In the past few weeks, I came across several exciting new trends and innovations in the area of impact investment and blended finance. These include; the emerging social impact markets, trading social outcomes, and Impact-Linked Finance.
Impact-Linked Finance is a form of funding that directly links financial rewards to the achievement of positive outcomes. It incorporates financial incentives for enterprises that achieve exceptional (agreed upon and verifiable) positive outcomes. That means that a social enterprise will enjoy better financing terms (ie lower interest rates or a grant alongside a loan) if they meet specific impact outcomes.
“These outcomes can come in many shapes and forms – for example increased incomes for the poor, more gender equality, reduced plastic waste, or improved learning outcomes for children. The more social or environmental value a company creates, the lower its cost of capital will be. This value-creation could have a powerful effect. The best companies in the world – in terms of positive impact – would suddenly be able to raise large amounts of low-cost capital to scale. And even more importantly, they could further optimize their impact. As a result, resources would flow to what matters most to society, and this has mutually reinforcing effects” (Bjoern Struewer, Roots of Impact)
The Climate School powered by Kite Insights aims to equip all employees with the knowledge (head), motivation (heart), and tools (hands) to become true leaders and take action on climate and other sustainability issues.
Disclosure: the latest addition to my portfolio career is being a Kite Insights Fellow
The problem: while companies are making increasingly bold sustainability commitments…few are transforming their organizations at the pace or scale needed to positively impact nature and climate change. Achieving net-zero targets requires radical transformation of every aspect of a company.
At the same time, the latest survey (Every Job is a Climate Job) shows that 83% of employees are ready to take action in the context of their work, irrespective of their seniority, gender, or function. So there is a huge employee engagement opportunity.
The solution: The Climate School – We activate employees’ readiness, willingness, and ability to act through an education and engagement program designed to boost: climate knowledge, climate conscience, and climate action.
The approach: Evaluate measuring employee readiness with our proprietary Climate Action Readiness Assessment (CARA). Based on the results we move to educate and co-develop customized engagement and learning journeys that include e-modules, workshops, and masterclasses by the level of knowledge, function, level of seniority, and geography. Armed with a clear understanding of the challenges and opportunities, we further support our clients to activate employees, facilitating ideas for change, and how they can advocate and lead on these issues aligned with corporate business and sustainable strategies.
The global impact investment market exceeded $1tn according to the latest study of Global Impact Investment Network (GIIN). Amit Bouri, CEO of GIIN announced this figure and unveiled the latest report Sizing the Impact Investment Market 2022 at GIIN Investor Forum in Hague (Oct 12-13).
“In recent times, the climate crisis, the drive for transparency around impact performance reporting, and global sustainability reporting standards have brought renewed attention towards the importance of implementing impact investing strategies throughout the investment process. The Core Characteristics of Impact Investing require a clearly stated impact intention, as well as measurement and management of impact performance throughout the investment cycle, to ensure that investments achieve positive impact results relative to the previously defined impact intentions” (from this report).
Other significant impact investment topics on the rise: Gender lens investment, Climate justice finance, and financial inclusion for refugees.
Regeneration this word/approach/concept/movement is now everywhere. Here are 3 recommendations: a book, a video and an article that provide excellent guidance to understand and follow this important movement.
1.One of the most remarkable books covering this subject is Regeneration: Ending the climate crisis in one generation by Paul Hawken. Regeneration is a radical new approach to the climate crisis, one that weaves justice, climate, biodiversity, and human dignity into a seamless tapestry of action, policy, and transformation that can end the climate crisis in one generation.
The book together with its companion website plot a pathway to achieve the goals outlined by the report “Global Warming of 1.5°C” published by the IPCC in October 2021. The book concludes with a section titled “Action and Connection” showing the solutions in detail and actions to be taken. It also includes an ever growing wiki of climate actions for the most important Nexus. Nexus are large complex issues that intersect multiple institutions, geographies, cultures, and people, but which do not fall under a single category of action or impact. Plastic, global fishing fleets, and palm oil are three prime examples (from the book Regeneration by Paul Hawken)
A seminal speech by Doug McMillon, CEO of Walmart. The company has been very active with their sustainability efforts since 2005. In 2020 they committed to become a regenerative company and explains in detail how they will achieve this goal.
An insightful interview by the Godfather of modern sustainability, John Elkington and the founder of Patagonia, Yvon Chouinard, a rock climber, surfer, innovator, environmentalist, entrepreneur and outdoor industry billionaire businessman.
