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Faith in Finance

Buddhist statues Yangon, Myanmar, February 2015 (Photo by J. Durok) Creative Commons license via Flickr

Buddhist statues Yangon, Myanmar, February 2015 (Photo by J. Durok) Creative Commons license via Flickr

By Sunny Lewis

ZUG, Switzerland, October 27, 2017 (Maximpact.com News) – First the numbers. Financial investors and leaders of more than 30 faith traditions representing over 500 faith investment groups from eight religions with some three trillion dollars in assets, will meet in Zug this month. They are gathering with representatives of the United Nations and some key ethical impact investment funds, for a unique meeting on faith in finance.

These faith groups are using their investment funds to create what they see as a better and fairer world. In a shift from the faith tradition of saying, for ethical reasons, what they will not invest in, they have all agreed to set out and make public their priorities for positive investment.

The meeting on October 30-31 at Lassalle Haus, Zug, marks a radical shift in how pension funds, governments, foundations and individuals might in the future make their money work for good, while it is still bringing in the returns they need.

Participating in the Zug meeting will be Daoist leaders, Buddhists, Christians, Hindu, Jewish, Muslim, Sikh and Shinto investors.

Trillions of investment dollars will be represented by delegates, including:

  • the Presbyterian Church USA (around $11 billion) * – EKD – German Protestant Churches (11-figure investments)
  • the Oikocredit Ecumenical Development Cooperative Society (around $1.4 billion)
  • JLens, a network of hundreds of Jewish institutions and individuals
  • the Interfaith Center on Corporate Responsibility, representing over 300 faith investment groups

The new movement was sparked in part by the UN’s 17 Sustainable Development Goals, launched in 2015, to bring government and civil society together to make a world free of poverty, discrimination, with affordable, clean energy, clean water, good education and a planet that everyone aims to protect.

“The UN’s Sustainable Development Goals are a huge, and inspiring vision, one shared by many faiths,” said Martin Palmer, secretary-general of the Alliance of Religions and Conservation (ARC), which is hosting the meeting.

“They cannot be achieved by government tax money alone, or by charity donations. They can only be achieved by investment in environmental and sustainable development projects and financial products,” said Palmer. “But they are just the start for value-driven investment for a better world.”

St. Michael's Church, Zug, Switzerland, September 2014 (Photo by Patrick Nouhailler) Creative Commons license via Flickr

St. Michael’s Church, Zug, Switzerland, September 2014 (Photo by Patrick Nouhailler) Creative Commons license via Flickr

ARC is a secular body founded by HRH Prince Philip that helps the major religions of the world to develop their own environmental programs, based on their own core teachings, beliefs and practices. It is the main partner for the UN in working with the faiths on the Sustainable Development Goals.

It is sponsored by the Charles Stewart Mott Foundation, the Pilkington Foundation and WWF-UK as well as impact fund managers: Earth Capital Partners, Hermes Investment Management, Linius Capital, Rathbone Greenbank Investments, Resilience Brokers, Sarasin & Partners, Tribe, Triodos Investment Management, WHEB.

On October 18, the New York-based Interfaith Center on Corporate Responsibility (ICCR) announced the formation of the Investor Alliance for Human Rights, a new initiative designed to expand collective investor action on a range of critical human rights issues.

The Alliance, the first of its kind, builds on ICCR’s long-term shareholder engagements on business and human rights and invites active participation and collaboration from the larger investment community.

ICCR membership is made up of nearly 300 organizations, including: faith-based institutions, socially responsible asset management companies, unions, pension funds, colleges and universities that collectively represent over $200 billion in invested capital.

The primary objectives of the Investor Alliance for Human Rights are to:

  • Build a collective action platform that allows for the quick mobilization of a broad group of investors to advocate on urgent business and human rights issues.  Alliance members will address both critical public policy challenges, and emergent human rights risks arising from corporate operations and supply chains;
  • Coordinate strategies with relevant stakeholders that can help amplify investor efforts, and;
  • Expand the current shareholder engagement agenda on human rights.

Participation in the Alliance is open to all institutional investors both inside and outside the ICCR membership. The Alliance will be housed and staffed at ICCR’s headquarters in New York City.

“ICCR members have been engaging companies on human rights and supply chain risks for more than four decades, focusing on the impacts of corporate practices on workers and communities,” said David Schilling, ICCR’s senior program director for human rights.

“In the face of policy and regulatory rollbacks that would forestall progress on these critical issues we know this work grows ever more urgent to the investment community and to impacted people and communities. We are excited by the prospect of partnering with other concerned investors and by the promise of the meaningful change this new alliance could bring to the field of business and human rights,” said Schilling.

The United Nations estimates that religious institutional funds make up around US$10 trillion of the world’s invested funds, making them, as a bloc, the fourth largest investment groups in the world. A further US$30 trillion is owned by members of the major faiths as individuals or family foundations.

At Zug, for the first time, eight major faiths will set out their own Guidelines on what they will invest in to help fund and create a better world for all.

The Zug Guidelines on Faith-Consistent Investing give an overview of where religious investment is placed now, what principles each tradition calls upon when it decides its investment priorities, and a statement that the money should, where possible, be invested in environmental and sustainable development.

The Guidelines will be launched with a colorful procession with banners through the medieval town of Zug, on October 31, the 500th anniversary of the priest Martin Luther nailing his 95 theses onto the door of a chapel in Wittenberg, Germany.

In their very different way, the guidelines represent an equally radical, though more peaceful, shakeup in the impact of religions on the world’s future.

Keynote speakers at Zug include:

  • Cardinal Peter Turkson, who in 2008 following the global economic crisis, co-created a proposal to reform the international financial system. He has been one of Pope Francis’ special envoys for peace. He is head of a new department in The Vatican on the integrity of human development and is outspoken about the role of finance in creating a better world.
  • Elliot Harris, Assistant Secretary-General of the United Nations and head of the New York office of the United Nations Environment Programme. He was previously the International Monetary Fund’s Special Representative to the UN, involved closely in the areas of social protection, the green economy and fiscal space for social policy.
  • Gunnela Hahn, Church of Sweden, which has around 8 billion SEK (US$935 million) of assets, and in 2010 brought in the Church Order that financial assets “are also to be managed in an ethically consistent manner, in accordance with the fundamental values of the Church.”
  • Martin Palmer, ARC, who has been a key force behind making this meeting happen.

The event takes place at the same time as, and in collaboration with, the annual Swiss Impact Investment Association (SIIA) Summit in the city of Zug, which has as its theme this year the subject of Faith-Consistent Investing.


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Sacred Sites Strategize for Impact Investments

 Ramanathaswamy Temple, Rameswaram, Tamil Nadu, India. December 1999 (Photo by Ryan) Creative Commons license via Flickr.

Ramanathaswamy Temple, Rameswaram, Tamil Nadu, India. December 1999 (Photo by Ryan) Creative Commons license via Flickr.

By Sunny Lewis

LONDON, UK, August 1, 2017 (Maximpact.com News) – Representatives of sacred places and cities that attract spiritual pilgrims are working with highly placed conservationists to create a dedicated fund for their environmental protection by relying on the investment community’s growing commitment to ethical or impact investment.

The altar at the Naga Metropolitan Cathedral, September 2009. (Photo by Jay-Ar Cruz) Creative Commons license via Flickr.

The altar at the Naga Metropolitan Cathedral, September 2009. (Photo by Jay-Ar Cruz) Creative Commons license via Flickr.

In London last week, proposals totaling nearly a billion dollars were discussed in a meeting organized by the Alliance of Religions and Conservation (ARC), which was founded in 1995 by HRH Prince Philip.

ARC is a secular body that helps the major religions of the world to develop their own environmental programs, based on their own core teachings, beliefs and practices.

ARC now works with 11 major faiths, helping the religions link with key environmental organizations, creating powerful alliances between faith communities and conservation groups.

The event at The Wesley, the UK Methodists’ first eco-hotel in London, was co-hosted by R20, a not-for-profit, public-private partnership that envisions mobilizing the regions of the world to be leaders for green growth.

Founded in 2010 by former California Governor Arnold Schwarzenegger and other subnational leaders in cooperation with the United Nations, R20’s mission is to support local governments in the creation and successful financing of renewable energy and sustainable infrastructure projects.

The projects chosen are ones that produce measurable environmental, social and economic benefits, as well as attractive financial returns for investors.

According to the R20 Executive Director Christophe Nuttall, “The investment community, which has already made great strides in ethical investment, is starting to realize that religions are producing structured investable projects in this area.”

The aim of the London meeting was to set up a structure for faiths to access impact investments.

Pioneering impact investor BlueOrchard, and R20, together with ARC, are proposing to build just such a dedicated fund for sacred places and pilgrim cities.

Based in Switzerland, BlueOrchard was founded in 2001 by the United Nations as the world’s first commercial manager of microfinance debt investments worldwide. BlueOrchard now has a total of seven offices on four continents.

To date, BlueOrchard has invested US$4 billion in 350 institutions across 70 countries, providing access to financial and related services to over 30 million low-income individuals.

On July 25, the BlueOrchard Microfinance Fund exceeded the US$1 billion investment mark for the first time since its inception in 1998.

“Having proven for almost two decades how social impact, outstanding financial returns and environmental developments go hand in hand, BlueOrchard has become the industry’s thought and innovation leader,” says Peter  Fanconi, who chairs BlueOrchard’s Board of Directors.

Inside a mosque in Fez, Morocco, January 2011. (Photo by Anna & Michal) Creative Commons license via Flickr.

Inside a mosque in Fez, Morocco, January 2011. (Photo by Anna & Michal) Creative Commons license via Flickr.

Ten pilgrim cities and sacred places were represented at the London meeting:

Naga, Cebu, Philippines: Catholic. The province of Cebu and Naga City are proposing to replace thousands of polluting tricycle vehicles with electric vehicles as the major form of transport to key pilgrimage sites such as the Naga Metropolitan Cathedral.

Djerba Island, Tunisia: Muslim and Jewish business owners plan on developing infrastructure to accomodate pilgrim and tourist visits to sites such as the Ghriba Synagogue, the oldest synagogue in Africa.

Etchmiadzin, Armenia: Orthodox Christian. Planning is underway for a model green pilgrimage city focusing on education, water and energy. Pilgrims come to see the oldest cathedral in the world, Etchmiadzin Cathedral, built in the early fourth century.

Fez, Morocco: Muslim. At more than 1,000 years old, Fez is considered the spiritual heartland of Morocco. The city is planning biogas collection for public lighting.

Fujaira, United Arab Emirates: Muslim. planning new pilgrimage and tourist facilities based on traditional Islamic architecture. Among other sacred sites, pilgrims come to visit the 500 year old Al Bidya Mosque, called the oldest, smallest and most beautiful mosque in UAE.

Jiangsu Province, China: Taoist. Chinese authorities want to replace old energy systems in 200 temples with high tech sustainable technologies that will be a model for other, secular development in China.

Kalakad Mundanthurai Tiger Reserve, India: Hindu. Two state governments are proposing sustainable financially viable ways to cope with the millions of pilgrims passing through to visit the tiger reserve, which forms the catchment area for 14 rivers and streams, including the Ganges. A core area of this reserve has been proposed as a national park.

Kano, Nigeria: Muslim. The largest Sufi pilgrimage site in Northern Africa, Kano hosts up to three million people at key times. The government is planning infrastructure and drinking water distribution programs.

Rameshwaram, India: Hindu. Separated from mainland India by the Pamban Channel, this town is the center of attraction for Hindu devotees across the world. Two of main attractions are the great Ramanathaswamy Temple, built in the 17th century, and the nearby Five Faced Hanuman temple. Businesses plan to overhaul transport, water and waste facilities for pilgrim visits to the island’s temples.

Zanzibar City, Tanzania: Muslim and Christian. The city is planning an eco-hotel and environmental education centre on abandoned land beside the UNESCO Heritage Site of Stone Town. Pilgrims come to visit the 500 year old Malindi Mosque, Zanzibar’s oldest, dated to the 15th century.

There were also three complementary business initiatives represented at the London meeting:

Amaravati Buddhist Centre, London, UK: Buddhist. This center is planning an eco-village for the 21st century on its wooded site in London.

Wesley Methodist Hotel Group, London, UK: Methodist Christian. This company is expanding its chain of award-winning eco-hotels to include the first-ever Methodist National Park, in Kenya.

Dartington, UK: Multi-faith. A 14th century historic house and substantial grounds and property are the central point for 40 organisations, including businesses, working on technological solutions to energy needs, agriculture, waste and water.

All 13 groups have produced business plans to attract investment for sustainable infrastructure enterprises.

A dedicated fund is needed, meeting participants agreed. In the short term this could help finance some or all of the attending projects. In the medium term this could finance up to 200 sustainable projects in different cities and places.

By 2030 this could grow to include 7,000 cities, some of which will be considered sacred, but others which will benefit from having local faith groups consult in investment plans, meeting organizers said.

While there is an increased interest in ethical, or impact investment from investors, meeting participants recognized that there is a real shortage of sustainable projects for sustainable funds to invest in around the world.

R20 and BlueOrchard have developed a unique value chain which, on the one hand, identifies and structures a portfolio of low-carbon and climate-resilient infrastructure projects up to bankability, and on the other hand, helps invest in these projects due to a de-risking blended finance mechanism with philanthropic, subsidies, equity and loans from both public and private banks.

R20, BlueOrchard, ARC and representatives of many of these projects will be taking part in the Faith in Finance meeting on October 29 in Zug, Switzerland. Find out more at: ArcWorld Projects


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Featured Image: The Laozi-Jinshan Temple, with a gigantic statue of Laozi the legendary founder of Taoism (Photo courtesy Mao-shen, Sacred Taoist Mountain of Eastern China) Posted for media use

Corporate Conscience Distinguishes Trailblazer CEOs

Travelers EDGE, which stands for Empowering Dreams for Graduation and Employment, has provided direct financial assistance to support hundreds of college and university students. (Photo by John Walker)

Travelers EDGE, which stands for Empowering Dreams for Graduation and Employment, has provided direct financial assistance to support hundreds of college and university students. (Photo by John Walker)

By Sunny Lewis

NEW YORK, New York, July 5, 2017 (Maximpact.com News) – Chief executive officers of hundreds of the world’s largest companies are finding that improving society is the path to energizing and reaching vital stakeholders as well as building more resilient markets.

