Entries in impact investing (5)


Stormy weather forecast for financial markets?

Capital markets can play an important role in mutuality, as a greater percentage of people become invested in them, and as they provide a supportive environment for social investments. In a recent outlook for Bloomberg View, consultant and portfolio manager A. Gary Shilling outlines why he believes global financial markets may face severe conditions in the near future (along with a handful of factors that have the potential to soften the expected market headwinds).

The stressors include:

  • Further fallout from Brexit;
  • Low oil prices (and weak demand); and
  • A global labor surplus.

He argues further that central banks are already taking extraordinary steps with monetary policy (quantitative easing and negative interest rates), to little effect. At some point these will spark a market correction, perhaps a significant one.

Still there are factors that may ameliorate some of these stressors, including the relative value of stocks compared to government bonds, and the potential for more infrastructure investment by the U.S. in the years ahead.

-- Catalysts



Impact investment and a measuring the higher purpose

An upcoming conference on impact investing at the Vatican highlights just one aspect of the growing interest in the intersection between financial capital performance and human, social and environmental performance, according to a recent article in the Financial Times.

Impact investing has been gaining traction in mainstream wealth management circles, generating both funding and attention to the issue of how to measure the social impact -- as well as the financial returns -- of a given investment. Exactly how much capital is invested in this manner is a point of some discussion: the Global Impact Investing Network (GIIN) has identified about $75 billion in total, while BlackRock -- one of the world's largest investment firms -- states that it alone manages $200 billion in impact investments. Still, there is clearly momentum behind the idea of doing well by doing good in the capital markets.

The requirement to measure social impact is what differentiates impact investing from other types of investment activity, such as socially responsible investing (SRI), or environmental, social and governance (ESG) investing, which apply various levels of screening up front to weed out certain industries or invest in companies that exhibit certain characteristics.

As expected, there is an active debate about what the right metrics for impact investments should be, and how they should be calculated. These are the same questions we addressed in developing the economics of mutuality, and we are very interested in the evolution of the answers.

-- Clara Shen


Danish example demonstrates how partnering delivers results for SDG incubators

A recent report in Business Fights Poverty cites the example of Danish biotech company Novozymes, which implemented a strategy called Partnering for Impact to achieve the greatest impact for underserved markets.

Novozymes realized its expertise in the technical innovation space would be insufficient in nations looking to improve their sustainable development goals (SDGs), because pieces of important infrastructure are underdeveloped or missing. For that reason, Novozymes participated in an incubator called DIVA Ventures L3C, which includes foundations, corporations and impact investors that focuses on increasing capabilities and spreading risk. All partners bring their ideas for positive societal change to a joint team governed to DIVA. The venture is then developed systematically to ensure bankable returns. Corporations like Novozymes benefit from strong organizations with proven track records while its partners can see their ideas for societal growth scaled to provide the greatest impact.

Image source: Business Fights Poverty

-- Catalysts


Big business? Investing in businesses with social benefit

A recent article in the Guardian observed that there is a growing trend of impact investors  funding services for new consumers moving towards the middle class.

These investors look for businesses that have a social or environmental benefit while also turning a profit. One such investor, Leap Frog, estimates the market that includes those who are moving out of absolute poverty and seeking goods and services amounts to 4 billion people, meaning there is tremendous potential in this space.

This potential is translating into rapid growth for companies like Bima, which means “insurance” in Swahili. Started just five years ago, it has grown to nearly 18 million customers in Asia, Africa and Latin America. Bima sells life insurance through mobile phone network operators – a kind of loyalty program that delivers gains for the operator, and an insurance safety net for people long locked out of financial services.

Still, even as the UN prepares to move forward with a new development agenda that calls on greater involvement from the private sector, some have concerns about the actions and impact of private equity in developing markets.

We are interested in your thoughts -- do you have an example of businesses that do well by doing good? And what are the best tools for building businesses with social benefits?

-- Jay Jakub



Impact investing evolution?

Impact investing -- an investment approach that intentionally seeks to generate a measurable social impact as well as a financial return -- is gaining greater attention from "mainstream" investors, according a recent article by David Bank in Impact Alpha.

While the precise definition of "impact investing" may still be the subject of some debate, it's hard to argue against the statement that Goldman Sachs' acquisition of Imprint Capital "could signal that the impact investing market has graduated from the white-papers-and-conferences stage to become a core part of the banks’ client-retention strategies and asset-management offerings." Bank also points out that Goldman decided to buy an existing specialist asset manager rather than building up it's own in-house capability, suggesting that other smaller funds specializing in impact investment may become acquisition targets.

With these new dynamics, it's reasonable to ask what this might mean for the future direction of impact investing -- will managers' approach change? Will the mix of institutional vs. family investors shift at all? Will the number of funds and/or the amount of capital directed towards social businesses increase?

Finally, we will be interested to see how these issues play out where it matters most -- among the businesses striving to create a social impact, and the communities in which they operate.

Image source: Impact Alpha

-- Clara Shen