The Impact Management Platform (Platform) is a collaboration between Partner organizations, all of whom are leading providers of sustainability standards and guidance to coordinate efforts and mainstream the practice of impact management.
The Platform represents the next phase of the collaboration that, until now, was facilitated by the Impact Management Project (IMP), a timebound consensus-building forum that ran from 2016 to 2021. Through the Platform, initiatives will continue to work together to identify opportunities to consolidate existing sustainability resources, collectively address gaps, and coordinate with policymakers and regulators to support the mainstreaming of impact management. This web tool is the first product of the platform.
The Platform will be overseen by a Steering Committee comprised of the IFC, OECD, UNDP, UNEP FI and UNGC
This is a great platform to not only learn but to design and implement impact management. It is designed for a very broad audience from novice to professionals, from startups to large organizations, for investors and for impact organizations. The website contains an overview of the actions of impact management and it is an amazing resource center for standards and guidance. It is an interactive and rich platform.
This year we have seen a convergence/merger of the leading sustainability disclosure standard setters (corporate reporting framewords). In June the two giants, The International Integrated Reporting Council (IIRC) merged with the Sustainability Accounting Standards Board (SASB) into what is today the Value Reporting Foundation to provide investors and corporates with a comprehensive corporate reporting framework across the full range of enterprise value drivers and standards to drive global sustainability performance. This was followed in Nov at the COP26 in Glasgow the IFRS Foundation announcing the formation of the International Sustainability Standards Board (ISSB) by consolidating the Climate Disclosure STandards Board (CDSB) and the Value Reporting Foundation (which houses the Integrated Reporting Framework and the SASB Standards) by June 2022.
The Platform encompasses all these actors above and all the industry leaders in impact and sustainability like GIIN, B-Lab, UN Global Compact, OECD, PRI, UN, GRI and more. It is a very needed and welcome move towards simplification and in creating a robust global standards for sustainability and impact management.
The undeniable effects of climate change, global pandemics, and growing income inequality have heightened corporate awareness of the need to incorporate sustainability into their business strategy. These social and global challenges offer also a unique opportunity to transform the role of business in society. A new paradigm and a global leadership reset are urgently needed.
In the backdrop of Net-zero targets, Reduce Emissions, Reduce Waste and Reduce Plastics (which are all extremely important) there is an exciting and bold body of work surfacing on beyond net-zero and going for positive impact value creation!
The B-Corp movement has been a leading example of this by rallying companies to use business as a force for good and to aim for being the best for the world rather than the best in the world. The new must-read book of Paul Polman “Net Positive: How Courageous Companies Thrive by Giving More Than They Take” offers a roadmap towards this new paradigm. More recently I learned about Positive-Impact Companies, Positive Institutions, or Flourishing Enterprises1 which replaces shareholder primacy with greater purpose as the North Star for a company’s journey.
It is not long ago that we have been celebrating the movements of Do Less Harm and “Shareholder Primacy to Stakeholder Capitalism” but the notion of “Flourishing Enterprises” seems to guide us to aim for one step further by including in the business purpose the flourishing of people and planet and acknowledging the interconnected nature of business success with the long-term prosperity of the planet.
slide from Chris Laszlo’s presentation on “Flourishing Enterprise” at the 5th Global Forum for Business as an Agent for World Benefit, Oct 19-28th, 2021
So, what are these Flourishing Enterprises?
According to David Cooperrider, “It is something every leader wants…. Flourishing enterprise is about people inspired every day and bringing their whole selves into the enterprise, it’s about agility and innovation arising from everywhere; and it’s about realizing remarkable relationship value with stakeholders, including customers and societies, and ultimately with a flourishing earth.” 2
Chris Laszlo3 referred to “Unilever, Orsted, Natura, Ikea, Triodos Bank, Eileen Fisher, Gro Intelligence, TOMS, Greyston Bakery, Beyond Meat, Headspace, and Kingfisher as examples of emerging Flourishing companies. These are for-profit businesses that compete on the basis of creating a positive impact for society and the environment. Their model for business success is that by creating prosperity in the communities that they are part of and by contributing to a regenerative natural environment and improving human well-being, they can actually be more successful than their peers that don’t have this focus.” (Of this list, Natura, Triodos Bank, Eileen Fisher, TOMS, Greyston Bakery are also B Corps) According to Laszlo, Flourishing enterprises embed 5 key factors in their organizational strategy:
Positive impact (not only reducing harm but improving social, environmental or health dimensions)
The approach is embedded in their life cycle (so not a pilot nor a part of the company but end to end)
Radical innovation (not incremental)
Socially inclusive
Efforts aiming at system change
The concept of “doing well by doing good” (that there are investments where you can have both financial and social returns, i.e., impact investments) inspired me to write a book on Microfinance and Microfinance Investments4 in 2004. This concept has developed and expanded over the years as more evidence mounted that it is possible to achieve both goals and now, we can witness businesses changing their purpose to include the prosperity of people and the planet not only because it is the right thing to do but because it is the way for the business to thrive!
