consensus of governments that robust global cooperation, grounded in national action, is essential to meet the climate challenge,” Ban said.

 Ban, who will step down as secretary-general on December 31, has made adoption of the world’s first global climate agreement a priority of his 10 years as UN leader.

 Over the past decade, Ban has labored to accelerate the global response to climate change. He has visited communities on the climate frontlines, from the Arctic to the Amazon, and has witnessed how climate impacts are already devastating lives, livelihoods and prospects for a better future.

On Wednesday, he reminded world leaders that the work of implementing the agreement still lies ahead, saying, “Now we must move from words to deeds and put Paris into action. We need all hands on deck – every part of society must be mobilized to reduce emissions and help communities adapt to inevitable climate impacts.

Adopted in Paris by the 195 Parties to the UN Framework Convention on Climate Change (UNFCCC) at a conference known as COP21 this past December, the Agreement calls on countries to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low-carbon future, as well as to adapt to the increasing impacts of climate change.

It seeks to limit global temperature rise above pre-industrial levels to well below two degrees Celsius, and to strive for 1.5 degrees Celsius.

The pact was signed in New York on April 22, Earth Day, by 175 countries at the largest, single-day signing ceremony in history.

It will enter into force 30 days after at least 55 countries, accounting for 55 percent of global greenhouse emissions, deposit their instruments of ratification, acceptance or accession with the secretary-general.

The requirements for entry into force were satisfied today when Austria, Bolivia, Canada, France, Germany, Hungary, Malta, Nepal, Portugal and Slovakia, as well as the European Union, deposited their instruments of ratification with the Secretary-General.

Earlier this week, New Zealand and India signed onto the Agreement, following the 31 countries which joined at a special event at the United Nations on September 21 during the UN General Assembly’s general debate.

Early in September, the world’s two largest greenhouse gas emitters, China and the United States, joined the Paris Agreement.

Wednesday in the Rose Garden at the White House, President Barack Obama said, “Today, the world meets the moment. And if we follow through on the commitments that this agreement embodies, history may well judge it as a turning point for our planet.”

Now, the Paris Agreement alone will not solve the climate crisis. Even if we meet every target embodied in the agreement, we’ll only get to part of where we need to go,” said Obama. “But make no mistake, this agreement will help delay or avoid some of the worst consequences of climate change. It will help other nations ratchet down their dangerous carbon emissions over time, and set bolder targets as technology advances, all under a strong system of transparency that allows each nation to evaluate the progress of all other nations.

By sending a signal that this is going to be our future – a clean energy future – it opens up the floodgates for businesses, and scientists, and engineers to unleash high-tech, low-carbon investment and innovation at a scale that we’ve never seen before,” Obama said. “So this gives us the best possible shot to save the one planet we’ve got.

Mindy Lubber, president of the non-profit Ceres, said, “The world must ratchet up global investment in clean energy by an additional $1 trillion a year to achieve the Paris Agreement goals. Global investment in clean energy is currently tracking at about $300 to $350 billion a year, which is far short of the Clean Trillion target we need to hit every year to avoid catastrophic climate warming.”

 Based in Boston, Massachusetts, Ceres mobilizes investor and business leadership to build a sustainable global economy.

We have much more to do to navigate the transition to a sustainable economy, but today represents a major step forward,” Lubber said.

The Paris Agreement will enter into force in time for the Climate Conference (COP 22) in Morocco in November, where countries will convene the first Meeting of the Parties to the Agreement. Countries that have not yet joined may participate as observers.

UNFCCC Executive Secretary Patricia Espinosa said, “Above all, entry into force bodes well for the urgent, accelerated implementation of climate action that is now needed to realize a better, more secure world and to support also the realization of the Sustainable Development Goals.

It also brings a renewed urgency to the many issues governments are advancing to ensure full implementation of the Agreement,” Espinosa said. “This includes development of a rule book to operationalize the agreement and how international cooperation and much bigger flows of finance can speed up and scale up national climate action plans.”

 In Strasbourg, France, European Commissioner for Climate Action and Energy Miguel Arias Cañete said, “Our collective task is to turn our commitments into action on the ground. And here Europe is ahead of the curve. We have the policies and tools to meet our targets, steer the global clean energy transition and modernise our economy. The world is moving and Europe is in a driver’s seat, confident and proud of leading the work to tackle climate change.

