Blended Value, Capital Investing and the Pursuit of Multiple Returns

Jed EmersonImpactAssets

Transforming Philanthropy Forum

Cartagena, Colombia

May 11, 2011

Overview1. A Notion of Value2. Capital and Corporate

Considerations3. Appendix:

Tracking Integrated Performance

Perspectives on A Notion of Value Senior Advisor, The Sterling Group, Hong Kong (Family Office) Executive Vice-President, ImpactAssets, (Nonprofit Financial Services) Managing Director, Integrated Performance

Uhuru Capital Management (Fund of Hedge Funds) Senior Fellow, Generation Investment Management Foundation, London/New

York (Global Public Equity) Strategic Advisor, Sustainable Private Equity Funds (PE, Sustainability-Focused) Founding Board, Pacific Community Ventures (VC, Community Development-

Focused) Founding Director, REDF/HEDF (Venture Philanthropy) Advisor, Strategic/Venture Philanthropy Funds/Foundations (Philanthropy) Founding Director, Larkin Street Services (Social Enterprise/Social

Entrepreneurship) Faculty Appointments (Thought Leader, Academic Researcher)

Harvard/Stanford Business Schools Visiting Research Fellow, Oxford University CSI-Heidelberg University

At the Beginning and End of the Day, there are really only 2 questions:Are you and your assets maximizing your full, potential value?

Are all your assets strategically aligned to achieve your 10 year goals and attain your 30+ year vision?

What does it mean to be a Fiduciary? Definition of Fiduciary Responsibility has evolved over time Fiduciaries may consider not only financial return, but how

extra-financial factors could effect that return over time Fiduciaries often also involved in defining mission and intent of

foundations, investment funds, family offices and so on… Trustee vs Professional vs Advisory Fiduciary Responsibilities, in

various related roles with differing incentives and motivations The Future of Millennial Fiduciaries and Disgruntled Boomers

+1

-1

+1-1

FinancialInvestments &

Numeric Returns

PhilanthropicInvestments

& Social Returns

Beyond the Zero-Sum Dissonance:The Investment Plane and Capital Continuum

Quad A Quad B

Quad C

Economic Value

Social Value

Blended ValueInvestments w/Multiple Returns

FROI & SROI

+1

A Value Maximizing Equation

The Power of Financial Assets to Generate

Social and Environmental Impact

The Power of Social and Environmental Factors

to Impact Financial Performance

Total Portfolio and Corporate Performance: Multiple Returns and

Blended Value Creation

Capital Considerations

A Winning Philanthropic Business Model?“For every dollar you donate, 95 cents is invested in the pursuit of

financial return and a nickel is invested in our business… (Insert your business here: Small Business Development, Education,

Social Change, Environment, Economic Development…)

What Percent of Your Capital is Advancing Your Mission?

95% of your assets are, at best, neutral to your institution’s mission….

….while 5% of your assets drive 100% of your mission.

The New Golden RulePortfolio or company size does not define the breadth of one’s vision nor determine

the tools you may use to create the future you desire

Wealth Management and Fiduciary Translation: Your family’s financial AUM and/or

Family Firm Corporate Philanthropy Payout are not your current value nor your future potential!

360-Degrees for MissionMistra Foundation

Grant(Program)

AvailableCapital

Grant(Infrastructure) Grant

(Research andDevelopment, Seed Funding)

PRIs andRecoverable

Grants

FROI Risk Boundary

RiskFree Rate

TreasuryNotes,

Community CDs, ImpactInvestment

Bonds

Traditional Diversified Investment Portfolio

VC FundOr AngelInvesting

Privateand PublicEquity Investing

SociallyResponsibleAngel andSocialVentureCapitalFundInvesting

SROI Risk Boundary

A Unified Investment Portfolio

(Impact Investing Vehicles)

Solutions for Impact Investors Rockefeller Philanthropy Advisors

Sustainable Finance as Risk Mitigation Sustainable Finance integrates financial, social, and environmental

considerations into decision making, facilitating improved risk management and higher return on investment.

Financial institutions can potentially be affected by social and environmental issues through the operations of their clients. Social and environmental issues within a financial institution's portfolio may translate into business risks for the financial institution.

There are three types of risk a financial institution could be exposed to arising from the social and environmental issues of their clients: credit risk, liability risk and reputational risk.

IFC Web Site for reference

Foundation for Applied Research, Association for Accountants and Financial Professionals, 2009

“Nike, P&G, The Home Depot, and Nissan North America are better at balancing social/environmental and financial objectives than other companies because they don’t see them as competing objectives.

They are able to hold on to both perspectives simultaneously because they are using the sustainability tensions as a source of new ideas, creativity, and innovation. They expect more innovation and entrepreneurship from their employees and more sensitivity to sustainability issues by innovation and R&D, business unit, and functional leaders.”

Corporate Considerations of Value Creation

From Capital Market Catalysts to Collaborative Innovators

Tracking Integrated Performance

Why Are We Here?Where you sit determines… ….where you stand:

Social Entrepreneur…Asset Owner…Public Funder…Public Policy Activist…Foundation Executive…Business Owner…Social Enterprise Manager…Fund Manager…Social Worker…Researcher/Academic…Concerned Other!

…but there is only one question:

Are we maximizing total performance while generating real impact for our multiple investments?

Visible vs. Invisible Value

Enhanced Analytics and Research Frameworks to Assess /Track Financial and Extra-Financial Aspects of Firm Performance and Capital

Returns

Evolution of Metrics

Compliance Management

Value Maximization?

Acumen Fund Pulse

Discover Measure Manage Communicate

Project Title

Produced By

Total Dollar Investment in Project

Analysis Date

Project Date Range

Total Time Invested in Project (HRS)

PERFORMANCE SUMMARY

SOCIAL

ENVIRONMENTAL

ECONOMIC

FINANCIAL

CATEGORYCURRENT IMPACT

# of Jobs Created 22.0

# of People with Access to Clean Water 300.0

# of Educational Materials Provided 490.0

MWhs of Energy From Renewable Sources

100.0

Waste Reductions Achieved 123.0

# of Trees Planted 80.0

$ of Income to Community 19.0

$ Value of Community Service Donations 2000.0

IMPACT CALCULATOR SM

296.3

Project X

SVT Group

$67,500

8/10/09

2.8

11.9

% COMPLETION OF GOAL

SOCIAL

ENVIRONMENTAL

ECONOMIC

8.4

4.5

4.2

ECONOMIC

IMPACT PER $10,000 INVESTED

SOCIAL

3.3

ENVIRONMENTAL

14.8

5/10/2008 - 8/20/2010

750

WEIGHTED ACTUALS (0-10)

8.6

18.2

44.4

72.6

Project/Tactic Description

Project/Calculation Assumptions

Attempting to rectify the situation of severe poverty in Oakland

1 hour of work = $90

33%

N/A

vs. GOAL

-0.4

3.4

-1.5

-2.0

WEIGHTING (%)

33%

33%

88%

75%

96%

Category Score

0.0

2.0

4.0

6.0

8.0

10.0

SOCIAL ENVIRONMENTAL ECONOMIC FINANCIAL

100%

62%

53%

40%

83%

0%

Impact Reporting and Investment System (IRIS)

Evolving SROI Methodology REDF

1996 2000 2009

NEF SROI Framework European SROI Network

Regional SROI Networks On-Line/Off the Shelf Tools

LBS SROI Primer, Social E-Valuator, REDF Templates, Social Solutions SROI

Center for Social Investing, University of Heidelberg, SROI Version 2.0

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