When surveyed about the role of purpose at their companies, 64 percent of this group of CEOs agree that “purpose is a powerful motivator.”

The companies that have tapped into purpose as inspiration for their workforces are seeing the rewards, according to the survey by the business association CECP, The CEO Force for Good – 58 percent of companies with a clearly articulated and widely understood purpose see financial growth of more than 10 percent, and 85 percent of purpose-led companies increased revenue between 2013 and 2016.

Green Bronx Machine is a grantee of CECP member Newman's Own Foundation. Originally an after-school, alternative program for high school students, Green Bronx Machine has evolved into K-12+ model integrated into core curriculum. Students grow, eat and love their vegetables en route to spectacular academic performance.

Green Bronx Machine is a grantee of CECP member Newman’s Own Foundation. Originally an after-school, alternative program for high school students, Green Bronx Machine has evolved into K-12+ model integrated into core curriculum. Students grow, eat and love their vegetables en route to spectacular academic performance.

CEDP was founded in 1999 by the late actor and philanthropist Paul Newman (1926-2008) and other business leaders to create a better world through business.

Newman said at the time, “I helped to start CECP with the belief that corporations could be a force for good in society.”

Doing good and doing well proceed in tandem for these companies. Taken together, the more than 200 corporations represent $6.2 trillion in revenues, $18.4 billion in societal investment, 13 million employees, and have $15 trillion in assets under management.

CECP affiliation is by invitation only and is limited to multibillion dollar for-profit companies with a handful of smaller companies that embody the CECP mission.

Now, CECP has delved into its research base to develop insights designed to help guide other companies as they shape their own social strategies.

A new digest of data and insights, “Investing in Society,” is focused on best and most innovative practices drawn from CECP’s coalition.

It examines what actions companies are taking to identify and effectively meet stakeholder needs, and how a unified approach across all business units supports this effort.

Developed from CECP’s original research; findings from the 2017 Giving in Numbers Survey conducted in association with The Conference Board; and drawn from hundreds of monthly discussions with CECP CEOs, and conversations with experts and on-the-ground practitioners.

“CECP’s view is that the world’s leading corporations have emerged as a steadying presence and remain uniquely qualified to continue to drive progress, in spite of unpredictable global circumstances,” said Daryl Brewster, CEO, CECP.

“Investing in society serves as both inspirational and practical as companies seek to strengthen their societal investments and impacts,” Brewster said.

Brewster is far from alone in this belief. According to the 2017 Edelman Trust Barometer,  75 percent of the general population believe that companies can take actions to improve economic and social conditions in their communities, so now, more than ever, business will be expected to stand firm in their commitments.

This 75 percent result comes although the 2017 Edelman Trust Barometer also shows the largest-ever drop in trust across the institutions of government, business, media and NGOs.

CEO credibility dropped 12 points globally to an all-time low of 37 percent, plummeting in every country studied, while government leaders remain least credible.

Of the four institutions – government, business, media and NGOs – business is viewed as the only one that can make a difference. Three out of four respondents to the Edelman Trust Barometer survey agree a company can take actions to both increase profits and improve economic and social conditions in the community where it operates.

Among those who are uncertain about whether the system is working for them, it is business (58 percent) that they trust most.

Appreciation for steadiness appears to be spreading from Main Street to Wall Street. Top CEOs are relying on a long-term approach to set the context for short-term actions by prioritizing company health and value creation for all stakeholders, not just shareholders demanding strong quarterly returns, says CECP in its guidance for CEOs.

To help accelerate this movement, on September 19, CECP will host the second CEO Investor Forum, featuring CEOs presenting their companies’ long-term strategic plans, including operational and financial outlooks ranging three to five years or more.

They will address an audience of 200 long-term oriented institutional investors and pension funds, collectively representing $25 trillion in assets under management.

Cultivating volunteers for good causes among their employees, the most successful companies are allowing flexible schedules so their employees can volunteer based on their business’ skills and passions.

“Our dedication to being a strong corporate citizen and improving the communities where we live and work touches every part of our organization,” said Marlene Ibsen of CECP member Travelers Indemnity Company, vice president of community relations at Travelers and CEO and President of the Travelers Foundation. “We’re working to help our communities succeed, from company-sponsored programs like Travelers EDGE® to our passionate employees who logged nearly 118,000 hours of volunteer time in 2016.”

Finally, in a global take away message, the CECP report shows that despite global unrest no company can operate in isolation. CECP says, “All borders are blurred given supply chains and stakeholders. And all companies and countries need to work together to solve the global challenges at hand.”

In 2016, CECP’s Global Exchange continued to work with like-minded organizations in Europe, South America, Asia, and Africa to connect companies with collaborative opportunities to increase their global impact in solving the world’s most pressing problems, based on each region’s unique needs and cultures.

CECP found six approaches among corporations that give to social causes:

  • Direct Investments: The corporation acquires or merges with a social enterprise
  • Self-managed Funds: An entity is created inside the corporation that invests in business and social enterprise
  • Third-party Funds: Corporate funds are transferred to a fund which then deploys money to social enterprises
  • Strategic Alliances: Partnerships among companies create innovative market-based social benefits
  • Incubators & Accelerators: Companies deploy financial and non-financial assets to spur growth of small social enterprises
  • Corporate Foundations: Foundation funds are deployed to social enterprise, expected to be paid back

Data from the 2017 Giving in Numbers Survey show that, despite an uncertain sociopolitical environment, companies remain committed to increasing societal investments – median total giving increased in 2016.

But getting up in front of an audience is not the most effective practice for sustainable business leadership, said CECP corporate heads; only 17 percent endorsed it.

But companies are not staying silent. Another CECP poll found that 61 percent of companies are sticking to their public advocacy strategy, and more than 20 percent are advancing their support for social issues.

Since 2001, the Giving in Numbers Survey has collected data on corporate social strategy programs globally to provide professionals with the benchmarking and reporting tools to make data-driven decisions about social strategy.

With the release of “Investing in Society,” CECP’s research and data, as well as select reports from industry peers, will now be synthesized in a single presentation available to the public, with an even deeper dive supported by facts and figures available to affiliated companies.


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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.

Positive Impact Finance Stands on Principles

BankofAfricaMadagascar

A crowd waits for a Bank of Africa branch to open in Madagascar, Oct 1, 2014 (Photo by Bruce Thomson) Creative Commons license via Flickr

By Sunny Lewis

PARIS, France, February 21, 2017 (Maximpact.com News) – Nineteen global banks and investors, worth a total of US$6.6 trillion in assets, have agreed on a set of standards for financing sustainable development framed as the first-ever Principles for Positive Impact Finance.

On the last Monday in January, the set of four unpublished Positive Impact Principles was launched to provide a global framework for financiers and investors to analyze, monitor and disclose the social, environmental and economic impacts of the financial products and services they deliver.

The Principles for Positive Impact Finance are a direct response to the challenge of financing the UN’s Sustainable Development Goals . Adopted by the world’s governments in 2015 to end poverty, protect the planet, and ensure prosperity for all, each of the 17 SDGs has specific targets to be achieved over the next 15 years.

The principles are intended to provide a global framework for impact financing that applies across different business lines, including retail and wholesale lending, corporate and investment lending, and asset management.

Principle One: Definition

This principle is simple, “It’s a good idea to make a donation.

Eric Usher, director of the United Nations Environment Program (UNEP-FI) looks at what it will cost to make the SDGs a reality. “Achieving the Sustainable Development Goals – the Global Program of Action to End the Poverty, fight climate change and protect the environment – should cost between $5 and $7 billion a year by 2030,” he said.

The Principles for Positive Impact Finance will change the situation,” said Usher. “They will allow us to direct hundreds of billions of dollars managed by banks and investors towards clean low-carbon emissions, benefiting everyone.

The scope here is broad; this first principle covers loans of all kinds – corporate, retail, municipal, sovereign, inter-bank, project-related; bonds; equity; notes and credit-linked notes.

In all these cases the positive impact of the financial activity should be defined.

Principle Two: Frameworks

Entities, whether financial or non-financial, need adequate processes, methodologies, and tools to identify and monitor the positive impact of the activities, projects, programs, and/or entities to be financed or invested in. They should implement specific processes, criteria and methodologies to identify positive impact.

The Principles do not prescribe which methodologies and key performance indicators to use to identify, analyze and verify positive impact, instead they require that there be transparency and disclosure.

Principle Three: Transparency

Entities, financial or non-financial providing Positive Impact Finance should provide transparency and disclosure on the activities, projects, programs, and/or entities financed.

The intended use of funds released via financial instruments and their positive contribution should be clearly marked on the corresponding documentation.

Methodologies, key performance indicators and achieved impacts should be identified and disclosed.

Principle Four: Assessment

The assessment of positive impact should be based on the actual impacts achieved, this principle states. The assessment can be internally processed, or undertaken by qualified third parties such as audit research institutes and rating agencies.

The principles require a holistic appraisal of positive and negative impacts on economic development, human well-being and the environment, this is what makes them innovative.

These principles are timely from the financial sector. They demonstrate the willingness of the financial resources to go beyond current practices and contribute to more sustainable development,” affirmed the French Minister of Economy and Finance Michel Sapin. “These principles should strengthen the cooperation between public and private actors in this field.

The principles were developed by the Positive Impact Working Group, a group of UN Environment Finance Initiative banking and investment members, as part of the implementation of the roadmap outlined in the Positive Impact Manifesto released in October 2015.

The Manifesto calls for a new, impact-based financing paradigm to bridge the gap in financing for sustainable development.

As of January 1, 2017, the Positive Impact initiative is made up of the following members of the United Nations Environment Programme’s Finance Initiative: Australian Ethical, Banco Itaú, BNP Paribas, BMCE Bank of Africa, Caisse des Dépôts Group, Desjardins Group, First Rand, Hermes Investment Management, ING, Mirova, NedBank, Pax World, Piraeus Bank, SEB, Société Générale, Standard Bank, Triodos Bank, Westpac and YES Bank.

Séverin Cabannes, deputy CEO of Société Générale, a founding member of the group, says there is urgency pushing this initiative along – the urgency of confronting what’s happening to the planet.

With global challenges such as climate change, population growth and resource scarcity accelerating, there is an increased urgency for the finance sector both to adapt and to help bring about the necessary changes in our economic and business models,” said Cabannes.

The Principles for Positive Impact Finance provide an ambitious yet practical framework by which we can take the broader angle view we need to meet the deeply complex and interconnected challenges of our time,” he said.

Gérard Mestrallet, chairman of Paris EUROPLACE and chairman of the Board of the French multinational electric utility company ENGIE, views the principles as another tool in his problem-solving toolbox.

They are “the tool that is needed to enable the business and finance community to work and innovate together, and to address the challenge of the UN Sustainable Development Goals,” he said.

The financial sector has already moved forward in that direction,” said Mestrallet, “and we hope that the principles as well as the Paris Green and Sustainable Finance Initiative we launched last year will help marking a new stage.”

The UNEP-FI is a partnership between UN Environment and the global financial sector created after the 1992 Earth Summit in Rio de Janeiro with a mission to promote sustainable finance.

Over 200 financial institutions, including banks, insurers and fund managers, work with UN Environment to understand today’s environmental challenges, why they matter to finance, and how to actively participate in addressing them.

The need to align capital markets to a two degree world is urgent and necessary,” said Fiona Reynolds, managing director of the Principles for Responsible Investment. “The UN Environment Finance Initiative Principles for Positive Impact Finance are an important tool for investors to frame their positive contribution to the environment, the society and the economy.”


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Investing in Water for Life

Murray_River

Water is returned to Australia’s Murray River through a Nature Conservancy Water Sharing Investment Partnership, 2016. (Photo by Brian Richter) Posted for media use.

By Sunny Lewis

 STOCKHOLM, Sweden, September 1, 2016 (Maximpact.com) – Water scarcity is a top risk to global prosperity and ecological integrity. But creative impact investment solutions, such as Water Sharing Investment Partnerships, can shift water back to the environment, while supporting irrigated agriculture and meeting urban needs, finds new research presented during World Water Week in Stockholm.

The new study  from nonprofit The Nature Conservancy, “Water Share: Using water markets and impact investing to drive sustainability,” shows that through new approaches to water markets, the planet-wide problem of water scarcity can be managed.

The WSIP concept was created by The Nature Conservancy’s water program and impact investment unit, NatureVest, to advance the strategic trading of water-use rights within river and lake basins.

The establishment of high-functioning and well-governed water markets – in which a cap on total use is set; rights to use water are legally defined, monitored, and enforced; and in which rights can be exchanged among water users – can provide a powerful integration of public and private efforts to alleviate water scarcity,” the report states.

This model takes advantage of the motivations and incentives for trading water,” says Brian Richter, the lead scientist for the water program at The Nature Conservancy, headquartered in Arlington, Virginia with offices in 30 countries.

As water assumes a value, it provides a huge incentive for water conservation and water savings,” he said.

The Nature Conservancy launched its first Water Sharing Investment Partnership in Australia in 2015 in the Murray-Darling river basin, which drains one-seventh of the continent. As of May 2016, about A$27 million had been invested in the Murray-Darling Basin Balanced Water Fund , with a target of A$100 million within the next four years.

NatureVest plans to replicate the success of this fund in other areas of the world and is now in the process of scoping various river basins across the western United States and Latin America, where a similar model of water reallocation through investor-funded solutions can be applied.

 The Nature Conservancy is now building off its track record of using philanthropic dollars to purchase water on behalf of the environment in North America, to craft Water Sharing Investment Partnerships (WSIPs) and other water transactions and investment mechanisms to help rebalance water use in stressed basins.

 A WSIP operates within an existing water market, using investor capital and other revenue sources to acquire water-use rights.