Congratulating all of the signatories of the Agreement, the Secretary-General encouraged all countries to accelerate their domestic processes to ratify the Agreement as soon as possible.

 Specifically, the Agreement calls on countries to combat climate change and to accelerate and intensify the actions and investments needed for a sustainable low-carbon future, and to adapt to the increasing impacts of climate change.

It also aims to strengthen the ability of countries to deal with the impacts of climate change. The Agreement calls for appropriate financial flows, a new technology framework and an enhanced capacity-building framework to support action by developing countries and the most vulnerable countries in line with their own national objectives.


Featured Image: Open water in the usually frozen Canadian Arctic, Labrador, February 18, 2015 (Photo by Sterling College) Creative Commons license via Flickr

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Making Deals in Impact Investing

By Pallavi ShahInternational sustainable/impact investing consultant; photographer

Global Investing, May 20, 2016 (Maximpact.com News)  – Impact investing is gaining traction among both large and small investors and entrepreneurs. Angels, private equity firms, and banks are expanding beyond their traditional markets and exploring deals that could generate financial returns, while also having a positive environmental or social impact. Some previously niche industries – such as clean tech, natural food – are moving toward the mainstream. While both investors and entrepreneurs are embracing this trend, they are having a hard time connecting.

Why? In my experience, it is a limited understanding by both parties on the opportunities of impact investing, the risks, and the realities and nuances of each other’s worlds.

Many investors say they have trouble finding good quality deals; they’re too risky, difficult to scale, and are mired in confusing definitions of business models (for-profit vs. non-profit vs. hybrid) and impact investing itself (impact vs. SRI vs. ESG vs. sustainability). At the same time, for-profit impact enterprises (“investees”) are getting more attention but are having trouble securing funding.

It’s like dating. A good match can be very successful, but it is difficult when you know what you want but just can’t find the right person, or when you are not sure what you want and end up with some not-so-great options. In impact investing, the trial and error process for both parties takes a lot of time and money. It can lead to poor quality investments, higher perceived risks, frustration, and in some cases, no investments at all.

In my work with investors, including through the International Finance Corporation (IFC/World Bank), and with for-profit investees, building their “investor-readiness,” I’ve gained perspective on each party’s needs and common pitfalls. A few lessons stand out:

Investors

Evaluating and choosing impact deals is complicated. As with any investment, investors need to understand the investee’s business model and potential risks before making an investment decision. The riskier the deal profile the costlier the capital. Risk assessment of impact investments is tricky because of the sector’s relative infancy, its heterogeneity, the variety of measurement and reporting approaches, and the limited information on lessons learned.

In addition, most investors do not have an impact investing track record and vague terminology makes it hard to sort through potential options and choose what’s right for them. There are also industries, geographies, and business models that are less risky than others so painting all impact deals with the same brush can lead to an over- or under-assessment. All of these factors affect the categorization of the deal’s risk profile.

What can investors do to help make their process easier?

  • Build their internal capacity. Increase investment staff’s awareness and expertise to help them better understand impact investing and the various risk profiles.
  • Offer a range of investment options. Don’t offer a “one size fits all” deal structure. Typically this isn’t the best way to support both the finance and impact goals of an impact investment.
  • Set up impact-related systems. Set up systems to collect impact evaluation, monitoring and reporting data according to the investor’s impact strategy and goals.
  • Apply lessons learned. Analyze data regularly to identify patterns and understand what worked and didn’t work and why.
  • Collaborate with external parties. Work with industry experts, strategic partners who have complementary geographic, technical, or market expertise.

Investees

For-profit impact investees are unique. Their goal – to address an environmental or social issue and have a profitable business model – is not easy. The ones that will thrive are the ones with effective business models, who know how to approach investors, and who know what factors are critical to their business.

What can investees do to improve their funding chances?

