innovative platform for social capital markets - robert kraybill
TRANSCRIPT
Building an Innovative Platform for Social Capital Markets
10 January 2011
www.asiaiix.com
$500 Billion Potential Market
Impact Forum for Social Change
Global Managed Assets: $53Tn
Environmental, Social and Governance Focus: $20Tn
Socially Responsible Investing : $7Tn
Impact Investing: $500Bn
Philanthropy: $310Bn
Investment Philanthropy
Sources: BCG asset management industry survey (July 2010)
United Nations Principles for Responsible Investment
Monitor Institute: Investing for Social and Environmental Impact (2009)
But is it achievable?
Impact Investment
Market
Demand
Supply
Impact Forum for Social Change
Supply of Impact Investment Capital: US Retail
U.S. Retail Market Study
$120 billion potential today
~50% of Americans interested in Impact Investing
Minimal cannibalization of charitable donations (~10%)
Increased investing activity after first impact investment
Source: Hope Consulting (2010)
Impact Forum for Social Change
Case Study of a Microfinance Fund Manager
0
100
200
300
400
500
600
700
800
900
2003 2004 2005 2006 2007 2008 Current
US
D in
Mill
ions
Year
Global
Microfinance
Fund is
Launched
Second
Microfinance
Fund is
Launched
responsAbility’s growth in asset under management
Impact Forum for Social Change
$0.5 Trillion
Impact InvestorsTriple Bottom Line Investors
Impact Investing Landscape
Invest through Mutual Funds
Microfinance Investment Vehicles
Social Venture Capital Funds Private Loans
and Private Equity Investments
Publicly Traded Shares and
Bonds
DFIs
Other Individual Investors
Broad Range of Institutions
Foundations
Insurance Cos
UHNWIs
Impact Forum for Social Change
Impact Investment Exchange Asia (IIX)
Creating platforms to facilitate capital raising by Social Enterprises
The Mission
To provide a liquid and transparent market where:
Social Enterprises can raise capital for expansion to scale their social and environmental impact
- and -
Impact Investors can achieve both financial and social / environmental returns
Impact Forum for Social Change
East Asia // China, Hong Kong, Japan, Korea, Mongolia, Taiwan
Southeast Asia // Brunei, Cambodia, East Timor, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam
Pacific // Australia, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, New Zealand, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu
South Asia // Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka
Singapore
Indonesia
Thailand
BangladeshIndia
Impact Forum for Social Change
Two Platforms to Connect SEs and IIs
Impact Partners What: A private marketplace
where selected Impact Investors will be introduced to carefully screened Social Enterprise investment opportunities
Target investors: Social Venture
Funds and UHNWIs
Target companies: Established
Asian SEs seeking private venture funding
Transaction structure: privately
negotiated investments by 1 or a small number of investors
Impact Exchange What: A stock exchange where
Impact Investors can invest in and trade shares and bonds issued by Social Enterprises in a liquid and transparent environment
Target investors: Institutions and
Accredited Investors
Target companies: Well
established Asian SEs seeking access to broader pools of funding
Transaction structure: Private
placements to a broad group of investors; secondary trading and quotation on an established exchange platform
Impact Forum for Social Change
IIX Launch Phases
Social Enterprises Venture Funding ready
• Limited funding history
Private market ready
• Significant funding history
Impact Investors • Market entry for Social Venture
Funds (SVFs)
• Exit strategy for SVFs
• Market entry for Institutions,
HNWIs
Ecosystem Players Accountants, lawyers, specialized
financial advisors
Investment bank involvement
Impact Capital Raised $ 250K + $ 5 M onwards
Impact Partners
Social Enterprise Capital Absorption Ability
Low High
Impact Exchange
Launch Date: Q 1 - 2011 Q 1 – 2012
Impact Forum for Social Change
What Securities Will IIX List? Limited to Social Enterprises Primary mission to create positive social or environmental impact
Shares (for-profit social enterprises) Public offerings at valuations that reflect both economic and
social/environmental values of the enterprise Investors receive financial return through dividends (and potentially
capital appreciation) plus social/environmental returns
Bonds (for-profit and not-for-profit social enterprises) Bonds issued by for-profit SEs pay interest and principal from earned
income Bonds may also be issued by not-for-profit SEs with income streams
that provide a repayment source Investors will receive an financial return through receipt of interest and
eventual return of their principal plus social/environmental returns
Impact Forum for Social Change
Listing Criteria and Investor Eligibility
Listing Criteria for Social Enterprises Both financial AND Social/Environmental Impact
Financial performance, disclosure and corporate governance criteria appropriate for growth companies
Supplemented by social / environmental criteria that will limit listing to social enterprises
Eligibility Criteria for Investors Institutional investors and high-net worth individuals from
around the world
Self-selected group of Impact Investors interested in triple-bottom-line returns
Impact Forum for Social Change
Why Not List on a Traditional Exchange?
How the SE will be received by the market
Unfamiliar business models
Suspicion of social mission
Whether the social mission will be preserved
Lack of investor alignment
Limited impact reporting
Pressure to pursue financial returns at the expense of social impact
Exchange rules that enshrine shareholder primacy
Impact Forum for Social Change
Next Steps
Launching Impact Partners
Building a pipeline of market-ready SEs
Creating complete local and regional ‘eco systems’
Inviting Impact Investors to begin investing
Completing regulatory requirements and launching Impact Exchange
Impact Forum for Social Change