These rights can be reallocated to nature, or sold or leased to other water users seeking more supplies, generating financial returns for investors.

The report identifies investor funded solutions, some of which may serve as the basis for a future WSIP such as long-term water trades within farming communities by establishing a complex of water sharing agreements: “…farmers’ water markets, long-term trades between farmers and cities, short-term trades within farming communities and short-term exchanges between farmers and cities.

As water assumes a value, it provides a huge incentive for water conservation and water savings,” Richter says.

Freshwater ecosystems are the most imperiled on the planet, and their condition is getting worse. More than 30 percent of Earth’s water sources are being over-exploited, some to near exhaustion.

A sense of urgency pervades the conference hall as 3,000 people from 120 countries are gathered in Stockholm this week for the 26th annual World Water Week under the theme “Water for Sustainable Growth.”

Torgny Holmgren, executive director of the organizer, Stockholm International Water Institute (SIWI), said, “Without reliable access to water, almost no Sustainable Development Goal will be achieved. To make that happen, we must ensure water’s centrality to the entire Agenda 2030. This will show the power water has a connector.

Water connects not only sectors, but also nations, communities and different actors. Water can be the unifying power, the enabler for progress in both Agenda 2030 and the Paris Climate Agreement,” said Holmgren.

Stockholm Mayor Karin Wanngård told delegates that cities struggle with some of the biggest problems, but also have access to powerful solutions.

We have the job growth, the universities, the creative ideas,” she said. “We also face the biggest emissions, the social problems, and housing shortage. Our participation in the struggle for sustainable solutions is key for global success. And that means a growing responsibility, a moral responsibility towards future generations and their ability to live in cities where it is possible to work, live in security, breathe the air and drink the water.

Addressing the opening session, Sweden’s Foreign Minister Margot Wallström reinforced the message that water is a connector and an enabler in realizing the UN’s Sustainable Development Goals, particularly Goal 6 – clean, accessible water for all.

Successful realization of Goal 6 of the 2030 Agenda will underpin progress across many of the other goals, particularly on nutrition, child health, education, gender equality, healthy cities and healthy water ecosystems and oceans,” said Wallström.

 Angel Gurría, secretary general of the Organization for Economic Co-operation and Development (OECD), said that water now has come to the front and center of international deliberations. “Water now has the place it needs to have in international priorities,” said Gurría.

Rose_Receives_Prize

Professor Joan Rose is awarded the 2016 Stockholm Water Prize by H.M. Carl XVI Gustaf, King of Sweden, during a ceremony in Stockholm City Hall, August 31, 2016 (Photo courtesy Stockholm International Water Institute)

Professor Joan Rose from Michigan State University received the 2016 Stockholm Water Prize on Wednesday, for her tireless contributions to global public health; by assessing risks to human health in water and creating guidelines and tools for decision-makers and communities to improve global wellbeing.

The prize, worth $150,000, was presented to Professor Rose by H.M. Carl XVI Gustaf, King of Sweden, during a ceremony in Stockholm City Hall during World Water Week.

Professor Rose said, “As an individual it is an honor and I am overflowing with gratitude. But it means even more, because it is a prize that honors water, it honors the blue planet and it honors the human condition. Therefore, I am very proud.

Rose and her team, whom she calls “water detectives” investigate waterborne disease outbreaks globally, to determine how they can be stopped and prevented.

She is regarded as the world’s foremost authority on the microorganism Cryptosporidium, an intestinal parasite that in 1993 killed 69 people and sickened more than 400,000 others who drank contaminated water in Milwaukee, Wisconsin.

More than two billion people still lack adequate sanitation, and over one billion lack access to safe drinking water. Hundreds of thousands of deaths from diarrhoeal diseases each year could be prevented by improved water, sanitation and hygiene,” said Holmgren.

Joan Rose, our water hero, is a beacon of light in the quest for securing a better, healthier life for this and future generations,” he said.

Speaking of what she views as the world’s greatest water challenge, Professor Rose said, “I think it is going to be the reversal of water quality problems around the world; the algal blooms in fresh water and coastal waters, and the pollution, not just associated with humans, but also with disease outbreaks among our wildlife, like amphibians and fish. I also think reconnecting water and food security will be a major challenge. We are starting to do it but it will definitely continue to be a challenge.”

Water Facts from the United Nations:

  • Some 2.6 billion people have gained access to improved drinking water sources since 1990, but 663 million people are still without.
  • At least 1.8 billion people use a source of drinking water that is fecally contaminated.
  • Water scarcity affects more than 40 percent of the global population and is projected to rise. Over 1.7 billion people are currently living in river basins where water use exceeds recharge.
  • Of the world’s 7.5 billion people, 2.4 billion lack access to basic sanitation services, such as toilets or latrines.
  • More than 80 percent of wastewater resulting from human activities is discharged into rivers or sea without any pollution removal.
  • Every day, nearly 1,000 children die due to preventable water and sanitation-related diseases.
  • Hydropower is the world’s most important and widely-used renewable source of energy and as of 2011, represented 16 percent of total electricity production worldwide.
  • Roughly 70 percent of all water drawn from rivers, lakes and aquifers is used for irrigation.
  • Floods and other water-related disasters account for 70 percent of all deaths related to natural disasters.

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Featured Image: The Jordan River runs along the border between the Kingdom of Jordan, Israel and Palestine. The 251-kilometre (156 mile)-long river flows through the Sea of Galilee and on to the Dead Sea. (Photo by Tracy Hunter) Creative commons license via Flickr

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.

Takeaways from the 2016 Latin American Impact Investing Forum

logo_FLII_completo1-1024x340By John Kohler

The most recent Latin American Impact Investing Forum (Foro Latinoamericano de Inversión de Impacto , or FLII) gathering, held in Mérida, Mexico, highlighted both the promise and remaining challenges of impact investment and social entrepreneurship in Latin America. Here are the top three things I took away from the 2016 FLII event:

  1. Latin American impact investing is gaining traction and evolving its own identity. The FLII attendees are very professional in how they’re forming, supporting, and investing in social enterprise in Latin America. They are also taking ownership of the FLII event and creating a vibrant, solutions-oriented conference. A precursor to FLII, Sustainatopia, was held in Miami with sessions primarily in English. With its move to Mérida, Mexico, FLII now presents a majority of sessions in Spanish. This is important, because impact investing needs to be locally driven. Some in our sector like to say, hemispherically, that we want to encourage a South-to-South conversation around solutions, rather than holding the North-to-South dialog that has been the norm until recently.

It was also obvious at FLII that the idea of impact investing is gaining momentum throughout the region: About half of those attending in 2016 were new to FLII, which bodes well for the continued growth of impact investing in the region.

  1. Although the infrastructure is growing and progress is happening, FLII felt very Mexico-centric. Yes, there were people there from Guatemala, Chile, Argentina, Bolivia, Peru, and Colombia, but most of the action is from Mexico. Perhaps part of that imbalance was because the gathering was held in Mérida and because it was organized by New Ventures Mexico. But for the entire Latin American region to flourish and to benefit from social investing, the FLII message needs to have a more regional reach.

The conference organizers tried to hold a FLII event in Columbia last year, and they also tried to do one in Guatemala. Unfortunately, both were too small, and one-time events lack staying power and continuity. It’s good news that the premier Latin conference has moved from the United States (Miami) to someplace that’s more accessible to Latin Americans. But I would love to see FLII extend even further.

  1. At this year’s FLII, there were more people from countries that have been largely isolated in the past, specifically Chile and Argentina. Until now, the efforts of those countries have not melded with the rest of Latin America. The South American countries showed some nascent activity in the past, but I see bigger sparks being generated. I’m hopeful that with greater South American participation, FLII becomes truly a southern hemisphere effort for all of Latin America.

Beyond those three takeaways, I had one other observation of note, which is the flowering of new financing programs that leapfrog the whole idea of banks. One issue faced by many social enterprises in Latin America, especially agricultural or other seasonally based businesses, is that their income isn’t consistent throughout the year. As a result, it’s difficult for these enterprises to adhere to traditionally structured, monthly loan payments. The need for flexibility with repayment amounts and timing is a consistent theme across several Latin countries.

In addition, traditional bank loans are based on collateral, and many Latin American social entrepreneurs are women or farmers or others that have not had the ability to hold anything of sufficient value in their own names.

An example of an alternative approach is Variable Payment Obligation (VPO) financing, which I pioneered at Santa Clara University’s Miller Center for Entrepreneurship. Taking a page from venture debt mechanisms, and another page from microfinance aimed at very small-scale livelihood loans, the combination became VPO financing for social enterprises, in which payments are based on cash flow instead of collateral and fixed monthly payments.

At this year’s FLII, not only did a number of VPO financings take place, but there was a session where an investor and an entrepreneur talked together about their considerations as they went through the VPO financing process, as a way of teaching the rest of the investors and entrepreneurs in attendance how they might do it, too.

It’s clear that Latin Americans have quickly grasped both the opportunity and the depth of change that’s possible by embracing impact investing and by supporting social enterprises and entrepreneurship in their communities and countries. In the end, I came away from FLII feeling optimistic about the direction of impact investing and social entrepreneurship in Latin America.


John Kohler

John Kohler is executive fellow and director of impact capital, Miller Center for Social Entrepreneurship, Santa Clara University. He is the pioneer of a new impact investment vehicle – the Demand Dividend – that presents investors with a structured exit alternative to equity. Kohler will speak on a panel at the Second Vatican Conference on Impact Investing June 28 in Rome.

Top Trends for Grantmakers for 2016

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by Kerrin Mitchell, Co-founder and COO of Fluxx

Now that we’ve had a few weeks to settle into 2016, it’s time to look ahead ­– to the big ideas and trends that are likely to dominate the conversation in the philanthropic sector for the next 12 months and beyond. From billionaire tech tycoon philanthropy to the smallest crowdfunded community initiative, the year in philanthropy promises to test big ideas and, as always, refine the everyday hard work of grantmaking. Here is our, by no means exhaustive, list. Enjoy.

Tech Titan Philanthropy

Bill Gates along with British Chancellor George Osborne have pledged $4.3 billion to eradicate malaria, one of the world’s most deadly diseases. The effort re-enforces Gates’ status as the grandfather of tech philanthropy who has opened the door for others in Silicon Valley, like Elon Musk of Tesla Motors and Reid Hoffman of LinkedIn, who have formed a $1 billion nonprofit, OpenAI, which aims to research and develop “digital intelligence” projects. The alliance between the tech and nonprofit sectors is, without question, one of the bigger trends to watch in 2016, as many major players are throwing their names into the philanthropic ring. The most notable example perhaps is Mark Zuckerberg who made waves when he and his wife announced last month that they are planning to give the majority of their fortune to nonprofit causes. Focusing primarily on promoting education and community, Zuckerberg is quickly becoming one of the biggest names in philanthropy. We’re optimistic he’s taken to heart lessons-learned from his 2010 foray into education reform in Newark.

Taking Data to Heart

It’s safe to say that big data is changing the way foundations are making decisions. Long gone are the days of paper quarterly or yearly reporting. Gathering data to understand trends and predict future behavior – often in real time – will continue to be a major focus for foundations in 2016. Understanding and analyzing data can help foundations measure impact, track donor behavior, and make hyper-accurate predictions about the impact of their grantmaking. In 2016 I expect to see many more philanthropic leaders taking actionable steps toward measuring impact. The case has been made that impact measurement is of critical importance. 2016 is the year to act. Foundations like the Children’s Investment Fund Foundation, Arcus Foundation, and others are already making great strides in this area.

Impact Investing

In 2015, there was a surge of philanthropic announcements endorsing the practice of impact investing, including Kresge’s announcement of their $350 million impact investing funding pool and Heron Foundation’s public commitment to move 100 percent of their assets to impact funding. Unlike traditional grantmaking, impact investing refers to investments in companies, organizations, and funds with the intention to generate beneficial social impact alongside a financial return. In the wake of Kresge’s and Heron’s announcements, we’ll be interested to see which foundations follow through by putting all of their investments toward their missions. While philanthropists like Pierre Omidyar have been able to step outside of the bounds of traditional philanthropy in this way, it remains to be seen if foundations will do the same.

Crowdfunding Philanthropy

2015 showed us that philanthropy is no longer just for private foundations, with the enduring popularity of crowdfunding websites, like Kiva and GoFundMe, built to aid nonprofits. Then in October, Indiegogo launched Generosity, a site which allows nonprofits to gain access to crowdfunded resources without having to to pay any membership fee. This allows 100% of the money a nonprofit collects to be used for the greater good, while simultaneously lowering the bar so that people can help support causes they care about regardless of their income. Looking at all this progress, it’s safe to say that crowdfunded philanthropy will continue to grow and expand throughout 2016.

Donor-Advised Funds

According to Inside Philanthropy donor-advised funds will be as popular in 2016 as they were last year, bringing many more newcomers to the philanthropic table. Many donors love DAF’s as a way to set aside money for charitable giving and for their immediate tax benefits. However, critics of DAF’s worry that the money set aside in these accounts will never see the light of day. For a cash-strapped nonprofit that needs operating support now, DAF’s may not sound so attractive. Is this the year the critics find traction? Not likely, according to David Callahan at Inside Philanthropy.: the convenience of DAF’s will continue to bring new and younger donors into the world of giving, making 2016 another “boom year”.

Women in Philanthropy

Women’s empowerment has been a philanthropic goal for a long time, but in the past few years foundations have been making an extra effort to support women’s equality. On top of that, as women have gained a foothold in some sectors of the economy, they have also become more prevalent in the philanthropic field, and 2015 saw more women participating in grantmaking than ever before. Just to name a few – Michele Sullivan at Caterpillar turned her focus to girl’s education with WASH, the Virginia B. Toulmin Foundation is using $15,000 of grants to support women composers, and the Adrienne Shelley Foundation is providing production grants and other resources specifically for women filmmakers. We’re hoping to see these trends continue both domestically and internationally as we move further into 2016.


kerrin1Kerrin Mitchell, COO/Co-Founder

Kerrin Mitchell is the Co-founder and COO of Fluxx, a comprehensive technology platform that aims to unite foundations and non­profits worldwide. Kerrin started her career at Cisco Systems as a Finance Business Manager. After seven years of working at Cisco, Kerrin decided to join the startup world and join Sprout as VP of Operations. In 2010 Kerrin co-founded Fluxx where, in under five years, she has bootstrapped the company to year over year triple digit growth and a client portfolio of over $150B in assets. She earned a B.S. in Economics from Duke University, a Certificate in Advanced Program Management from Stanford University and a Certificate in Accounting from University of California, Santa Cruz.