  • Target the right investors. They need to understand and articulate their company profile (e.g., Is this a startup? What is the target market? What impact does the business want to make?). Knowing these answers will help them target the right investors. For instance, angel investors will be best for some investees while others will be better served by a bank.
  • Address key risks for investors. Address two sets of risks: those that are common to all businesses (such as business model, team composition, competitiveness, etc.) and those unique to the impact sector (e.g., how incorporating environmental & social factors will affect the revenue model; how to measure and report impact). Example: A biomass energy company was providing electricity to underserved populations and approached an investor for funding. While the business was compelling, it had not secured a reliable biomass fuel supply or done a comparative analysis to its competition. The deal was rejected because the company did not address its key business risks.
  • Ensure the pitch tells the right story. Lead the pitch with the business arguments. Then show how incorporating environmental, social impact will support the business. Example:A sustainable coffee company focused most of its investment pitch on how the coffee would improve the lives of farmers and reduce environmental impact. It did not provide information about the increasing demand for coffee in its target market, how its coffee met gourmet quality standards, or its plan to get environmental certification, which was proven to yield a price premium. These oversights led to it being rejected by the investor.
  • Clearly show returns, impacts. Showing financial returns over time is important for investors. Additionally, investees need to be clear about which specific environmental, social metrics they will focus on (e.g., CO2 reduction, job creation, access to energy) and their approach to measuring, monitoring, and reporting the impacts.

These are some of the key factors that can help both investors and investees understand each other’s needs and concerns and lead to more productive conversations. Addressing the real and perceived differences in incentives, interests and constraints will give both parties a better chance of finding the right match.

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

The Proper Amount of Due DiligenceMaximpact Services

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

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

What Is Financial Due Diligence?

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

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

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

Why Is Financial Due Diligence Important?

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

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

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

Other Types of Due Diligence

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

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

How Can Maximpact Help Businesses, Investors and Funds?

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

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

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

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

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

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

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

‘Planet 50-50 by 2030’ Means Gender Equality

IndiaWomenRiceBy Sunny Lewis

NEW YORK, New York, March 8, 2016 (Maximpact.com News) – “Women and girls are critical to finding sustainable solutions to the challenges of poverty, inequality and the recovery of the communities hardest hit by conflicts, disasters and displacements,” said Phumzile Mlambo-Ngcuka of South Africa in her message for International Women’s Day – today.

Phumzile Mlambo-Ngcuka

Phumzile Mlambo-Ngcuka

As UN under-secretary-general and executive director of the agency UN Women, Mlambo-Ngcuka (pronounced: mlam-bo hu-ka) is living proof.

A member of the first democratically elected South African Parliament in 1994, she rose to serve as deputy president of South Africa from 2005 to 2008, the first woman to hold that position.

The UN agency she heads today was created in 2010 to direct UN activities on gender equality.

“The participation of women at all levels and the strengthening of the women’s movement has never been so critical, working together with boys and men, to empower nations, build stronger economies and healthier societies,” she said.

The theme for International Women’s Day 2016 is “Planet 50-50 by 2030: Step It Up for Gender Equality,” and communities throughout the world are taking steps to let their views be heard.

The official International Women’s Day 2016 website enables visitors to browse or search thousands of events celebrating this unique day: global gatherings, conferences, awards, exhibitions, festivals, fun runs, corporate events, performances, political events and online digital gatherings.

Investment and environment are linked in an event being held both online and in person by the Global Environment Facility (GEF) in Washington, DC.

Over breakfast, a Q & A discussion on why and how gender equality and women’s empowerment matter for environmental sustainability will feature participants from the World Resources Institute (WRI), Conservation International, the International Union for the Conservation of Nature (IUCN) and the World Bank, among others.

Members of the public can join in via WebEx meeting or join in by phone. Click here for connection details.

The World Bank is hosting a global live chat on a second draft Environmental and Social Framework that bank personnel believe is “better for people, the environment, and for our borrowers.”

The World Bank has consulted in 33 countries on this proposal, and now wants public comments in a live chat with an expert panel from the World Bank. People can submit questions in advance here .

In Europe, health issues are first and foremost.

To mark the day, the civil society network WECF has published “Women and Chemicals,” an examination of the impacts of highly hazardous pesticides, mercury, and endocrine disrupting chemicals on the health of women everywhere.

Initially called Women in Europe for a Common Future, but now using only the acronym WECF, this international network of 150+ organizations works for a healthy environment and gender-justice in over 50 countries.

In the new publication, WECF calls for more political action for better health protection from harmful chemicals.

