impact investing: building an industry - rockefeller foundation

8/6/2019 Impact Investing: Building an Industry - Rockefeller Foundation

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Impact Investing:

Building an industryImpact Forum

10 January, 2011Dhaka, BangladeshMargot Brandenburg

Associate DirectorThe Rockefeller Foundation



© Global Impact Investing Network, 2009

What is Impact Investing?

Investments intended to create positive social impact beyond financialreturn

Provide capital

Transactions currently tendto be private debt or equityinvestments

We expect more publiclytraded investmentopportunities will emerge asthe market matures

Expect financial returns

The investment should beexpected to return at leastnominal principal

Grants and donationsshould be excluded

Market-rate returns inscope

Business designed withintent …

The investment should bedesigned with intent to makea positive impact

This differentiates impactinvestments frominvestments that haveunintentional positive socialconsequences

… to generate positive socialand/or environmental impact

Positive social and/orenvironmental impact shouldbe part of the stated businessstrategy and should bemeasured as part of thesuccess of the investment




Why Impact Investing?

Government andcharity scale solutions

20 th century

Private charitysubstantial funder of social innovation

Need to harness creativityand reach of private sector

Not enough charity andgovernment subsidy to address

global challenges

Now




A convergence of forces

Investors and consumersincreasingly values driven

Eagerness to adopt new tools

Growing inequity and environmentalcrisis

Track record of early success

Talent pushing new careers

Impactinvestingnow“locked in”

Can ittakeoff?

Openings for policy change

4




Who are impact investors?

A heterogeneous group:FoundationsFamily officesDFIsBanksPension fundsHigh Net Worths (HNW)Social Investment Funds

http://www.investingforgood.co.uk/index.php

http://www.blueorchard.org/jahia/Jahia/pid/1




What is industry potential?

6

Potential profit and invested capital to fund selected BoP businessesover the next 10 years

Sector Potential investedcapital req’ed , USD bn

Potential profitopportunity, USD bn

Housing: Affordable urbanhousing

$214 - $786 $177 - $648

Water: Clean water for ruralcommunities

$5.4 - $13 $2.9 - $7

Health: Maternal health $0.4 - $2 $0.1 - $1

Education: Primaryeducation

$4.8 - $10 $2.6 - $11

Financial Services:Microfinance

$176 Not measured

Source: JPM Morgan Global Research/Rockefeller Foundation


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Phases of industry evolution

7

Unlock Latent Supply ofCapital by Building

Efficient Intermediation

Build EnablingInfrastructure for the

Industry

Evolution of social and environmental impact investing

UncoordinatedInnovation

MarketplaceBuilding

Capturing theValue of theMarketplace

Maturity

Increase Transparency and Credibility in Impact

Investing

Benefits of a common language of metrics and definitions 1946 ----- Venture Capital ---------

Present1900s ----- Community Development Finance ---------

1970s ----- Clean Tech Finance ---------

Impact investing is positioned along a trajectory of industry evolution that mirrors what we have seen in other, related industries

----- Microfinance ---------1970s



Status of impact investingindustry

8

Launching a marketplace requires both public goods and hybrid public/private infrastructure. This infrastructure requires significant philanthropy and patient investment capital.

Building EfficientIntermediation

Build EnablingInfrastructure for the

Industry

Evolution of social and environmental impact investing

UncoordinatedInnovation

MarketplaceBuilding

Capturing theValue of theMarketplace

Maturity

Build a cr and Credibility in Impact

Investing

Future StateEarly State Current State

BuildDevelop Industry

Infrastructure

BuildPromote throughresearch, outreach,

enabling policies



What will it take to capture thepotential value of impact investing?

IRIS

Facilitateleadership

Buildinfrastructure

Researchand

advocate

Catalyzeintermediation

http://www.socialfinance.org.uk/




Build infrastructure

standard language and framework for tracking andperformanceA shared vocabulary for describing the performance of impact investments

Repositories of comparable data used to produceanonymous performance benchmarks

Regulated exchanges and other mechanisms for reducingtransaction costs and improving liquidity

Ratings systems that assesses the social and environmentalperformance of companies and funds seeking investmentcapital from impact investors




Catalyze intermediation

standard language and framework for tracking andperformance

Funds that can mobilize institutional-scale capital

Exchanges that to raise appropriate capital for SEs, provideon-ramp for individual investors, improve liquidity

Databases, subscription facilities that facilitate dealsourcing, reduce transaction costs

Investment clubs that reduce transaction costs, share dd

http://www.themix.org/default.aspx

http://www.responsability.com/index.html



Why Impact Investment Exchange Asia(IIX)?

Why an exchange?Enables social enterprises to attract capital without compromisingmission

Drives adoption of standard social and environmental reporting andmeasurement

On-ramp for individual investors (HNW and retail)

Reduce transaction costs for enterprises and investors (search and

market-clearing)Improve liquidity for investors



Why Impact Investment Exchange Asia(IIX)?

Why an Asia regional exchange?Regional nuance and presence matters

Leading role of enterprises in region, esp. Bangladesh

Opportunity for regional application of global social andenvironmental reporting and measurement



What else does an exchange need tobe successful ?

Parallel investments are required toBuild capacity of social enterprises to list, use capital to scale, report

Engage national, regional policymakers on enabling regulations

Build awareness among private banks, ‘gatekeepers’ for HNWs

Improve offerings of relevant service providers (accountants, auditors,legal services, etc.)

Promote and refine standardized social and environmental reportingmetrics



Thank you

Margot BrandenburgThe Rockefeller Foundation

[email protected]+1 212.852.8464

mailto:[email protected]

mailto:[email protected]

impact investing: building an industry - rockefeller foundation

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