 

SOCAP15: Bigger Than Ever & Leading the Conversation About Money and Meaning

SOCAP15

Tomorrow sees the start of, SOCAP, the leading conference on social enterprise and impact investing, where an expected 2,500 attendees will be part of the biggest SOCAP yet, taking place October 6-9 at Fort Mason Center, San Francisco, CA.

SOCAP15 will feature more than 140 sessions for learning, connecting, and meeting peers and potential partners, as well as uniting global innovators in business, finance, tech, international development, philanthropy, and more.

Maximpact‘s social media team will be attending this years SOCAP15 and live tweeting on key events throughout each day, follow us at @Maximpactdotcom for these updates.  For more tweets on SOCAP15 follow @SOCAPmarkets and keep up with the action via the hashtag #SOCAP15

It’s not to late to join us at SOCAP15

Conference Schedule, Gratitude Awards Finalists, and Tips for SOCAP15

In addition to the main stage speakers that have been announced, over 400 changemakers, social entrepreneurs, impact investors, and related thought leaders will share their perspectives and invite collaboration with the broader SOCAP community to build the market at the intersection of money and meaning at SOCAP15.

SOCAP15 Schedule

For the list of speakers and attendees, check out the full schedule for SOCAP15, now available on the conference app, Pathable. Conference attendees can join the SOCAP Pathable community to schedule meetings, explore the conference schedule, participate in discussions, and continue to build on conversations and collaborations that start at SOCAP15.

Panel Preview

Here’s a sampling of some of this year’s most anticipated SOCAP15 panels, across the content themes of Impact Investing, Meaning, Divest/Invest, Financial Inclusion, Neighborhood Economics, 21st Century Talent, Living in the Future, and Sustainable Supply Chain:

At the Tipping Point: Risks and Opportunities of Impact Investing Going Mainstream

Speakers: David Chen, Equilibrium Capital; Abigail Noble, The ImPact; Wayne Silby, Calvert Social Investment Fund; Jackie VanderBrug, US Trust; Mark Newberg, Womble Carlyle Sandridge & Rice, LLP

Impact Investing in 2015: a Panoramic View of the Field

Speakers: Cathy Clark, Director CASE i3 at Duke University; Fran Seegull, Chief Investment Officer ImpactAssets

Neighborhood Economics: a Whole Portfolio

Speakers: Ross Baird, Village Capital; Bryce Butler, Access Ventures; Dr. Ann DeRosa PhD, Chilton Capital Management; Kevin Jones, SOCAP

Building Financial Capability

Speakers: Timothy Flacke, D2D Fund; Daniel Rogers, Moneythink; Ben Mangan, Center for Social Sector Leadership at Berkeley; Shalu Umpathy, IDEO.org

Exploring Segmentation: Breaking Down Impact Investing to Build it Up

Christina Leijonhufvud, Tideline; Lauren Booker Allen, Omidyar Network; Debra Wetherby, Wetherby Asset Management; Clara Miller, Heron Foundation; Gil Crawford, Microvest

How Environmental Investments are Generating Social Outcomes

Speakers: Taryn Goodman, NatureVest; Craig Wichner, Farmland LP; Bettina von Hagen, Ecotrust; Debra Schwartz, MacArthur Foundation

The Results are In: Impact Funds are Outperforming

Speakers: Maya Chorengel, Elevar Equity; Dave Kirkpatrick, SJF Ventures; Jessica Matthews, Cambridge Associates; Nancy Pfund, DBL; Wes Selke, Better Ventures

Funding Fair Trade: Gaps and Opportunities in the Supply Chain

Kate Danaher, RSF Social Finance; Les Szabo, Dr. Bronner’s; Scott Leonard, Indigenous Designs; Benjamin Schmerler, Root Capital; Chris Mann, Guayaki Yerba Mate.

Gratitude Awards Finalists Announced

Nine finalists for the 2015 Gratitude Awards were selected from over 550 applications representing 30+ countries around the world in the categories of Community Development, Education, Sustainability and Environment. Of these, four Gratitude Award winners will be announced live on the mainstage at SOCAP15.

The 2015 Gratitude Awards finalists:

CareNx Innovations

CityTaps

Vendedy

Library for All

The Reset Foundation

ZanaAfrica

CASSA

Carbon Analytics

Waste Ventures

Tips for Getting the Most out of SOCAP

The SOCAP15 team spoke to Minhaj Chowdhury, the co-founder and CEO of DrinkWell, about how he works to overcome challenges in social impact work. Chowdhury was a 2014 Echoing Green Global Fellow, a 2014 Gratitude Award recipient, and was named one of Forbes Magazine’s 30 Under 30 Social Entrepreneurs for 2015. His venture, DrinkWell, works to solve the global crisis of arsenic-contaminated water by supplying filtration technology and business tools to a network of entrepreneurs who sell arsenic-free water within their local communities.

Read Chowdhury’s tips on how to get the most out of SOCAP as an entrepreneur.

Sponsors & Partners

Each year, SOCAP welcomes new sponsorship from a variety of institutions who believe that business and investment can have a positive impact on social and environmental challenges. This year, they are excited to work with a record number of sponsors and partners in what will be the biggest SOCAP yet. SOCAP15 would not be possible without the financial and in-kind support of these wonderful partner organizations.


Images: courtesy of from SOCAP15 website

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.

Three Ways Fear Gets in the Way of Nonprofits’ Decision-Making Processes

FEAR_Steve Scheier

By Steve Scheier

Whether you’re an executive director, board member, funder, staff member or even a volunteer in a nonprofit, chances are you feel frustrated with the inefficiency of your organization’s decision-making processes.

“Our fear of failure hampers our decision-making and results,” I’ve heard many people at nonprofits say. Or, “We take a long time to mull over decisions, and we constantly revisit decisions we’ve made.”

Indeed, the mere act of making a decision can be time consuming. However, nonprofits face great challenges to their decision-making because they often grapple with a relative lack of clarity about who has power and who makes decisions.

The underlying reason is implicit in these statements but is rarely acknowledged aloud:

Fear.

Think about it. Mulling over and revisiting decisions reflects a fear of failure. Worrying “If someone questions what we’ve decided, we immediately think we’ve done something wrong” – as I’ve also heard many people at nonprofits say, reflects a fear of making mistakes. Other commonly expressed sentiments, such as “Everything is a group decision. We like consensus. We don’t want to disagree,” show that fears of upsetting organizational harmony, of challenging authority and of stepping on other people’s toes also run deep.

Because making decisions is at it’s essence an act of power, it’s natural that it provokes a slew of emotions for many people, including fear. There are three major fears typically connected with decision-making in nonprofits: Fear of failure, fear of conflict and fear of rejection.

Fear of failure

Nonprofits take on huge goals — ending hunger, eliminating homelessness and advocating for people with disabilities. These are challenges that no for-profit company would ever attempt. However, while for-profits are “successful” if their profits are increasing and their market share is growing, nonprofit organizations are rarely satisfied with their progress. Why? Because there’s always another client to serve, another problem to solve. The needs are seemingly never-ending. This is a perfect recipe for encouraging environments that fear failure. People who lead nonprofits also fear the potential failure of disappointing the people and institutions that have given them time and money.

Fear of conflict

People generally don’t enjoy conflict, but in nonprofits, an aversion to conflict can be a by-product of the familial atmosphere of the organization. As J.B. Schramm, Chair of Learn to Earn at New Profit and formerly College Summit Co-founder said, “Looking at my own experience as a leader, there were times when I handled staff with kid gloves, concerned because they were working very hard for less money than they could make in the for-profit sector. Upon reflection, I realized that was a myth—and a little patronizing”.

On the staff level, consensus and harmony are important in the familial nonprofit atmosphere and no one wants to feel ostracized from the group for violating the established norms. Staff are slow to question the existing process, and even more reticent to take on decision-making roles unless they are explicitly encouraged to do so.

These feelings can be further complicated by the unresolved and often awkwardly, if ever, discussed issues of race, gender, class, age and sexual orientation and their effect on decision-making in nonprofits. Whether we want to admit it or not many nonprofit leaders have implicit and unspoken biases about who should be making what decisions in their organizations and these biases are rarely if ever addressed or even acknowledged.

Fear of rejection

A particularly raw emotion, fear of rejection confuses discussions of nonprofit power and stymies decision-making by limiting the issues that people are willing to discuss. Exclusion from an organization can have a devastating effect on an individual, and this is particularly concerning for people outside the dominant white culture. In our observations, people who work in nonprofits are consistently loyal to their organizations and committed to the mission they serve. None of them wants to be seen as uncommitted, and many are willing to stay in untenable situations in order to be faithful to and advance the needs of their constituents.

This tenacity and faithfulness combined with the anxiety over potential loss of affiliation often makes people hesitant to bring up the uncomfortable topics that might cause them to be ostracized. Thus, fear of rejection limits the issues–however important–that people are willing to discuss.

Taken individually or together, these fears have the undeniable effect of complicating decision-making processes in nonprofits.

But there is a remedy. Quite simply, talking about power and decision-making openly within an organization will go a long way toward diffusing fears. To do so, it’s necessary to have a common language that helps navigate the worries that will inevitably spring up during the course of conversations.

Ultimately, the goal of talking is to help move past fear and enable the members of your organization to work together to make the decision-making process more efficient. One important step will be learn how to speak up and advocate for those decisions affecting your job that you would personally like to make.

Here are some ways accomplish this:

  • Be aware of the biases that guide beliefs about who should be making what decisions in organizations. Dare to challenge them – beginning with your own.
  • Manage your fear of rejection and conflict. Often people hold back from asserting themselves because they fear what others might say. Ask yourself, “What’s the worst thing that can happen if I’m honest about the decisions I want to make?” Is that answer a worthy reason to not be true to yourself?
  • Take a careful inventory of the decisions that affect your job. Identify the decisions you’d like to make and if you are not currently allowed to make these decisions, advocate to do so.
  • In advocating for a decision-making role, approach your boss and say, directly and compassionately, “this decision is important to my job and I want to make it. I’m willing to take the responsibility for making this decision if you will only trust me to take it on. Are you willing to let me do so?

If you’re a leader, doing so will translate into gaining the ability to focus more on high-impact decisions that will make a difference. If you are a team member at the staff level, you will gain the power to use more of your natural decision-making capacity to help move your organization forward in a meaningful way.

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About Steve Scheier:

Steve Scheier, author of Do More Good. Better. Using the Power of Decision Clarity to Mobilize the Talent of Your Nonproft Team is the CEO and Founder of Scheier+Group, a consulting firm dedicated to helping organizations distribute power differently so they can do more good. Prior to founding Scheier+ Group in 2010, Steve was vice president of human assets  and training at College Summit, and president at Entrepreneurs Foundation.  On the private-sector side, Steve has served as a vice president of human resources at Food.com and at CKS Group, and worked in marketing at Apple, Inc.  He is a an occasional contributor to the North Bay Business Journal.

 

Why Social Investors Must Get Behind the Circular Economy

recycling symbol superimposed over image of trash

By Marta Maretich @maximpactdotcom

What goes around and around and comes out better for the planet? By now, most of you will guess that the answer is the circular economy.

But what is the circular economy? It’s an approach to manufacturing based on the principles of reuse, repair, remanufacture and recycle. The point is to preserve finite resources, such as fossil fuels, which are running out. At the same time, the principles provide a way to manage supply chains and design waste out of the manufacturing equation.

See examples of circular products

Going around is gaining ground

With roots deep in a number of different design, ecology and industrial movements including regenerative design, biomimicry, and the recent Cradle to Cradle phenomenon, the Circular Economy is less a new idea than a coming-together of several strands of thought.

Today, the concept is gaining ground in a big way with high-profile leadership from circumnavigator Dame Ellen Macarthur and her foundation as well as support from the WEF. Big companies as diverse as Coca-cola and Caterpillar, a heavy machinery manufacturer, are embracing its principles.

This rise in popularity is generating a whole ecosystem for the circular economy. New service providers, funds and accelerators are already popping up to fuel the trend. Research, such as this Nesta report on data use, is beginning to shine a light on what makes circular approaches successful. Events and conferences and even DIY toolkits are proliferating.

Why the circular economy still needs social investment

So what does this craze for the circular mean for social investors?

Despite its popularity, there are indications that this new approach to manufacturing needs the support of social investors. Significant barriers remain to building and scaling the circular economy and one of these is financial.

There’s evidence that companies making the transition to circular economy principles are having trouble raising the finance they need to adopt circular business models designed for sustainability. This is because companies in transition have special financial requirements that mainstream investors and venture capitalists are reluctant to meet. First, they must finance the ownership of products for a longer time than in a linear model. Second, existing businesses need significant investment to change established systems, such as setting up a different revenue model.

Doubts about the practicality of adopting the circular economy are being felt at high levels. In 2014, the European Commission rejected a proposal that would have established circular principles at the center of policy across the Eurozone. Though EU president Frans Timmermans promised a “more ambitious proposal” by the end of 2015, the Greens and other environmental campaigners are concerned about the EU’s commitment to sustainability and the influence of big business over government policy.

Opportunities for “circular portfolios”

All this underlines the circular economy’s continued need for social investment capital. On the positive side, the rise of the circular economy should offer tempting investment opportunities for investors, especially if, as is planned, standards can be developed.

