impact investing intro march 2011

8/7/2019 Impact Investing Intro March 2011

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6440 S. Wasatch Blvd, Suite 260

Salt Lake City, Utah 84121

Phone: 801 274 6010

www.altacapital.com

An introduction to...Impact Investing

Prepared By:

Kurt BrownPrincipal


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investing to generate positive

environmental or social return

along with financial return.

Impact investments aim to solve social or environmental

challenges while generating financial profit.

Actively placing capital in businesses and

funds that generate social and / or

environmental good.

What is Impact Investing?

An investment strategy whichseeks to maximize both financial

return and social good.

...using profit-seeking investment

to generate social and

environmental good."


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Blended Value Investing

Mission Driven Investing

Mission Related Investing

Triple Bottom Line Investing

Social Investing

Values Based Investing

Program Related Investing

Sustainable and Responsible Investing

Responsible Investing

Ethical Investing

Source: Monitor Institute

Impact Investing travels by many names...

Impact Investing is also known as...

Impact Investing is closely allied

to but differentiated from

Socially Responsible Investing(SRI), which generally employs

negative screening to avoid

investing in harmful companies.

Investments that unintentionally

result in social good are notregarded as Impact Investments.


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In the U.S., community investment* has grown

to a total of $26 billion invested, with a

compound annual growth rate of 22 percent

between 2001 and 2007.

The microfinance field globally has grown

even faster, with the total volume of

microloans growing at a 44 percent annual

rate from 2001 and 2006 to reach $25

billion.

The volume of money coming into clean

technology investments has quickly

become a flood, growing to $148.4 billionof new investments in 2007, up 60 percent

from the year before.

If the market grows to even 1 percent of the

global managed asset allocation, it would

create a market of approximately $500 billion.

How big is the market?

Source: Monitor Institute. * Refers to the provision of financial services to underserved

communities and includes banks, credit unions, loan funds, and venture capital funds.


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Using profit-seeking investment to generate social

and environmental good is moving from a peripheryof activist investors to the core of mainstream

financial institutions.

-Monitor Institute


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From the NY Times this past weekend...

There is a true moral hunger for a new asset class.

a recent study showing that some $120 billion of investment capital much of it from wealthy families

is looking for a socially productive, and profitable, home.

There is a huge

community interested in

doing business in a

different kind of way.

the notion that for-profit companies with a

social mission at their core could constitute an

asset class is fairly new. And though there are

myriad challenges in making it real, there is

genuine progress.

a handful of investment funds recently

established to finance businesses that address

social problems, especially in the developing

world. Emboldened in part by the success of themicro-finance industry, which provides loans for

small-scale businesses


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Source: Hope Consulting Survey4,000 respondents

Individuals are most interested in the

Investments with a Social Bonusconcept

The public wants access to these opportunities...


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56% of money would come

from investments

23% of money would be new

to an investment advisor or

broker (charitable donations

+ discretionary spending)

The risk of cannibalizingcharitable donations seems

minimal (10%)


The new investment dollars would come principally from investments

(with limited cannibalization of charitable dollars)

Investors are willing to divert funds...


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Lack of track record 55%

Dont know where to find 52% Financial Advisor hasnt recommended 50%

Limited information available 49%

Insufficient ratings or benchmarks 47%

Too risky 40%

Not effective way to make financial returns 39%

Want to keep charity and investments separate 38% Not enough time to research 37%

Hard to measure social impact 33%

Why potential investors have not invested in Socially Responsible

Investments

Why is the industry not larger?


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If/when investors make Impact Investments, their priorities are

Guarantees principal back 21%

Addresses a cause I care about 20%

Has a track record of success 12% Has a business model I believe in 10%

Offered by a well-known company 6%

What are potential investors looking for?

Our mission is to:

1) Invest in companies...producing significant impact2) Generate commercial returns

3) Mobilize capital markets and create new asset classes

Huntsman Gay Capital Impact

Mission Statement


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The larger ecosystem...


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Investment Profiles


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Loans to Indias rural and urban poor

Typical Loan -

Size: $125 loan

Duration: 50 weeks

Interest Rate: 22 26% APR

99% repayment rate

Mid-2002 5,000 clients Mar 2010 6.8M clientsUpcoming IPO scheduled at USD $1 -2 billion

SKS MicrofinanceHyderabad, India

Example 1: Microfinance Bank...


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Micro Benefits China

Market Size: 300 500 million low-income factory workers

Product Offering: Loan distribution through a deduction-

secured benefits card that acts like a credit card and isadministered and issued by established Chinese banks

Functions through Visa, MasterCard, or China Union Pay

Benefits:

Low interest rates

Benefit provided by employer

Easy to access cash on demand

No credit history needed

Automatic payments - no late fees

Goal: Set the responsible lending benchmark for low-income

populations in China and other export-driven economies

Example 2: Private Company...


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Unitus Equity Fund

In 2003, Unitus realized that the micro-finance institutions they

assisted needed large amounts of capital to grow. These MFIs were led

by solid management teams, had upgraded their business systems,

and simply needed more capital to extend additional loans to more

clients at the bottom of the economic pyramid. But the current market

conditions made it extremely difficult to raise and obtain the capital

they required through non-profit donations.To solve this problem, Geoff Woolley and Bob Gay assisted Unitus in

forming Unitus Equity Fund, a for-profit private equity investment fund

primarily focused on providing growth capital to micro-finance banks.

UEF equity investments created an immediate social impact as

investee MFIs were able to provide micro-loans to more than one

million additional low-income clients using the UEFs capital

contributions.

Meanwhile, what began as a socially-driven fund turned out to be

incredibly profitable, as UEF realized returns exceeding 4x and

generated tremendous investor demand for a second, larger fund.

Perhaps most importantly, the proven success of this type of

investment brought billions of investment dollars into the worldwide

microfinance industry. Today, the worlds largest investment banks and

private equity funds have invested large amounts of capital into

microfinance.

Example 3: Fund Structure...


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Market Conditions:

27 million unit housing shortage in urban India

Increases yearly by 2 million units

Low-income Indians live in unsanitary, unsafe, andunstable conditions

Product:

Apartments ranging from USD $6k - $20k

160-500 sq.ft. apartments

Running water

Private toilet & bath

20-30% down, 12-15% mortgage, 15-year term

Market Opportunity: USD $270 billion

Investment Strategy:

Build the affordable housing ecosystem by

investing in

(i) construction companies,

(ii) affordable housing projects, and

(iii) housing finance companies

Sorenson Housing

Opportunity Fund

Example 4: Fund Structure...


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Microfinance:

Impact Investings First Success


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Mohammed Yunus:

Considered the founder of the microfinancemodel

Founded the Grameen Bank in Bangladesh in

1976

Awarded the Nobel Peace Prize for his effortsin 2006.


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Grameens growth...


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India

Africa

The Explosion of Microcredit...


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The Explosion of Microcredit...

Azerbaijan

Cameroon

impact investing intro march 2011

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