The rapid globalization of impact investing
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The Rapid Globalization of Impact Investing. Ted Jackson School of Public Policy and Administration Carleton Centre for Community Innovation Presented to the Research Works Luncheon Session, Senate Room, Carleton University, November 1, 2012. Core Issue.

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The rapid globalization of impact investing

The Rapid Globalization of Impact Investing

Ted Jackson

School of Public Policy and Administration

Carleton Centre for Community Innovation

Presented to the Research Works Luncheon Session,

Senate Room, Carleton University, November 1, 2012


Core issue

Core Issue

Impact Investing is growing across the globe, but so far this growth has been driven mostly by investors from the Global North. How to effectively engage investors from the fast-growing new economic powers, and the low-income countries, is a challenge that this new field must meet directly, with energy and creativity.


Current context

Current Context

Slow economic growth globally

High unemployment and growing inequality

Pressure to reduce western aid budgets

Continued ascendance of new economic powers: China, India, Brazil, South Korea, Indonesia

Increased importance of G-20 in global governance

Increased development assistance and trade on the part of the new powers

Need and opportunity to lever private sector capital to address pressing social issues


Investments intended to create positive impact beyond financial return

Investments intended to create positive impact beyond financial return

  • Provide capital

  • Transactions currently tend to be private debt or equity investments

  • We expect more publicly traded investment opportunities will emerge as the market matures

  • Expect financial returns

  • The investment should be expected to return at least nominal principal

    • Donations are excluded

    • Market-rate or market-beating returns are within scope

  • Businesses designed with intent

  • The business (fund manager of company) into which the investment is made should be designed with intent to make a positive impact

  • This differentiates impact investments from investments that have unintentional positive social or environmental consequences

  • … to generate positive social and/or environmental benefit

  • Positive social and/or environmental impact should be part of the stated business strategy and should be measured as part of the success of the investment

Source: JP Morgan, Rockefeller Foundation and GIIN, 2010


The rapid globalization of impact investing

i

Financial

First

Impact Investing: Mapping ReturnsSource: Adapted from Monitor Institute 2009, via Rockefeller Foundation , 2011

Impact

Investments

High

Traditional

Investments

Market

Related

Impact

First

  • SRI

  • (“Do No Harm”)

Financial

Returns

Low Impact

and

Low Financial Returns

Philanthropy

  • Subsidized Investments

Below

Market

  • Grants

Low

High

Social Returns


Actors in the impact investing industry

Actors in the Impact Investing Industry


Examples of impact investments

Examples of Impact Investments

Investee:

Investors:

Investee:

Investors:

and

USA

INDIA

TANZANIA

Investee: M’tanga Farms

Investors: Calvert Foundation,

Lion’s Head Global Partners

Investee: LGBT Enterprises in Latin America

Investors:

and

supported by NESsT.org

CHILE


Mapping the impact investing industry

Mapping the Impact Investing Industry

The Sterling Group

UK

GERMANY

CHINA (HONG KONG)

NETHERLANDS

USA

INDIA

MEXICO

KENYA

SINGAPORE

BRAZIL

SOUTH AFRICA

AUSTRALIA


Capital growth

Capital Growth


Value of reported investments by region 2011

Value of Reported Investments, by Region, 2011

Source: Saltuk, Bouri and Leung, “Insight into the Impact Investment Market,” 2011


What impact i nvesting is not

What Impact Investing is Not

Not a silver bullet / panacea

Not implying that every social issue can be solved through market-based approaches

Not replacing the important role of philanthropy

Not an excuse for governments to ignore their obligations to marginalized populations or their obligations to redistribute wealth


The potential of impact investing

The Potential of Impact Investing

The ability to unlock new types of capital to address a range of social issues, and to combine capital in creative ways

An opportunity to address the limitations of traditional investment approaches that narrowly focus on financial returns

A desire by some wealthy investors to generate both financial and social returns


What should could carleton do i

What Should/Could Carleton Do? (I)

Ottawa/Eastern Ontario

Engage Canadian impact investors to finance LTW and other Carleton-affiliated enterprises that can generate social or environmental benefits

Accelerate efforts to commercialize and scale social-purpose technology in priority sectors: health, the environment, sustainable energy, etc.

Integrate impact investing strategies and actors into promotion of regional economic development

Become an impact investor in affordable housing and social infrastructure, through partners and intermediaries (e.g., CMHC)


What should could carleton do ii

What Should/Could Carleton Do? (II)

Global

Use evaluation to hold impact investors to account for their declared intentions

Conduct independent, critical research on effectiveness of models and tools in impact investing in various sites

Design/facilitate “triangle” interventions involving a western country, a new economic power and a low-income country

Consider hosting professional training in impact investing at Carleton (e.g., “IPDET for impact investing”)


Resources

Resources

Bugg-Levine, A. and J. Emerson. Impact Investing: Transforming How We Make Money While Making a Difference, 2011.

Gates, B. “Innovation with Impact: Financing 21st Century Development,” Report to the G-20 Leaders, Cannes, 2011.

Global Impact Investing Network: thegiin.org

Harji, K. and E.T. Jackson. “Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry,” Rockefeller Foundation, 2012.

J.P. Morgan, GIIN, Rockefeller Foundation. “Impact Investments: An Emerging Asset Class,” 2010.

Monitor and the Acumen Fund. “From Blueprint to Scale: The Case for Philanthropy in Impact Investing,” 2012.

Monitor Institute, “Investing for Social and Environmental Impact: A Design For Catalyzing An Emerging Industry,” 2009.

SVT Group. “Catalog of Approaches to Impact Measurement,” 2008.

United National Development Program “Innovative Financing for Development: A New Model for Development Finance,” 2011.


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