Investors could engage in this connected market in a number of ways. First, they could put their money into funds whose portfolios focus on companies that use circular economy approaches. Themed funds in sectors such as agriculture, food retail, clothing manufacture and waste management all have potential to benefit from backing the circular way of working.</>

Alternatively, social investors can invest directly in companies that take a circular approach, or in a clutch of companies along a circular supply chain. Imagine a “circular portfolio” that includes a company that produces the raw materials, the manufacturer that turns those materials into a consumer product and the recycler that turns any product waste back into a usable commodity.

Social investors can also benefit from adopting the circular mindset and applying it to their own use of capital. By treating capital as a resource to be preserved, conserved and recycled in sustainable systems, social investors have the opportunity to deepen their commitment to this new way of doing business. The analogy even extends to the idea of waste and byproducts. Just as businesses need to design them out of their processes, social investors should avoid producing financial negatives such as toxic debts, crushed economies and unhealthy markets.

Overall, the rise of the circular economy is a positive sign that the world is ready to change consumer culture and seek more sustainable solutions, and that’s good news for us. Beyond this, the circular economy is in step with a sector-wide push for collaborative, systemic ways to tackle global problems with both resource scarcity and waste. It’s joined-up sustainability logic for manufacturing, and that’s something we social investors certainly can, and definitely should, support.

Taking an Integrative Approach to Impact Investment

By guest contributor Harald Walkate, Head of Responsible Investment at Aegon Asset Management

Headshot of Harald Walkate

Harald Walkate is Head of Responsible Investing at Aegon Asset Management

In the last few years, great progress has been made in the area of impact investment. At first the exclusive domain of foundations, family offices and SRI-driven investors, it is now gaining recognition in mainstream finance as a tool that will help tackle social problems while realizing required investment returns.

This is a welcome but also necessary trend, because for this approach to have the impact (no pun intended) our community desires, much larger dollar amounts will need to be allocated. This will require the unlocking of the vast capital pools held by that mainstream sector — pension funds, insurance companies and sovereign wealth funds around the world. As Antony Bugg-Levine and Jed Emerson write in their book Impact Investing (2011), the key will be “determining where the high-potential capital pools sit, understanding how to motivate their managers to redeploy them, and supporting them do so.”

Exact numbers are hard to come by, but speaking in ballpark terms, today investment has reached the tens of billions. To seriously move the needle, we need to start thinking about how to engage the hundreds of billions, if not trillions, held by those asset owners.

For this, several things still need to happen.

Understanding the mainstream investor

First, the impact community should better understand this “mainstream” financial sector. It should recognize that, however socially-oriented and sustainable these organizations might be, or claim to be, their first priority is matching their investments to the liabilities on their balance sheet.

This is as it should be: whether for-profit or not, this is what they were created to do in order to pay out pensions and insurance claims at some point in the future. This means most mainstream investors take a hard-nosed and no-nonsense approach to asset management, where strict return requirements apply, volatility is thoroughly analyzed, difficult questions will be asked about liquidity, and regulatory requirements need to be scrupulously fulfilled.

Also, for more than a few asset owners, established asset classes such as equity (not even to speak of private equity or venture capital) are totally out of the question. The impact community needs to understand that, while this restriction often poses barriers to certain impact investments, these barriers are there for good reason and will not go away in the short to medium term.

Understanding this will help manage everyone’s expectations of what mainstream finance can do in impact investing. It will also help the impact community to become true “mainstream messengers” and to pitch their investment opportunities more effectively to institutional investors.

Looking for impact opportunities within existing portfolios

Second, asset owners should take an integrative approach to impact investment, looking for impact opportunities within existing portfolios and asset allocation processes, not in addition to them. The recent report Allocating for Impact by the Asset Allocation Working Group of the G8 Social Impact Investment Taskforce is enlightening in this respect. It provides an excellent framework for doing exactly that: “the traditional framework for portfolio construction can be used as the guide rails for making what an investor considers to be a reasonable allocation to impact investments.”

Working for a company that has applied this approach, I can vouch for its effectiveness.

It is worth pointing out that this also means the impact community should not ask asset owners to commit to a certain, separately-labeled, “impact asset allocation”. While such a commitment could have the positive short-term effects of putting the topic on the table, focusing minds with a target, and bringing additional billions into the impact pool, it will not unlock the larger amounts that are required. Separate allocation reinforces the still-common view that sustainable investments are not “real” investments but rather something for the CSR and PR people that should come out of marketing budgets. Finally, there is the risk that these asset owners, feeling they have fulfilled their “sustainability obligation”, will not look for further impact opportunities in their broader portfolios.

Getting the message to into the heart of mainstream institutions

Third, and most importantly, asset owners and asset managers need to get to work with the type of analysis described in Allocating for Impact. This is the hard part.

You’ve heard the expression “good strategy is 2% thinking, 98 % execution.” In this case, the thinking work has been done for us by the Asset Allocation Working Group, but the execution requires individuals within pension funds, insurance companies, asset management firms and sovereign wealth funds to take action.

But how do we reach them with this message? This is no mean task.

For a typical pension fund, insurance company or asset management firm, you need to imagine a very large, often somewhat bureaucratic, organization, with tens or hundreds of exceedingly specialized portfolio managers, analysts, actuaries and risk & compliance managers. They follow highly detailed and thoroughly documented investment mandates and procedures to allocate their capital through analysis and investment decision-making. Making even very minor changes to these complex systems is a significant task.

These people are inundated with information: research generated by internal research desks or external brokers, industry reports, academic papers, actuarial tables, continuously shifting regulatory demands, news nervously flashing across their dual screens. What are the chances they would find the Allocating for Impact report, let alone read it? My estimate is close to zero. The chances that they will take action based on its findings are even more remote.

No, bringing change will require positive and proactive action by the impact investment movement to approach individual CIOs, specialists on the fixed income or research desks, people responsible for asset allocation decisions, or other influential individuals within these organizations. Note here that people without the fancy title, but with an open mind and a creative bent, sometimes wield the most power to make little changes to big systems. They need to be persuaded to start discussions in their organizations about applying the Allocating for Impact analysis across their entire portfolio and to integrate it with their investment processes. Only by doing so will impact investment find its formal place within institutional portfolios.

Who will step up to this challenge?

About the author: Harald Walkate is Head of Responsible Investment at Aegon Asset Management and founder of Insurers’ Investors on Impact Investment (IIII). He has a longstanding interest in sustainability issues and has been specializing in responsible investment and ESG issues since 2009, when he joined AEGON Asset Management (AAM) as Head of the Corporate Office. Harald has worked on a in a variety of initiatives around strategy and governance, including the implementation of a Responsible Investment Framework.  A particular area of interest is engagement and ESG integration for credits. A former corporate attorney, Harald also has significant experience in international business development (M&A, joint ventures, greenfields), in particular in the Central & Eastern European region, and holds a law degree from Leiden University, the Netherlands and an MBA from the University of Chicago Booth School of Business.

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

Money in pocketBy Marta Maretich, Chief Editor @maximpactdotcom

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

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

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

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

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

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

Steering clear of rotten deals

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

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

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

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

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

Providing anti-corruption leadership

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

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

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

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

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

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

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Convincing Foundations to Take the Impact Investing Plunge

Convincing Foundations to Take the Impact Investing Plunge

By Marta Maretich, Chief Editor @maximpactdotcom

Impact investing was invented with foundations in mind: specifically, it was designed to unlock the vast pool of capital represented by their endowments (over  $662 billion in the US alone) and align that money with social mission.

Foundations have been slower on the uptake than the impact pioneers initially hoped. While the practice of impact seemed to explode into government circles and mainstream markets, foundations, traditionally very conservative investors, held back, constrained by risk aversion and, in some cases, a misunderstanding of fiduciary responsibilities.

But that’s beginning to change. Led by the brave examples of a few early-adopters, more foundations are now thinking about getting involved in mission-driven investing. There’s anecdotal evidence that many, often spurred on by progressive beneficiaries and trustees, are actively reviewing their portfolios with an eye to making the change to socially beneficial investing.

But it’s a big step for a foundation — and it involves a huge paradigm shift that can be a challenge to any institution. What will it take to encourage more foundations to take the plunge and unleash a wave of capital for social and environmental good?

Evidence

Foundations are duty-bound to protect their capital. They need solid reassurance that a mission-driven strategy can work financially, and the best form of assurance comes in the form of evidence.

Luckily, some leading foundations are documenting their mission investing experiences and making the information public for the benefit of others. Two detailed case studies from the report Impact Investing 2.0 provide examples of this commitment to transparency: W.K. Kellogg Foundation (WKKF) and RSF Social Finance (RSF) both offer insights into the ins and outs of their mission investing strategies, shining a light on how the process works for them and extracting lessons on what it takes to succeed. An upcoming book by the reports’ authors, The Impact Investor: Lessons in Leadership and Strategy for Collaborative Capitalism, gathers further lessons learned.

Demystification

Winning a commitment to impact investing from foundations is one thing, making it happen in practice is another. Leading foundations are helping here too by directly sharing their experiences with their peers and demystifying the practicalities of changing to mission-driven investing.

At a recent event organized by the charitable-sector law firm Bates Wells and Braithwaite (BWB), a small group of foundation personnel gathered to hear the personal accounts of three foundations who are in the process of reallocating assets into impact investments.

Anne Wade, of the Heron Foundation, Anne Tutt of the SIB foundation and James Perry of Panhapur all spoke candidly of their experiences and answered challenging audience questions about what works and what doesn’t in making the switch to mission-driven investing. This kind of peer-to-peer learning exchange can be a powerful tool for changing people’s minds about the viability of adopting a new approach to allocating capital.

Expert Advice

Yet foundations are going to need more than positive role models to effectively overhaul their investment strategies. To get the process right — which means making the change without compromising their endowments or failing in their fiduciary duties — they will need expert advice.

As an example, the BWB event included an update by Luke Fletcher, a partner in the firm and a social investment specialist, on the current legal status of trustees in the UK when it comes to making social investments. Based on recent clarifications from the Law Commission, Fletcher was able to offer reassurance that trustees had the freedom to allocate assets to mission-relevant investments if they so chose.

This kind of expert advice, coupled with the first-hand testimony of trailblazing foundations, is exactly the sort of support that gives foundations the confidence to pursue new strategies. If we want to see more movement of foundation capital into impact markets, we should all be doing more of this kind of person-to-person work, connecting directly with trustees and foundation asset managers to show them the evidence and give them a realistic understanding of their rights and responsibilities.

If this kind of networking happens on a wider basis, many more foundations will get the message that they have a green light to move their assets into impact investments. And if more foundations move into mission-driven investing, well, just think of the benefit that could bring to all of us.

[Credit Image: Flickr]

Impact Investing in the Justice Entrepreneurs

By Marta Maretich @maximpactdotcom

statue representing justice with scalesAgriculture, healthcare, cleantech and financial services are all now recognized sectors of impact investing with growing track records of success. Businesses from these sectors are frequently the choice of impact investors who want to put their money into related areas of social and environmental benefit such as poverty alleviation or natural resource protection.

But what about investors who are interested in causes such as fairness, the rule of law and universal access to justice? Surely, these aren’t areas where impact investors can place their capital, are they?

Now, thanks to a burgeoning trend for justice entrepreneurship, they just might be.

Once the only way for impact investors to support justice was indirectly, through careful ESG investment screening coupled with impact metrics to assess outcomes. Now thanks to the emergence of bold new approaches to delivering justice, impact investors have the opportunity to put capital behind businesses bringing cost-effective justice solutions to citizens and governments alike.

The justice shortage

Most of us assume that justice is a matter for governments or international bodies like the European Court of Human Rights. But, just as the state monopoly in education is giving way to a more entrepreneurial picture, things are be beginning to change in the justice sector. According to HiiL (The Hague Institute for the Internationalization of Law), a justice sector advisory and research institute, there are important drivers behind this shift.

In the developed world, the cost of delivering access to justice continues to grow while state budgets are contracting. In the US, the number of unrepresented defendants is increasing and more people are representing themselves in court, mainly for financial reasons. Basic legal services, like will writing and land conveyance, are also expensive—too expensive for many who need them.

This means that a growing number of people are unable to afford legal counsel or legal services, a situation that leaves them without basic legal safeguards. This shortfall comes with a high social cost, especially when it denies justice to the poorest and most vulnerable members of society. Governments are now actively looking for more cost-effective ways to deliver access to justice to their citizens.

In the developing world, the problem is even more serious, according to recent studies by the World Bank. Many communities are simply unable to get access to justice, even when their constitution guarantees it. They may live too far from courts and legal services to use them. In many countries, only money buys access to the formal legal system. In others, the justice system works so slowly, or is so corrupt, that it is no help to citizens.

All this means that there is large and growing global demand for justice services, both from citizens and from governments who want to ensure access. And where there is a demand, of course, there is a potential market. For impact investors, the question now is: Who is opening this new market and how do we engage with them?

Enter the justice innovators

The Innovating Justice Accelerator is an early entrant into the field of justice sector entrepreneurship. Responding to what it saw as an urgent need for solutions, HiiL established the intermediary body in 2010, providing a platform and network for justice innovators and sponsoring an annual innovation award.

For any impact investor with an interest in justice and the rule of law, their website is an eye-opener. It features a range of innovative ideas and programs to improve justice and the rule of law, some of them potentially investable and scalable:

  • Prison Paralegal Justice Centers is a program that helps prisoners become legal advisors within the prison system.
  • I Paid A Bribe is a web-based tool to decrease corruption and make it more visible by using a platform for reporting instances of paying or not paying a bribe.
  • Aahung, a reproductive rights organization in Pakistan, is producing a TV series with a commercial production house to spread its message in a financially sustainable way throughout the region.
  • Made in a Free World, an anti-slavery organization, created the Forced Labor Risk Assessment Tool a software program for businesses that exposes forced labor in global supply chains and helps companies eliminate slavery from the way they do business.
  • Rechtwijzer 2.0  is a justice platform developed by HiiL, offering legal information and advice to people in the Netherlands. It enables people to work on solving their legal problems in their own words, at their own pace, from their own homes with the support of legal professionals.