Corinne Lepage, chair of the WECF Board of Trustees and a former French environment minister, is worried especially about endocrine disrupting chemicals (EDCs), which can interfere with the natural hormones in the bodies of not only females, but males as well.

“Although we know about the threat to environment and human health, the EU Commission so far has not been able to regulate EDCs,” Lepage worries.

“In particular women and men who are planning to have children, need to be better protected from and informed about EDCs,” LePage said. “This report is a good starting point to show the linkage between chemical exposure of women and increasing rates of diseases and that political action is needed now.”

Women may be exposed to toxins when they work as pesticide sprayers, waste pickers, house cleaners or plastics industry employees, and, of course, women consume products that contain toxins.

Exposure to toxic chemicals can lead to non-communicable diseases such as breast cancer, infertility or diabetes. These non-communicable diseases are today the biggest global threat to women’s health – and they are still on the rise.

WECF is one of 68 organizations that co-signed a letter to the 28 environment ministers of the European Union urging them to call on the European Commission to immediately comply with the December 2015 ruling of the European Court of Justice in the case of Sweden vs. Commission on scientific criteria to identify endocrine disruptors.

The letter from EDC-Free Europe states, “Scientists, health professionals and medical doctors have increasingly warned that EDCs can contribute to diseases and disorders like hormonal cancers (prostate, testicular, breast), reproductive health problems, impaired child development, and obesity and diabetes.”

WECF’s Alexandra Caterbow demanded, “Immediate steps have to be taken to end use of highly hazardous pesticides, to strictly regulate EDCs such as bisphenol A from consumer products and packaging, to ban mercury use in artisanal small gold mining, and to promote the use of safer substitutes and non-chemical alternatives.”

To celebrate the launch of its report, WECF will be hosting an Ask Me Anything on Reddit where the general public can ask questions on the findings.

Law enforcement for women is rising to the top as an important function to keep women safe.

UN Women, the Police Cadet Academy, Thailand Institute of Justice and the Embassy of Sweden came together to organize the Youth Dialogue on Gender Equality with Police Cadets in Nakorn Pathom, Thailand on March 7.

UN Women has partnered with the Royal Thai Police and the Office of the Attorney General in training police cadets and police investigative officers to protect women, end violence against women and implement the Domestic Violence Law.

Since 2012, UN Women has helped train 555 police officers.

In another part of the world, Palestinian and Israeli activists took part Friday in a demonstration in the West Bank city of Bethlehem calling for a better future for both peoples ahead of International Women’s Day.

On Monday in Jerusalem, victims of sexual abuse hugged each other after taking part in a project to speak out against sexual violence.

Some actions take the form of non-action. The UN Development Program in Afghanistan plans to stop publishing photographs on its website to highlight the plight of Afghan women, a UN official said Sunday.

Many actions today are a pledge of future action for gender parity.

The campaign theme hash tag of #pledgeforparity urges readers to take the pledge as champions of gender parity.

A host of corporate leaders have pledged to achieve gender parity in their own organizations and in the wider world, people such as Sir Richard Branson, founder of the Virgin Group; and Sir Suma Chakrabarti, president of the European Bank for Reconstruction and Development, who said, “Equipping women with the tools to achieve their full potential in the workplace empowers us all.”


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Phumzile Mlambo-Ngcuka – image courtesy of Flicker UN Women Gallery
Header image Caption: Women working in their rice paddy fields in Odisha, India’s poorest region. Trócaire works with communities to help them access government support. (Photo by Justin Kernoghan courtesy Trócaire) creative commons license via Flickr

 

Green Groups Guide Investors to Protected Areas

GLAND, Switzerland, December 1, 2015 (Maximpact News) – Two of the world’s largest and most influential nonprofit groups have made a new 10-year commitment, combining their strengths to enhance the role of protected and conserved areas in achieving sustainable development.

The International Union for the Conservation of Nature (IUCN) and the World Wildlife Fund (WWF) have pledged to expand the number of protected areas reaching IUCN Green List quality standards to at least 1,000 protected areas in 50 countries.

The partnership will look at how challenges to protected areas such as poaching, illegal logging and other destructive activities can be addressed through new financing and investment.

The two organizations have promised to seek the application of US$2 billion of new investment funding for the enhanced performance and sustainability of these Green List protected areas.

