This was a special session at the Skoll World Forum, because it centered around an Oxford-style debate on the motion “Has impact investing been inflated?” Chris West and Mara Bolis argued for the motion, Cathy Clark and Lisa Kleissner argued against, and Julia Sze moderated.
It should be noted that speakers on both sides of the debate are active in developing the impact investing space, with neither of them opposed to the practice. Nonetheless, today they took a firm position either for or against the motion being debated, for the sake of creating a more thought-provoking debate.
The argument from Chris West and Mara Bolis broadly followed the one made in their recently launched report: “Impact Investing: Who are we Serving” (blog by Mara Bolis). Their key concern with the field as it stands today is that there is a mismatch between the type of capital supplied and the type of capital needed. “Because this sector is trying to behave differently, this money should behave differently”, pleads Mara Bolis. Too frequently, the social entrepreneurs who are knowledgeable about the financing needs of enterprises which serve the poor in developing countries, are left out the conversation when impact funds and other investment vehicles are designed. This has lead to unrealistic expectations about returns, and risks undermining the sector.
What can be done? Chris West argues that more patient capital is required, as well as more realistic expectations about returns. Entrepreneurs also need to ensure that they accept investment only at the right time, from the right people, and under the appropriate terms. Otherwise, enterprises can end up with “schizophrenic boards”, which cannot agree on whether to prioritize financial growth of social impact. Participants from all sides agreed that social investment finance intermediaries have a key role to play in helping entrepreneurs raise the right kind of capital, as do resources developed for entrepreneurs seeking investment, such as the CASE Smart Impact Capital toolkit.
Nigel Kershaw, OBE Chair of The Big Issue Group, addresses the panel of speakers.
On the other side of the debate, Cathy Clark and Lisa Kleissner spoke about the progress that has been made in developing this field, emphasising that there is genuine commitment to social impact among many of the funders have in the field. For instance, in the Toniic 100% impact network, over 130 individuals have pledged to use 100% of their assets for positive social and environmental impact, amounting to a total of over $4.5 billion in assets. Lisa Kleissner, who is a member of the network, shared her personal perspective: “The money that we [received] was more than we had hoped for, so we were willing to take a risk.” Her approach has been to work closely with entrepreneurs, understand their business model, and provide a combination of grants, loans, and other investments as needed.
The T100 project will provide other personal journeys and insight from 50 Toniic 100% impact members. The early findings are that 83% met or outperformed financial return expectations (in a sample of 40 portfolios), and 87% of all respondents met or exceeded their impact return expectations. However, what constitutes an annualised market rate of return varies considerably among respondents, leading 53% of respondents to state that the discussion around financial returns needs to be re-framed.
What can we conclude from this this debate? By one metric, the side against the motion won. The small group of 7 audience members who felt that impact investing had not been inflated grew to over 15 after the speakers finished their remarks. But they remained a minority in the room. Nonetheless, many audience members commented that “Has [the promise of] impact investing been inflated?” was the wrong question to ask. Inflated according to whom? And is it not too early to tell? What is clear is that the field has developed substantially in the last 15 years. Regardless of whether early results meet or defy expectations, the recently created sector infrastructure (funds, advisors, measurement experts, and other intermediaries) will enable growth, better capital placement, and better impact outcomes in the coming years.
As you may know, term has started and things are getting more exciting everyday here at the Centre. Part of that excitment has been fueled by opportunities like the ones below. Feel free to peruse them and see if any are of interest to you!
Dr Larry Brilliant is coming to Oxford
Dr Larry Brilliant, President of the Skoll Global Threats Fund, will be speaking on ‘Pandemics – Can we eliminate major worldwide epidemics?’ on 22 October at 17:30. To register or for more information click here.
Are you interested in working in Russia? The Alfa Fellowship Program is a professional development program placing American and British citizens in work assignments at leading organizations in Russia in the fields of business, economics, journalism, law, public policy and related areas. Financial and programmatic support are provided. Apply by 1 December.
Want to help WAMT generate its own income through social business? If so, apply to intern and help compile a costed Business Plan for the social business(es) WAMT wishes to pursue. For more information contact Andy Kelmanson, Chief Executive at email@example.com.
The Skoll Centre’sAlex Nicholls was recently on sabbatical at various social entrepreneurship organisations in Australia. While there, illness he had the chance to talk to SkyNews on the global nature of social entrepreneurship and its evolution over the last decade. Hear what he has to say about measuring the impact of social entrepreneurship and the future of social finance markets. Watch the video here.
This post was writen by Skoll Centre Director, diagnosis Pamela Hartigan.
If you are an investor who has been wooed by impact investing and are looking for solid deals, capsule where do you go?
That was the challenge faced by Ron Cordes, order a wealthy New York based entrepreneur who was faced with the prospect of conducting due diligence on a myriad of possible social investment deals – without the time or expertise to do so. But rather than give up, as many frustrated investors might do, Ron sought the help of the Calvert Foundation and together, launched ImpactAssets last year with capital from Ron Cordes’ Foundation, the Rockefeller Foundation, and other leading philanthropic and financial services sponsors.