Democratizing access to justice

These examples provide a sense of where the global justice marketplace is heading, with digital approaches to delivery and remote support systems democratizing access to justice and making it more affordable for more people.

But there are still barriers. While digital delivery capabilities bring new possibilities, to be successful many of the new approaches require the cooperation of national governments; some require changes to regulation and law. Hiil, which campaigns in these areas, recognizes that bringing real change will take time.

Yet when you consider the potential benefits of a more innovative justice sector—universal access to justice, effective service delivery, reduced costs, and metrics resulting in a more robust rule of law throughout the world—opening the market seems the obvious thing for impact investors to do. In these early days, they are well positioned to play a key role in what could be the birth of an important new impact sector. Watch this space.

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[Credit Images: 123RF Stock Photo]

Impact Investing in Education infographic

Education Infographic maximpact_com

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

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

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

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

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

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

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

Impact investing vs. venture capital

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

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

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

Find impact investing opportunities in the Bay Area

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

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

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

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

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

Social Entrepreneur Organizations with existing venture capital support

Connectors: Organizations that bring together impact investors with social entrepreneurs

Looking beyond the Bay Area

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

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

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

Thinking Systemically About Water: An interview with J. Carl Ganter

By Marta Maretich, Chief Editor, Maximpact, @mmmaretich

Water sector investments continue to be high on the wish-list of many impact investors. But what are the wider issues surrounding investment in water? Maximpact talks to J. Carl Ganter, award-winning CEO and Founder of Circle of Blue and member of the World Economic Forum’s Global Agenda Council on Water Security.

What’s your view of water sector investing?

A few years ago, some venture capital firms invited me to make the rounds in California. I visited three different firms. Two of them had practically the same list of 68 companies to invest in, which they slid across the table with great gravitas. They asked me to comment, to tell them which ones I thought were winners.

What struck me at the time was that all these investments were what I think of as traditional. They were investments in a new type of pump or a new type of filter, for example, or a desalination plant. The venture capital firms, at least at this point, still had a very old world, 20th century, incremental way of thinking about investing in water. They were looking for ways to turn the water crisis into an opportunity by doing what they had always done.

I flipped their perspective and asked, “What if you had known in advance that Australia was under severe drought and its entire rice industry was going to collapse and this was going to ripple across world markets, affecting not only commodities traders, but impacting on the way the UNHCR manages its budgets for human disasters, its ability to buy food for refugees. How would that have changed your water investment choices?”

I don’t think they had ever thought about the wider ramifications of investing in water. Clearly, they weren’t thinking systemically about water. Hopefully, impact investors will take a more sophisticated approach.

What do you mean by “thinking systemically about water”?

I am seeing this as one of the biggest trends in the water sector today. I have an unusual perspective right now, with one foot in the “water buffalo” crowd; the community of water experts and people on the inside of the conversation; and the other in the world of journalism, which requires more of an everyman’s perspective.

In the water buffalo crowd, we’re hearing a lot more talk of a nexus of water, food and energy in a changing climate. In other words, it’s better not to think of water in isolation, but to consider it as part of a system in which those four pieces; water, food, energy and the effects of climate change; are interlinked.

And why is that important for impact investors?

From my experience, it seems that many in the investment community are still trying to figure out where the big play is in the water sector. But by thinking this way, they’re missing a massive opportunity.

If we understand there is a system in operation here, a competition, it’s possible to take a very different approach to everything we do. It’s become our mantra at the WEF, where I’m a member of the Global Agenda Council on Water Security. We joke about tattooing it on our foreheads; water, food and energy in a changing climate. We can’t think exclusively about water anymore; even the dedicated water buffalo’s can’t; we all have to think about the four-part system.

When it comes to impact investing, we need to embed that meta-message so that people looking for capital and impact investors are all thinking systemically. For example, if you’re in micro-finance and your focus is on women’s issues, then you really need to have water and sanitation embedded in your thinking. If you don’t, your work won’t be as effective as it could be. Or it may fail all together.

Why is that? When you bring water to communities in an appropriate way, you bring health, gender equality and education to girls and women. Girls will come to school because there are bathrooms that are safe for them to use. They have time for education because they aren’t carrying water all day. By thinking about these issues systemically, you can really have an outsized impact with the same level of investment.

Apart from thinking systemically, what can we do to be more effective when it comes to investing in water?

At the WEF, we’ve identified two major areas where change needs to happen. Both of these have implications for impact investing.

The first is governance. How do we break down the siloes within governments so that the water ministry talks to the infrastructure ministry and the education ministry? How do we remove the obstacles that prevent institutions from different sectors collaborating? Governance; the systems and processes that encourage cooperation and safeguard accountability; is key to breaking down siloes and creating conditions where collaboration can happen.

The other issue is values: What is the value of water? How much should people pay for water services? To what degree is water a human right? The answers to these questions tell us how much we value water for human use, industrial use, agricultural use and ecological use. Considering the value of water helps us include water in all of our conversations so that it isn’t an afterthought. It shouldn’t come down to a crisis situation if that can be avoided with foresight.

What would you like to say to an impact fund manager trying to put a portfolio together that includes water?

I’d advise someone on the sharp end of investing to think about water impact risk. By this I don’t mean only for water investments, I mean for all investments.

From the micro finance to large-scale bonds, it’s possible to go down the line with each investment, not only in the water world, and rate each one by risk of water impact.

For example, you might have an investment in an energy company. If you’re drawing a percentage of energy from hydro-electric energy, you need to consider how a prolonged drought like the one in California would affect electricity output. If you have investments in manufacturing businesses overseas you need to think about how drought in those parts of the world might ripple through your investments.

Organizations like Ceres have been successful in getting companies to disclose their water and climate risks in their annual reports. They’ve developed a method for assessment that impact investors could learn from.

Any other advice?

Our biggest obstacle lies in what we don’t know about what’s happening around the planet in this competition between water, food and energy. Our first step should be to invest heavily in understanding what is really going on. To this end, the White House recently announced its landmark Climate Data Initiative. Circle of Blue is participating and supporting this initiative with a new data dashboard that displays in real-time California’s water supplies.

This kind of information scaled will provide the key to finding solutions for the water issues we’re facing today. Not only that, but data projects like these will offer deeper insight for investment and return. Impact investors should consider how they can capitalize companies and projects that are collecting data and putting it in context.

One last thing: Do water experts really call themselves Water Buffalos?

(Laughs) Circle of Blue recently did two huge conference calls on water issues that each included about 400 people from around the world, with such experts as Peter Gleick, Jay Famiglietti and Lynn Ingram. I polled the participants beforehand, and many preferred, only half joking, to be identified as water buffalo’s. Perhaps it symbolizes persistence and strength while wading through vast pools of water and mud.

Circle of Blue announces new initiative exploring the water-food-energy nexus in India.

Ceres President Mindy Lubber will participate in the opening plenary of the 2014 Skoll World Forum in Oxford, U.K., from April. Hear what she has to say.

J. Carl Ganter

About J. Carl Ganter: J. Carl Ganter is co-founder and director of Circle of Blue, an internationally recognized center for original front-line reporting, research, and analysis on resource issues, with a focus on the intersection between water, food, and energy. He is a member of the World Economic Forum Global Agenda Council on Water Security and, for more than five years, served on the Woodrow Wilson International Center for Scholars Navigating Peace Water Working Group. In 2012 he received the Rockefeller Foundation Centennial Innovation Award

Water Sector Spotlight Deal: HydroMentia

Imagine a water treatment technology that costs less than traditional chemical treatment methods but which improves water quality by delivering low treatment levels using a natural and sustainable solution.

Our latest spotlight deal; HydroMentia; can do just that. The company delivers sustainable, commercial-scale water treatment using natural algae to remove high levels of nitrogen and phosphorus from wastewater, surface water and other water bodies.

Algal blooms are a problem in the Gulf of Mexico and thousands of other water bodies across the world. Caused by increased nutrient levels in the water, these blooms can contaminate seafood, spread disease and lead to marine mammal and seabird deaths as well as extensive fish kills, according to the EPA. Now HydroMentia has found a way to turn the destructive characteristics of algae into a water treatment powerhouse by making a virtue of what these organisms do best: Recovering excess nutrients.

HydroMentia has spent several years perfecting their water treatment technology to harness nature’s power for nutrient pollution control by optimizing algae’s natural capabilities. With a growing reputation, the process has been described as “best in its class” for improving water quality at low treatment levels using sustainable attached algae systems.

The system is based on shallow, sloped pools in which contaminated water is passed over dense beds of attached algae. As they reproduce, the algae remove nitrogen and phosphorus (as well as CO2) from the water. The algal biomass is then recovered and processed to recover organic and inorganic by-products, a practice that maintains the algae in an accelerated growth phase. The algal biomass is then processed into marketable commodities such as soil-enhancing compost or livestock feed. The process is less expensive than more established chemical treatment methods and uses far less land areas than traditional treatment wetlands.

The Algal Turf Scrubber, one of the company’s leading products has been demonstrated at commercial and pilot scale from Florida to New York and from Chesapeake Bay to California. One county in Florida has successfully operated this product for several years, with a second system being installed in 2014. Other clients in the pipeline include a mining company and an environmentally responsible real estate development.

The company is well positioned to expand both within the US and globally due to their widely applicable solution to a growing challenge. In order to do that they are seeking 1 million to 5 million USD in investment and have their eyes set on the impact investing community.

At the moment HydroMentia is still looking for investors and collaborators, so if you would like to learn more about this deal, register with Maximpact today further explore their potential.

View more Maximpact water sector deals.

Getting it Together: Public-Private Partnerships and Cross-Sector Collaboration are the Future of Impact

By Ana LaRue, Digital Media Manager, Maximpact

An impressive, cross-sectoral group of panelists gathered at Stanford on March 5th, 2014 for an impact investing round table titled: What is Impact? Definitions, Intentions and Everything. Standing room was the only option for those who arrived late, as attendants from various asset classes filled Stanford’s Center on Philanthropy and Civil Society to its limits.

Co-hosted by the Bay Area Impact Investing Initiative and the Flora Family Foundation, the event focused on taking a deep dive into impact definitions, measurement and the steps needed to shift more investment portfolios toward impact. Kim Meredith, Executive Director of Stanford Center on Philanthropy and Civil Society opened the conference. Pointing to the immense growth of the sector, and noting that philanthropy can’t be the sole driver of social innovation, she underlined the great potential for using impact investment to scale social enterprise.

Moderator of the evening, Paula Goldman, Senior Director of Knowledge; Advocacy at Omidyar Network kicked off the conversation by asking what is needed to bring impact investing to scale. As the panelists addressed her question, the importance of public-private partnerships emerged as an important theme.

The public-private partnership debate is something that we are seeing more and more of recently. In 2007, for example, the impact industry had little support from government. Seven years on, it’s clear that individual investing heroes and small family offices can no longer go it alone and government involvement is becoming increasingly important. A recent article co-authored by Cathy Clark and Jed Emerson titled Success in Impact Investing Through Policy Symbiosis shows that the role of public policy is already significant in underserved markets where impact investors operate.

So what else would the panelists like to see happen in regards to impact investing sector development? Other key points included:

      Increased funder collaboration: Coming together across sectors, more collaboration and better coordination are needed to propel the sector forward. This is something that our team at Maximpact is extremely excited about, as it truly summarizes the mission of our platform and our network.

      Increased deal flow: A shortage of products and services is a difficulty many impact investors continue to face yet there are investment opportunities ready and waiting now. The sector needs to find ways for players to take advantage of the growing interest in impact investing.

      Patience: More patience is still needed, especially when it comes to expecting returns in developing countries. While impact investors in developed countries can afford to demand quicker returns, patience remains an important aspect of scaling impact in developing countries.

      Improvements in measurement: The difficulty of measuring impact is still high on the agenda and will likely stay there through 2014. We have in the past discussed emerging impact measurement standards such as IRIS and the importance of their continuous development. The panel showed that his is very much an issue that continues to be a priority of the impact agenda.

      Maximization of impact: The effectiveness of impact is variable. All companies create impact: The key question impact investors should ask themselves is whether their investments make the greatest impact possible. As impact investing extends its reach, finding ways to maximize our impact will be ever more important to investors and impact businesses alike.

Among other things, the Stanford panel discussion showed the value of bringing together a diverse, cross-sectoral group of impact professionals (in this case a philanthropist-academic, a venture capitalist, a corporate engagement financial advisor and a public-private policy consultant as well as an audience from various sectors) to discuss the changing face of impact. The debate was dynamic and stimulating; and it is this level of exchange that sparks innovation and forges new kinds of partnership. In our opinion, bringing people from various sectors under one roof is exactly what is needed to scale impact investing and we hope to see many more such events taking place throughout the world in the future.

The Panelists of the evening:

For information about future impact investing events at Sanford Center on Philanthropy and Civil Society visit their website.

For latest impact investing deals visit Maximpact&rsquo;s deal listing platform.

Image credit: Vector image 123RF – Images taken at the event by Ana LaRue

Impact Investing in Disruptive Technologies

by Marta Maretich

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

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

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

Wearable computing bringing technology into new scenarios and transforming accessibility:

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

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

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

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

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

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

Find disruptive impact deals.

Image credit: buchachon / 123RF Stock Photo

Seven Steps to Allocating More of Your Portfolio to Impact

Guest blog by En Lee and Sam Lindsay

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

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

Step 2: Identify Target Impact Areas and Role of Investment

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

Step 3: Integrate Impact Allocation

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

Step 4: Evaluate and Select Investment Opportunities

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

Step 5: Implement a Strategy

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

Step 6: Monitor, Analyze and Report Results

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

Step 7: Consider Changes in Objectives, Strategy and Managers

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

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


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


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


Image credit: 123RF

Spotlight Deal: Maximpact forestry deals achieving positive results

Maximpact spotlight deals shine a light on the forestry sector. Currently Maximpact Eco has over thirty forestry deals listed and many of these are seeing a high degree of interest from impact and sustainability investors.