And the groups say they will generate at least 20 new ambitious protected area commitments for biodiversity and United Nations’ Sustainable Development Goals from communities, governments and other organizations.

The two groups, both based in Gland, believe that by combining their strengths they will multiply their chances of making a major contribution towards achieving the Sustainable Development Goals.

The IUCN-WWF partnership was announced on the first anniversary of the IUCN World Parks Congress, which took place in November 2014 in Sydney, Australia and culminated in the Promise of Sydney.

The Promise of Sydney commits signers to invest in protected areas, which help to halt biodiversity loss; mitigate and adapt to climate change; reduce the risk and impact of disasters; improve food and water security, and promote human health and dignity.

The Promise of Sydney encompasses four elements:

A Vision that reflects a set of high-level aspirations and recommendations for the change needed in the coming decade to accomplish conservation and development goals for parks, people and planet.

Twelve Innovative Approaches to transformative change to: achieve conservation goals, respond to climate change, improve health and well-being, support human life, reconcile development challenges, enhance the diversity and quality of governance, respect indigenous and traditional knowledge, inspire a new generation, protect World Heritage sites, conserve the marine environment, develop greater capacity for effective action and create a new social compact.

The third element of the Promise of Sydney is a Panorama of Inspiring Protected Area Solutions to overcome obstacles to the stability of people and protected areas. Supported by IUCN, its Commissions and members, they can serve as reference points and resources for conservation practitioners around the world.

The fourth element is Promises. These are pledges by countries, groups of countries, funders, organizations and other partners to chart the path forward for the world by stepping up or supporting accelerated implementation.

For instance, the U.S. National Park Service committed to setting up a program to engage 100,000 youth in protected areas across the United States.

South Africa committed to more than triple its ocean protection over the next 10 years, from less than 0.5 percent to five percent of its Exclusive Economic Zone within Marine Protected Areas. South Africa will do this to ensure environmental sustainability because MPAs deliver ecosystem services that underpin South African livelihoods, food security and ecotourism.

Russia committed to grow its protected area network by establishing at least 27 federal protected areas and expanding 12 others, increasing the total area of federal protected areas by 22 percent, or 13 million hectares.

Critical habitats for important threatened species, including the Amur tiger in the Bikin River watershed in Russia’s Far East, the polar bear in the Novosibirsk Archipelago, the Siberian crane in Yakutia, and the Beluga whale in the White Sea near the Solovetsky Archipelago, among others, will be granted protection.

Japan’s Ministry of the Environment committed to working with the IUCN Asia Regional Office to enhance collaboration among Asian countries on protected areas management through the Asia Protected Area Partnership, which was officially established during the IUCN World Parks Congress 2014.

China committed to increase its protected areas territory to at least 20 percent by 2020, and to match Chinese categories of protected areas to global standards.

The Promise of Sydney is the foundation for pathways the WWF and IUCN can take over the next 10 years to ensure that protected areas can be perceived as one of the best investments in the planet’s future.

The 10-year partnership aims to make the case for direct investment in protected areas and protected area systems that demonstrate enhanced conservation outcomes.


Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Featured image: A wildebeest grazes beside a vast flock of flamingos at Tanzania’s Lake Magadi in the Ngorongoro Conservation Area. (Photo courtesy IUCN World Parks Congress)
Slideshow Images: A.  The Three Sisters – Australia’s Blue Mountains National Park is located in the Blue Mountains region of New South Wales, in eastern Australia. (Photo courtesy Nosha via Flickr) B. Half Dome seen from Glacier Point in Yosemite National Park, California, USA (Photo courtesy IUCN World Parks Congress) C. Guere Community conservation area, Choiseul, Solomon Islands (Photo courtesy IUCN World Parks Congress)

Investment Court Could Restore Trust in Dispute Resolution

By Sunny Lewis

BRUSSELS, Belgium, September 25, 2015 (Maximpact News) – Europeans no longer trust the way the EU resolves disputes between investors and states, says European Trade Commissioner Cecilia Malmström. The Swedish politician proposes to restore that trust by establishing a “modern and transparent” Investment Court System to replace the existing investor-state dispute settlement (ISDS) arbitration model.

The Investment Court would be part of all Europe’s ongoing and future trade negotiations, particularly the Transatlantic Trade and Investment Partnership between the European Union and the United States now under negotiation.