ImpactAssets is a non-profit financial services company (I know that sounds like an oxymoron, but then, think of OneWorld Health, the first US non-profit pharmaceutical company). It combines both philanthropy and asset management to mobilize capital for social and environmental impact. At present, it has current assets of US$60 million and offices in San Francisco, New York, Seattle and Bethesda, Maryland.
I happened to be in New York this week and took advantage of a brief respite from meeting- mania to have coffee with my long-time friend and social investment pioneer, Jed Emerson. In catching up with one another’s professional and personal lives, Jed told me about his involvement in ImpactAssets – which in addition to him, has drawn upon some of the “greats” in the impact investing field, including Tim Freundlich as its President and as its Chairman, Wayne Silby, the creator of the Calvert Fund and Foundation.
As it turned out, I was serendipitously in the city for the launch of ImpactAssets 50, s a very cool initiative. In short, Cordes invited a group of impact investing experts, of which Jed is one, to review and select the top 50 fund managers who are taking the best of the for-profit and not-for-profit structures and blending them to yield social, environmental and financial returns. Criteria for consideration in this blue ribbon group include over three years experience in the impact investing field, a minimum of US$5 million under management, and a demonstrated commitment to social/environmental impact at the portfolio level.
In this way, wealth management advisors have a list of places to start their due diligence in looking for funds for their clients to invest in or products to place in their portfolios.
It will be exciting to see how ImpactAssets evolves in the coming years, how many fund managers will vie for the privilege of being selected among its Top 50, and how many entrants are spawned to compete with this very promising venture.
We are pleased to announce the recepients of the Skoll Centre Research Grants. This newly lauched scheme offers University of Oxford academics and researchers the opportunity to advance knowledge in the field of social entrepreneurship – with this year’s theme specifically focused on finance. It is an area timely and relevant to practitioners and academics alike.
We were so pleased to receive many other quality proposals from across disciples throughout the University. It is a promising sign that the scholary inquiry into finance for social and environmental advancement will only continue to grow and enrichen our understanding of its broad potential.
Congratulations to the recepients, and look out for next year’s research round in early 2012.
Impact, implications and opportunities for mobile phone water payments in Sub-Saharan Africa
A comparative study of the financial and societal implications of water mobile payment initiatives. It will explore:
the degree to which mobile banking can boost revenue collection and strengthen the financial base of water service providers
the extent to which mobile payments can benefit poor households due the lowering of water payment transaction costs
the broader potential of mobile banking platforms to unlock new and innovative models of water provision for the unconnected urban and rural poor in Sub-Saharan Africa.
Towards a Framework to Assess Credit Risk in the Group Lending Approach to Microfinance
The study aims to develop a tool for practical use in the assessment of credit risk among borrower groups. It is basedon previous empirical work identifying the three major sources of credit risk in joint liability group lending:
risk at the individual level pertaining to socioeconomic status, financial history and family support toward group membershi
risk arising from the particular purpose of loan use such as for productive investments, consumption, home construction, repayment of other loans and so on and
risk relating to group dynamics – particularly, the mechanism of group formation and levels of group cohesiveness.
This study will incorporate these major sources within a single analytical framework.
The Regulation of Micro-Banking Industries
This project aims to design a regulatory framework that can be used to help regulate micro-banking industries. It will explore whether the principals, rules, and institutions that regulate retail banking industries in developed countries can serve as a guide to build a “hybrid” model of regulation. It will then examine which types of institutions can effectively apply this hybrid model, with cases studies in Cambodia, Kosovo, and Fiji.
There is no denying the prevalence and prominence of the impact investing discourse these days. A hot topic? Absolutely. A brand new conversation? Not even close.
So, when you can hear from one of the early pioneers of the industry, it is always insightful.
This week we hosted Tammy Newmark and Michele Pena of EcoEnterprises Fund who joined us as part of the Skoll Centre Speakers Series. They have been investing growth capital in sustainable businesses in Latin America for over a decade – and have the battle wounds to prove it.
Not that it’s been all setbacks and scars — but because they simply are open and transparent about the challenges they (and other risk-taking impact investors) have faced over the past 10 years.
Set up in 2000, EcoEnterprises Fund provides long-term investment capital and business advisory services – one without the other would be ineffectual and downright bad business, they say. The Fund has invested in 23 companies from ecolodges to organics, sustainable forestry to aquaculture. Most of these investments have been wildly successful (20 companies still in operation, 11% p.a. return, and most importantly, measurable social and environmental impact) but of course, there have been challenges.
Which is no surprise, seeing that they are injecting risk capital into companies that are, well, risky. They bet on the companies that are first-movers and market makers, whose products and services have yet to gain market acceptance. As such, they are cultivating new demand and a vibrant marketplace that moves these eco-enterprises from the outskirt to the mainstream.
What’s next for EcoEnterprises Fund? Be on the look out for their book this fall called “Portfolio for the Planet”, which is an open playbook to their tools, indicators and investment cases. Also, they are currently raising $30 million for a new fund EcoE II, which will target 10-12 small and growing community-based businesses via mezzanine investment instruments.