The number of responsible investments in the forestry sectors of the emerging countries may still be limited due to uncertain market environments and a low level of investment experience. However, there are attractive deals in the marketplace now; and those listed with Maximpact Eco are proving attractive to investors looking to place capital in sustainable businesses.

Twenty of these deals have been chosen and show cased to a select group of the Maximpact Eco investor community. As a result six of them were short listed and three of them are now in advanced discussion.

These are very promising results for a sector where, in large investment portfolios (USD 1 billion), forests and forestry usually represent only around one percent of the total portfolio. Yet it isn’t enough: From an impact point of view, more investment is needed worldwide in order to effectively combat forest exploitation combat carbon related issues and build bridges between sustainable forestry and investors.

The fact that forestry deals are getting substantial traction is a step in the right direction, demonstrating that, when it comes to sustainable forestry and impact investors, the attraction is mutual.

Interested in forestry deals? Login or Register now.

Global Supply Chains: It’s Time to Decide on the Way Forward

Guest contributor Dr. Maximilian Martin

As we start using our new holiday gifts this year, it is too easy to ignore the miraculous supply networks that allow us to enjoy the products of human labor and ingenuity around the world. Sustainability is increasingly viewed as a strategy for enduring in a world of scarce resources and unlimited needs; but we seem to be locked in an endless cycle of merely reacting to deep-seated economic and social problems. It is now time to decide on the way forward: do we want to make supply chain upgrading happen across the board and reap the benefits, or continue using half measures and band aids?

Perhaps more so than other industries creating value through global supply chains, the textile and garment industry illustrates the crossroads we are at. A three trillion dollar industry that encompasses the manufacturing and selling of textiles and garments, apparel has long been considered a source of economic progress around the world and has historically served as a catalyst for national development and industrialization. The inverse of this growth and the accelerating production of fashion has been a broadening and deepening track record of poor working conditions and heavy pollution. The collapse of the Rana Plaza factory in April 2013 in the Bangladeshi capital Dhaka jolted to life widespread and increasingly prolonged scrutiny of the industry. It has brought to the forefront longstanding questions over how to bridge the gap between economic viability and social and environmental performance. To the credit of many buyers involved, attempts to address the social and environmental issues plaguing the apparel industry in Bangladesh (and elsewhere) are being made; the European buyer-funded Bangladesh Accord on Fire and Building Safety and the US buyer led Alliance for Bangladesh Worker Safety are just two of the high profile efforts underway. But the New York Times also just published a piece reporting how clothing companies like Mango have declined to contribute to a landmark $40 million compensation fund for victims of Rana Plaza disaster. And as we are just entering the New Year, in Cambodia, where apparel is the country’s most important industry, a special military unit in riot gear dissolved a garment worker demonstration for higher wages on January 2, 2014, using force.

How can we graduate to a new normal where next level sustainable value creation is the standard state of affairs? To help address this need, Impact Economy; a global impact investment and strategy firm; has just issued my report, Creating Sustainable Apparel Value Chains, so industry stakeholders can begin to build a common way forward. The key insight is this: systems created this situation, and a systemic solution is now needed to address it. The good news is: there is ample value creation potential. A redesign of production processes paired with better infrastructure and training can save up to 20 percent of chemical inputs, up to 40 percent of energy, and up to 50 percent of water. Building humane working conditions, an improved environmental footprint and staying competitive need not be at odds.

The report offers a framework that links greater resource productivity with an ambitious agenda to improve working conditions and environmental footprints. This framework includes four key levers that need to be pulled in order to achieve industry transformation, including: (1) fostering total resource productivity and transparency across the supply chain; (2) upgrading the industry infrastructure by (impact) investing; (3) improving working conditions with a new level of ambition; and (4) studying and replicating the best practices of leading producers.

Of course, no one actor or lever is a panacea unto itself. But the framework presented in the report offers a more comprehensive way to consider the issues influencing the development of the industry, and to design effective responses to them. And the apparel industry is far from unique. Fragmented approaches to industry transformation, which otherwise prevent a fundamental and systemic shift to sustainability, are widespread.

Take the commodities industry. In 2012, the value of the global metals and mining industry approached $1 trillion. In 53 mining countries, three-quarters of whom are low or middle income, extractive industries are a cornerstone for millions of people. They often face a unique set of social challenges due to the high impact nature and close proximity to environmentally sensitive areas. Geostrategic tensions result from attempts by the world’s main powers to guarantee their preferential long-term access to vital commodities.

The electronics industry is no different. Covering everything from computers, mobile phones, and televisions to name just a few consumer products, the global electronics market is set to reach $1.4 trillion by 2015, according to Global Industry Analysts, Inc. Yet again, electronic waste due to the use of toxic chemicals and difficulty of recycling is a growing issue.

Growing trends such as green growth and energy efficiency, the rise of the LOHAS (“Lifestyles of Health and Sustainability”) consumer, and rising demand for affordable products and services at the base of the pyramid (BoP) will only serve to emphasize the need to determine how global supply chains can be harnessed to drive inclusive value creation; in all industries, and for stakeholders and investors alike.

As we go about using our electronics and fashion gifts in the New Year, let us not forget that the opportunity for sustainability has the potential to be great. But Rana Plaza type disasters won’t be avoided, and the impact of progress will increasingly worsen unless we attempt a bolder strategy. To achieve industry transformation, we need to step up the game. It is now time to decide on the way forward.

___

Maximilian Martin, Ph.D. is the founder and global managing director of Impact Economy. Before creating the brand Impact Economy and founding the firm, he served as founding global head and managing director of UBS Philanthropy Services. Dr.Martin also created the first university course on social entrepreneurship in Europe. His work, and more than one hundred articles and position papers, have helped define the trajectory of market-based solutions and the impact revolution in finance, business and philanthropy. He was invited to write the primer on the status of impact investing for G8 policymakers in 2013, which considered the potential and development options for this new USD 36 billion branch of the financial industry.

Maximilian Martin_impact economy

[Image credit: 123RF, Impact Economy]

Impact Investing in 2013: Reasons to be Cheerful

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by Marta Maretich

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

1. The Impact G8

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

2. Mainstream Investors Join the Party

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

3. Social Stock Exchanges

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

4. Social Impact Bond Results

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

5. Metrics Move On

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

6. Better Exits

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

7. Smartness

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

8. Data Adds Up

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

9. Great Get-Togethers

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

10. The Next Generation

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

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

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

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

[Image credit: 123RF]

Impactful Empowerment: UnitedSucces

Guest contribution by Yvonne Finch, Director of UnitedSucces

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

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

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

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

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

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

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

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

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

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

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

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

About UnitedSucces

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

[Image credit: United Succes]

7 Key Impact Investing Vehicles Targeting Women

By Ana LaRue

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

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

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

1. Female centered networking organizations:

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

2. Women’s investing networks and organizations:

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

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

4. Gender lens centered philanthropy, foundations and endowments

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

5. Angel investors focused on women-led startups:

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

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

7. Microfinance institutions empowering women in developing countries:

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

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

Read more about Empowering Women through Impact.

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

[Image credit: nexusplexus, 123RF]

Making the Most of Women Professionals in Impact Investing

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

by Marta Maretich

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

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

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

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

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

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

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

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

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

Conclusion

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

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

[Image credit: mfrissen, Flickr]

View Women’s empowerment impact deals.

World Vision Projects Ready for Investment

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

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

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

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

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

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

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

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

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

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

View other Maximpact spotlight deals.

 

World Vision’s global development areas of focus.

[Image credit: Courtesy of World Vision]

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

by Marta Maretich

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

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

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

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

Taking a measured view of impact

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

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

She’s right of course

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

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

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

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

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

Keeping sight of a higher purpose

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

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

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

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

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

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

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

Saving our forests from the effects of climate change

By Ana LaRue

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

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

What do the findings mean for our forests?

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

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

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

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


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


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

What can we do today?

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

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


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


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


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

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

Interested in forestry deals? Login or Register now.

[Image credit: Morgue File]

How to Find Impact Investors to Finance Your Sustainable Business

By Marta Maretich

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

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

Decide what kind of investment you’re looking for

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

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

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

Build impact measurement into your business plan

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

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

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

Research investors

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

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

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

Types of impact investors

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

Cultivate relationships

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

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

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

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

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

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

[Image credit: 123rf]

Big Investors, Small Investors, All Investors

by Marta Maretich

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

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

Small is beautiful

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

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

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

Democratizing early-stage impact investing

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

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

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

On the large side

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

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

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

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

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

Working both sides

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

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

[Image credit: alphaspirit 123rf]

Weekly Deals: Empowering Women

Empowering women250

This week’s spotlight deals focus on Women’s empowerment.
A recent report explored the problems of under-investment in women-led small and growing businesses and found that there is a gap in financing available. The finance that does exist is especially difficult for women to access. On the other hand, impact investors have an opportunity to support women-led businesses, but they often lack information and access to quality deals.

Three of the latest deals from our Women’s Empowerment sector show that opportunities do exist, if you know where to look for them:

DEAL D000482 – LOCATION: GUATEMALA

Indigenous women may have experience in entrepreneurial activities such as handicrafts, but they have historically been excluded from bank credit. This often limits their possibilities of growth due to lack of working and investment capital. This project links indigenous women to working capital credit and markets in the Guatemala region in order to promote production and commercialization of handicrafts and other economic activities. The project uses a validated credit methodology used for more than 10 years in the local Credit Union, to establish a revolving credit fund to provide the women with credit at market rates.

This project is currently seeking strategic partnerships and an investment of $ 150,000.

DEAL D000404 – LOCATION: COLOMBIA

This company manufactures exotic sauces and vinaigrettes utilizing only locally sourced, native Colombian ingredients. The business sources all of its ingredients from a local network of approximately 100 smallholder farmers. The company employs primarily women, currently having a direct impact on 15 local families. They are now looking to expand their operations with the goal of further increasing their impact on the local community.

The company is currently seeking investment of $ 500.000 to $ 650.000.

DEAL D000331 – LOCATION: INDIA

This organization facilitates awareness, assistance and entrepreneurship in a manner that will not only provide support to women but ensures a sustained and self-aided livelihood in cash or kind. The organization has created a livestock exchange model. Women first pay an annual membership fee of Rs. 1500, based on which every woman is given a goat and a lamb, totaling to a worth of Rs. 15,000. The woman also agrees to give back half the number of young produced by her animals every year for three years. These kids and lambs are collected at the goat farm, where they are bred for further loaning or sale in the market, continuing the cycle.

For every goat or lamb owned by a member of the group, the equivalent value of money can be loaned at any given moment in exchange for the livestock. This means that the goats function as a ready cash exchange for the women. The project has the opportunity for further scalability through an online platform. Online, individuals can raise money, adopt a goat or lamb and see the progress and social development of the women and their families. In return, the amount raised is returned with interest.

This project is currently seeking investment of $ 55.000.

To explore other Women’s Empowerment deals, log in to Maximpact. Not a member? Register now.

Interested in the latest Women’s empowerment sector resources? Access them through the Newsstand.

[Image credit:123rf]

Notes from the Sharp End

By George Watson, Head of Finance for SEFA

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

The impact goes beyond the investment

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

Don’t look only at funds

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

Sustainability is key

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

Distinguish between “charitable” donation and sustainable investment

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

Define the risks

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

Seek scalability

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

Define to measure impact

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

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

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

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

[Image credit:123rf]

Weekly Deals: Natural Resources

weekly deals natural resources

There are compelling reasons for investing in natural capital -­ our ecosystems, biodiversity and natural resources;­ and the choices for investors in these areas are increasing.

Three of the latest deals listing with Maximpact this week show how attractive deals with Mother Earth can be.

Deal: D000470

By focusing on climate change, this fund demonstrates that financial performance can be fully aligned with sound environmental stewardship and social development. It places special emphasis on sustainable land-use, biodiversity and ecosystem services, while seeking to leverage investment by raising $ 150 million to catalyze a range of positive impacts including reduced greenhouse gas emissions, sustained or enhanced biodiversity and ecosystem function and conservation of endangered species.

The Fund is now gathering further commitments for rounds to be completed in Autumn 2013 and Spring 2014. They are seeking investments from $5 million to $25 million.

Deal: D000477

This opportunity consists of three different projects that will collectively protect nearly 250,000 acres in the Amazon rainforest from slash-and-burn forest clearing and prevent millions of tons of greenhouse gas emissions. About 20% of global warming is attributed to deforestation, which reduces the Earth’s capacity to absorb carbon dioxide. These projects will mitigate deforestation, preserve biodiversity, and provide alternative economic opportunities to local communities.

The deals are seeking investment in the range of $1 million to $5 million.

Deal: D000471

This organization employs resource accounting tools to measure human impact and uses the insights to help communities make more informed choices. The project focuses on Spain and Greece, two EU countries, both heavily hit by the economic downturn. It helps local authority partners to understand their dependence on natural resources and to integrate this knowledge into their plans for sustainable economic recovery. The project is to be implemented in three phases over three years with partners such as: WWF, Greece, Eco-Union, FEMISE, University of Lyon and ACR+.

To ensure its completion, this deal is seeking investment of 1.5 million EUR in grants.

For a full view of available opportunities in any of our sectors,log into Maximpact and navigate to the deal platform. Not a Maximpact member?Register now.

Further recommended reading: The Little Biodiversity Finance Book: A guide to proactive investment in natural capital. Look for it in the Newsstand.

[Image credit: CIAT International Center for Tropical Agriculture. Flickr]

Weekly Deals: Investing in Communities

What do a youth start-up acceleration program, a book distributor serving children at the base of the economic pyramid and a rural village educational program focusing on sanitation have in common?

One: their initiatives provide alternatives to national and global corporate and government programs. Two: all three deals are listing on Maximpact today.

Deal D000474

This entrepreneur is organizing support for young entrepreneurs in Belgium. Their three month acceleration program helps start-ups in launching their company while their second initiative focuses on helping kids of 10 to 15 to launch and develop a mobile app, a website or a product that they can build on their own or with the help of adults. This is one of the only accelerators around the world that doesn’t take equity in the start-ups that it supports.To further develop their initiatives this entrepreneur is seeking investment in the range of 25.000 to 250.000 $, depending on their upcoming growth.