MalmstromPanel

EU Trade Commissioner Cecilia Malmström debates with Members of the European Parliament the best dispute resolution system for investors in the context of the Transatlantic Trade and Investment Partnership. (Photo © European Union 2015 – European Parliament creative commons license)

 

The existing ISDS system enables an investor to bring a dispute before an arbitration tribunal. It operates on an ad hoc basis with arbitrators chosen by the disputing parties.

Instead, Malmström proposes a permanent tribunal of 15 publicly appointed, highly qualified judges and an accompanying six-judge appellate panel.

ISDS provisions appear in trade agreements such as the North American Free Trade Agreement and in such international investment agreements as the Energy Charter Treaty, but there is widespread disatisfaction with the ISDS system.

“From the start of my mandate almost a year ago, ISDS has been one of the most controversial issues in my brief,” blogged Malmström on her official site last week. “I met and listened to many people and organizations, including NGOs, which voiced a number of concerns about the old, traditional system.”

“It’s clear to me that all these complaints had one common feature – that there is a fundamental and widespread lack of trust by the public in the fairness and impartiality of the old ISDS model,” she wrote. “This has significantly affected the public’s acceptance of ISDS and of companies bringing such cases.”

Malmström has her eye on eventually establishing a permanent international investment court.

But a senior U.S. trade official has criticized the proposal.

Stefan Selig, U.S. undersecretary for international trade at the Commerce Department, told Agence France Presse in May that the United States prefers the ISDS mechanism because it “increases the security of companies willing to make investments…”

EU investors are the most frequent users of the existing system. To Malmström this means that the EU must take responsibility for reforming and modernizing the system.

“Some have argued that the traditional ISDS model is private justice,” she wrote. “What I’m setting out here is a public justice system – just like those we’re familiar with in our own countries, and the international courts which Europe has so actively promoted in the past.”

In crafting the proposal, Malmström has engaged in extensive public consultations, followed by detailed discussions with the 28 EU Member States, the European Parliament, national parliaments and stakeholders.

Setting up an Investment Court System would create trust, Malmström believes, if it is “accountable, transparent and subject to democratic principles.”

Judges, not arbitrators, would decide cases, and the judges would be publicly appointed. “We will guarantee there is no conflict of interest,” wrote Malmström.

Proceedings would be transparent, hearings open and comments available online, and a right to intervene for parties with an interest in the dispute would be provided.

And an Appeal Tribunal would form an essential part of the Investment Court System.

On September 16 Malmström made the proposal public and sent it to the European Parliament and the Member States.

EU First Vice-President Frans Timmermans likes the idea, which he says breaks new ground.

“The new Investment Court System will be composed of fully qualified judges, proceedings will be transparent, and cases will be decided on the basis of clear rules. In addition, the Court will be subject to review by a new Appeal Tribunal,” Timmermans explained. “With this new system, we protect the governments’ right to regulate, and ensure that investment disputes will be adjudicated in full accordance with the rule of law.”

“I’m convinced that this system will also benefit investors,” Malmström wrote. “These changes will create the trust that is needed by the general public, while encouraging investment.”

An overview of the proposal Transatlantic Trade and Investment Partnership  and a reader’s guide to the proposal Guide to the Draft text on Investment Protection and Investment Court System in the (TTIP) is also available.

Featured Image: Trade Commissioner Cecilia Malmström discusses the Transatlantic Trade and Investment Partnership at a breakfast with women of the ALDE party, the Alliance of Liberals and Democrats for Europe Group, July 9, 2015 (Photo courtesy ALDE Group via Flickr creative commons license)

Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

 

Aligning Institutional Investment With Sustainable Development

By Sunny Lewis

NEW YORK, New York, September 22, 2015 (Maximpact News) – The largest public pension fund in the United States, the California Public Employees’ Retirement System (CalPERS), with upwards of US$300 billion in assets, takes sustainability seriously.

Just days ahead of a United Nations summit in New York that will adopt new Sustainable Development Goals to guide international efforts through 2030, CalPERS has joined the UN Environment Programme (UNEP) in issuing a report that calls on regulators to build a new culture of sustainable investing.

Entitled “Financial Reform, Institutional Investors and Sustainable Development: A review of current policy initiatives and proposals for further progress,” the report calls for proactive policies putting sustainability at the core of new institutional investment frameworks.

Henry Jones, who chairs the CalPERS Investment Committee, said, “At CalPERS we have no doubt that our focus on sustainability is entirely consistent with our fiduciary duty – indeed it is an essential part of it.”

JonesHenryHenry Jones heads CalPERS Investment Committee (Photo courtesy CalPERS)

“Where doubts on this score remain, they must be dispelled,” Jones said. “And we need institutions that have the knowledge, the skills and the ways of working that are required to embed sustainability in their investments – to manage the risks it brings, and to capitalize upon the opportunities it offers.”

In his forward to the report, Jones writes, “Of all the sustainability challenges we face, climate change is one of the most pressing.”

“This report is being published just a few weeks before the Paris Climate Change Conference. At CalPERS, we earnestly hope the world’s governments will reach an ambitious global agreement to address climate change. Bold action is needed in particular to introduce stable, reliable and economically meaningful carbon pricing, and to strengthen regulatory support for clean energy. This will enable us, as investors, to manage the risks and take the opportunities that climate change brings. We hope every country will reflect on how it can best address these challenges,” Jones wrote.

The report’s author, Rob Lake, is a UK-based independent responsible investment advisor and expert, working with asset owners.

With an estimated annual financing gap of up to US$7 trillion a year in infrastructure investments alone, the global financial system, worth more than US$300 trillion, has a potential to transform the international economic landscape to better serve the needs of humanity, Lake’s report concludes.

The report had its genesis in the Inquiry into the Design of a Sustainable Financial System initiated by UNEP in January 2014 to advance policy options that could improve the financial system’s effectiveness in mobilizing capital towards a green and inclusive economy.

Nick Robins, who serves as co-director of UNEP Inquiry, said, “A package of measures is needed to deliver the full sustainability potential of institutional investors. Disclosure is important, but without effective governance frameworks and incentives, this will not drive sufficient change.”

The report shows that policy intervention has evolved from focusing on disclosure obligations and statements about investors’ core legal duties to a “second generation” approach that addresses the synergy between sustainability and other policy objectives.

CalPERSbuildingSolar panels on the roof of CalPERS’ Sacramento, California headquarters generate some of the electricity that powers the building. (Photo courtesy CalPERS) – Building for the Future, Protecting the Environment.

Seven critical policy objectives that hold the strongest potential for positive change are explored in the report together with 14 policy tools to achieve them.

The seven policy objectives are:

  1.  Aligning Institutional Investment System Design with Sustainability
  2.  Removing Policy Barriers
  3.  Stimulating Demand for Investment that Integrates Sustainability
  4.  Strengthening Asset Owner Governance and Capabilities
  5.  Lengthening Investment Horizons
  6.  Aligning Incentives along the Investment Chain
  7.  Ensuring Investor Accountability

The 14 policy tools are:

  1.  The Design of Pension Systems Investment
  2.  Performance Measurement
  3.  The Legal Duties of Investment Institutions
  4.  The Legal Duties of the Directors of Risk-Taking Financial Institutions
  5.  Solvency and Risk Regulations
  6.  Prudential Regulation
  7.  Investor Disclosure Rules
  8.  Corporate Disclosure Rules
  9.  Fiscal Incentives
  10.  Rules on Equity and Credit Research
  11.  Investor Rights, Codes and Stewardship
  12.  Risk Mitigation and Market Development for Green Assets
  13.  Soft Law Sustainability Frameworks
  14.  Professional Qualifications and Knowledge Transfer

The report concludes, “Enormous potential exists to pursue new policy initiatives designed to achieve sustainability goals through the institutional investment chain while simultaneously strengthening other public policy objectives: better governed asset owner institutions that serve their beneficiaries more effectively, enhanced prudential regulation, increased economic welfare meeting energy, water and food needs, and restored public trust in the financial system.”


 

Award-winning journalist Sunny Lewis is founding editor in chief of the Environment News Service (ENS), the original daily wire service of the environment, publishing since 1990.

Asian Development Bank Backs Financial Access for SMEs

ManilaMarket

By Sunny Lewis

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

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

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

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

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

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

Several countries have made progress tackling this crucial issue.

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

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

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

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

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

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

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

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

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

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

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]