Deal D000468

This entrepreneur has distributed over 100 million books to educators serving children at the base of the economic pyramid in the US and Canada. They are now launching the digital phase of their program. Their goal is to make the model accessible globally by adding digital content and devices to the products offered and distributed. This scaling initiative would take them to a self-sustaining level where they could efficiently serve the ecosystem of NGOs and others who aim to create educational equity worldwide.To make their vision come true, they are currently seeking investment of 9 million $ in 2-3 tranches.

Deal D000472

In the village of Turasha, Kenya waste is a serious problem. Much of the waste in and around the community is washed into the river: death and diseases such as diarrhea, dysentery, worms, cholera, and typhoid are the result. The project’s goal is to educate the community about improving hygienic behavior such as keeping the compound clean of fecal material, providing or restoring toilets and establishing convenient washing facilities and improving the quality of drinking water by protecting and cleaning the river Turasha.This project is seeking investment of 35,000 $ which would include the cost of project activities.
These three latest investing opportunities provide only a snapshot of what can be found within the Maximpact platform. The more we can bring together the entrepreneurial energy and ideas with the capital required to bring them to life, the better for all, so stay tuned for more deals coming up in the future.

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

Spotlight Deal: Composting Adds Value for Mali Farmers

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

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

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

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

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

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

[Image credit: michelealfieri / 123RF Stock Photo]

Where Are the Opportunities for Impact in Agriculture?

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

Scaling up existing models

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

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

Pioneering longer-term finance

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

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

Moving from “alternative” to mainstream

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

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

Embracing agribusiness

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

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

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

One Year of Maximpact by Tom Holland

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

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

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

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

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

Surprises, good ones

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

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

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

What’s on the horizon

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

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

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

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

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

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

19 Ways to Find Funding for Impact!

By Ana LaRue

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

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

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

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

Future of innovative social impact financing

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

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

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

The New Role of Impact Intermediaries

By Marta Maretich

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

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

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

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

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


Applying more, better expertise

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

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

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


A deeper, broader skill pool

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

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

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

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

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

New Educational Opportunities for Impact Investing Professionals

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

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

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

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

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

Feel free to share other educational opportunities in the comments.

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

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

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

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

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

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

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

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

Moving with the times: Example of a ColaLife Crate

Inspirational Summer Reads from Maximpacts Newsstand

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

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

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

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

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

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Impact Investing and CSR

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

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

THE BENEFITS OF MATURITY

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

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

THE CORE DIFFERENCE

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

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

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

THE CSR/IMPACT OPPORTUNITY

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

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

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

Why the Impact Sector Needs New Legal Structures: Guru Arthur Wood Talks to Maximpact

Arthur Wood,social finance pioneer and founder of Total Impact Advisors, is an impact sector leader with new legal structures in his sights. A former banker with years on the financial “dark side” (as he calls it) Wood left banking to become the head of social financial services at Ashoka. Today he’s back in the private sector as one of the founders of Total Impact Advisors but he hasn’t given up his role as an advocate for sector development.

“What we’re trying to do,” Wood told Maximpact in a recent interview, “is to create mechanisms whereby you can apply for-profit capital market tools, create cross-subsidization and layer financing structures in a simple, replicable,modular manner.” His commitment to this end lead him to become one of the chief architects of the social impact bond, an innovative financial arrangement designed to secure funding for social benefit outcomes. He is also a driving force behind a new legal structure for social benefit companies, the Social Enterprise Limited Liability Partnership or SELLP.

But why do legal structures matter to the impact sector? And why do they matter today more than ever?

A time of convergence

We are living through a process of “fundamental convergence and reconfiguration of the social and commercial sectors from completely separate fields to a common space”according to a much-quoted article in a recent issue of the Stanford Social Innovation Review. That sounds radical; and it is. It’s also welcome news for many of our readers who support this shift to common ground.

And yet this time of convergence raises fundamental issues for the sector. As one result, the very shape of the social benefit organization is undergoing a transformation.The days when were only two kinds of organizations, for profit and nonprofit,are gone for good. Today there’s a need for new kinds of organizations where players from different sectors are able to collaborate in new ways. Complex hybrid organizations that blend philanthropy, business and government; and that, significantly, draw their capital from a variety of sources; already emerging, though not without difficulty.

Early solutions

One early solution to the convergence challenge has been to establish two organizations,a for-profit and a non-profit, linked in a joint venture. Commonly the non-profit owns equity in the for-profit, giving it the power to control the activities of the joint venture while pursuing its mission. Another approach is to create complex collaborative structures using contractual frameworks to establish new kinds of relationships within existing legal structures. Once controversial,such entities are becoming more commonplace today as the charitable sector,government and the private sector try to find ways to work together.

Yet these arrangements have limitations. Experience shows that they can throw up significant structural, cultural and governance challenges as mission-driven organizations try to cope with the world of business and satisfy government demands for accountability. They are expensive to set up, too, because each one must be tailor-made with the help of specialist legal advice. Finally,although they are capable of functioning, they don’t easily accommodate the development of the kind of complex, multi-layered, multi-stakeholder organizations that are emerging today.

“What we’ve traditionally done is to create these entities one by one and try to force not-for-profits into a for-profit contractual frameworks,” says Wood.”Cross-subsidization between social and economic mission in a for-profit/not-for-profit environment is very difficult without a proper legal structure. Firstly, it’s expensive to set up and hard to replicate. Secondly,when it’s done within a contractual rather than a regulatory framework, the better-resourced partner always has an advantage; and this is not usually the social benefit collaborator. Thirdly, doing it outside of a regulatory framework makes it difficult for governments to help achieve scale, compliance or replication. Finally, the status quo frameworks don’t include social mission as a primary requirement.”

According to Wood, the challenge is facilitating the “cross-subsidization of social and economic mission” in a more efficient, scalable way. That means establishing off-the-shelf legal structures like the 501(c)(3) in the US, that are easy to adopt without specialist advice, straightforward to manage in practical terms and transparent vis-vis government regulators.

Emergent legal structures

Wood is part of a group of like-minded leaders, some from the charitable side, others from the worlds of banking and business, who are trying to establish just such structures. They are having some success; new legal forms are starting to emerge:

In the US

  • The Low-Liability Limited Company or L3C has been made by adapting an existing legal form to meet social investing needs. Developed specifically to encourage investment by foundations, the L3C is now being used to form new kinds of entities. New IRS guidance released in April 2012 provides more clarity about the tax status of L3C type structures and increases their appeal to investors. The L3C has passed in eleven US jurisdictions, nine states and two Indian Nations and a federal bill has been tabled.
  • Certified B Corporations or B Corps are the invention of the nonprofit certification body B Lab. B Corps go through a certification program that ensures they meet standards of purpose, legal accountability and transparency. Today B Corps are recognized in 11 US states with legislation pending in 16 more. There are currently some 600 B Corps organizations operating in 15 countries.
  • Flexible Purpose Corporations are recognized in the state of California; the outdoor gear company Patagonia was an early adopter. This legal structure allows corporations to pursue a specific mission in addition to profits. Directors choose a “special purpose” that benefits society, establish strategy to meet its goals and report on its performance to shareholders.

In the UK

  • Community Interest Companies (CICs) are limited companies with additional features created to encourage business for community benefit. The company’s money and equipment can only be used for its social objectives and there is a cap on shareholder dividends; a limitation currently being challenged by Stephen Lloyd, one of the architects of the form. CICs are regulated by the UK Charity Commission.
  • Similar to the L3C in the US, the Social Enterprise LLP is adapted from the existing Limited Liability Partnership form, or LLP. Still awaiting approval by Government, it’s been designed as an off-the-shelf structure for social enterprises, providing a form for collaborative partnerships that may involve a number of for-profit and not-for profit-stakeholders. The SE LLP is transparent for tax purposes, has a charitable golden share to ensure social mission lock and, like the CIC, may provide a cap on returns. It is regulated by the CIC regulator.
  • Charitable Incorporated Organisations (CIOs) are incorporated charities that are not companies. Members and trustees are personally safeguarded from the financial liabilities the charity incurs. The charity has a legal personality of its own, which means it can conduct business in its own name, rather than the name of the trustees. Like CICs, CIOs are regulated by the UK Charity Commission.

Worldwide

  • Finland, Norway, France and Luxembourg have all created new legal structures to facilitate the establishment of hybrid organizations, often by adapting existing structures.

But is it enough?

Despite these advances, change isn’t happening fast enough for those who want to see more structural options available to social benefit organizations. As the sector continues its rapid growth and an ever wider range of players get involved, the need for new structures becomes more pressing.

Yet there’s inertia when it comes to changing old ways. Foundations, the target investors for L3Cs, have been slow to take up the opportunity to put their money into socially beneficial entities; in a recent blog for Pioneers Post, Wood points out that some 98% of the capital of US foundations is still unaligned with social mission. Meanwhile, the SELLP is stalled as the UK Government mulls over its tax implications, a situation that frustrates Wood.

“There are numerous examples of these types of structures accepted by the IRS in America today,” he points out. “In this sense it is not a legal question but one of scaling, replication and marketing. The contentious issue is the compliance framework and how complex that needs to be. An LLC framework is of course extremely flexible, with an extensive body of existing law surrounding it,including precedents for creating internationally collaborative frameworks. In this sense the L3C and the SELLP are not new but simply iterations of the existing LLC and LLP codes but with a social purpose built in.”

Beyond legal structures

The delay leaves Wood and his collaborators looking for other strategies to bolster the sector while the gears of government slowly grind. Currently they are discussing ways to tweak the social impact bond framework to make it more broadly useful and cheaper to adopt.

“With a little more social and financial engineering we will be able to create a standardized product that is applicable to any social issue,” says Wood. “What most people overlook is that by securitizing the cash flows of a social impact bond you can create quasi-equity. This has a clear financial value as a function of the achievement of the tangible social outcome by a number of collaborating stakeholders. Thus social equity actually has financial equity value.”

That’s good news for a burgeoning sector looking for more ways to make impact investing work, but it raises other questions. One of them regards oversight: Who will manage the partners in a social bond’s collaborative framework. How will they do it?

For Wood, this is a strong argument for establishing legal structures. “Social bonds are certainly useful, but there still needs to be a strong regulatory (legal)framework for these interactions,” he argues. “As a society, we think it’s right to regulate grant-making because philanthropy effectively receives a subsidy though the tax code. How much more do we need regulation when we have contingent for-profit cash flows to various parties and the allocation of equity as the function of meeting a shared social goal? Without a legal structure, the alternative is just to trust the bankers who set up these deals and hope for the best.”

Total Impact Advisors is currently listing impact deals on Maximpact.com. Check out their deals and many others.

Interview by Marta Maretich

Maximpact: Broadening the Definition of Impact Investing

 

Outdoor photograph of Tom Holland

Maximpact Founder Tom Holland

 

Interview with Tom Holland by Marta Maretich

Maximpact.com is characterized by its “big tent” approach to impact investing. What made you set it up this way?

When I came in as an impact investor and started looking for deals I began to realize that the sector had structural inefficiencies. The deals above $100,000,000 are taken care of by private banking, the deals below $25,000 are handled by micro-finance and other intermediaries. Everything in between is a sort of no-man’s land where people are working in silos of activity, there’s insufficient deal-flow and insufficient liquidity. The good news is that the sector is really beginning to wake up to the problems created by this gap; a recent article in the SSRI, Closing the Pioneer Gap, described the problem very well, I thought. From our point of view, one of the things that makes the gap wider and dilutes the market is the very narrow definition of what counts as impact investment. I thought this was something we could work on by building our deal portal around a broader definition of what an impact investment could be, and so drawing in widest possible field of players from philanthropy, CSR, the eco; green technological sectors, entrepreneurs, intermediaries and funds.

What is that definition?

At Maximpact we say that as long as the investment is good for the planet and good for its inhabitants; and that includes animals, not just people; we consider it to bean impact investment and subject to quality checks we will allow it to be listed on the site. This approach allows us to be far more inclusive in terms of the kinds of deals we list and it lets us reach out to a broader range of investors, some of whom are new to impact investing. Our aim is to draw more players into the arena, get them working together to increase deal-flow and encourage innovation.

Is this approach controversial?

Less and less so. The idea of using financial models to bring social and environmental benefit has really gained ground across the whole sector and with the public in recent years. Some of the prejudices about how that should be done have gone away, and that’s a good thing. Everyone is beginning to see that it’s possible to use a whole range of financial approaches, involving a broad spectrum of different kinds of players, to do good. The important thing is not the means but the ends, the outcome, defining and accounting for the benefit. The sector still has some way to go before we have a sure-fire way of doing this, but we’re all working on it. In the meantime, we think experimentation and innovation are the best ways to learn what works, and we are doing our part to encourage them by being as inclusive as we can be and facilitating collaboration wherever it happens.

So who should be using the Maximpact platform?

I want to see everybody using it to list and source deals: financial intermediaries, funds,asset managers, foundations, philanthropists, venture philanthropists,technology start-ups, qualified family officers, governments, high net worth individuals, banks and other major financial institutions. I’d like to see more CSR investors active on the site; this is a new way to give something back to society. I’d like to see more foundations using the site to source PRIs and MRIs through the platform. Foundations represent a huge pool of capital that’s still not committed to social benefit and Maximpact can help them achieve more in this area.

What can these different players do on Maximpact?

Maximpact brings together all the players; philanthropy, impact, funds, CSR and eco; green technology. In a simple way it enables people to find each other and to find the types of investments they want. They can all come onto the platform, contribute deal flow and get into a collaborative environment where they can cross-invest with one another. There’s no reason why philanthropy can’t take part in an eco or green tech investment, and the same goes for CSR.There can be two or three different kinds of investor taking a combined investment position. At the same time, the platform allows users to reach out to specific funding groups and find like-minded entrepreneurs and investors, if that’s what they prefer. It’s all about being inclusive and collaborative and trying to resolve the bigger issues that we’re all facing.