1 This concept has been created, researched analyzed, documented, and presented by Chris Laszlo, David Cooperrider, Ron Fry, Ignacio Pavez, and Lori D. Kendall.
2Presentation at the 5th Global Forum for Business as an Agent for World Benefit. “The Great Leadership Reset” Day 1: David Cooperrider on “The Discovery and Design of Positive Institutions: Harnessing the Power of Mirror Flourishing”
3Presentation at the 5th Global Forum for Business as an Agent for World Benefit, Day 5: Chris Laszlo on “Flourishing Enterprise”
4Felder-Kuzu, Naoko: Making Sense: Microfinance and Microfinance Investments, Murmann Verlag, Hamburg, 2004
A timely and seminal work by Paul Polman and Andrew Winston. Paul Polman is Co-Founder and Chair of Imagine, Chair of the B Team, and Saiid Business School, a leading proponent that business should be a force for good. The Financial Times described Paul as “a standout CEO of the past decade”. In his 10 years as CEO of Unilever, he proved that a long-term multistakeholder model (ending quarterly reports!) can bring superior financial performance.
I will copy here the first part of the excellent “Exclusive Excerpt” of this book that Paul shared in his newsletter on Linkedin
Exclusive Excerpt
What is Net Positive?
Our vision of net positive is a business that improves well-being for everyone it impacts and at all scales—every product, every operation, every region and country, and for every stakeholder, including employees, suppliers, communities, customers, and even future generations and the planet itself.
This is a North Star. No company can achieve all these aims at once, but it’s where we should be heading if we want a viable economy and planet. To exist as a relevant business today is to enrich the world. The ultimate question is this: Is the world better off because your business is in it?
What it looks like
The net positive company will operate differently from what’s normal today. It will, for example, eliminate more carbon than it produces; use only renewable energy and renewably sourced materials; It will, for example, eliminate more carbon than it produces; us create no waste and build everything for full circularity, and replenish and make cleaner all the water it draws. This excerpt can be read in its entirety by going to the Linkedin link above.
I took a long break from this journal which I started in 2006. My last entry was in May 2020 (below) on some thoughts on the Great Reset. The COVID-19 pandemic went viral causing millions of deaths globally and affected everyone, how we live, work, think and interact with each other.
Fast forward, 18 months passed and now vaccines are available, though not equally accessible for all. Governments and companies have started to experiment to live with the pandemic as it is far from over. Tokyo Olympics has begun with no spectators. It is perhaps a sensible time to reflect upon what has changed, what we learned, and how should we carry on forward.
One of the biggest changes to our lives (how we live, work, think, feel and interact) is that we have gone much more digital. Massive acceleration of digital adoption. e-commerce, remote working, e-learning, telemedicine. There are many positives and new opportunities but we have to find ways that the benefits of going digital also reach the last mile.
People, as well as organizations, have been forced to understand the importance of natural capital, our planet, climate crisis, diversity, and inequality. What can we do as an individual or as a company or as a country? At least we are seeing a vast range of initiatives that are trying to crowdsource solutions for the climate, sustainability, diversity, inclusion, and inequality.
When thinking of where we are heading which should be a better world, it would be imperative to emphasize how we use, harness, and develop technology for all, in a human-centric way through a broad collaboration from all sectors and parties.
In some ways quickly and in others in slow motion, the world has changed in front of our eyes and screens. We, everyone in the world, have been impacted by the same cause, almost at the same time. This turmoil caused by the Covid-19 pandemic underlines how we are interconnected and it is a wakeup call for us to realize what truly matters and what not. Needless to say, there is a big difference in the challenges posed depending on where you are and the degree of how privileged or not privileged you are. As to this reality of inequality what comes to mind is one of my profound beliefs;
“From those to whom much is given, much is expected”
So, what kind of mindset is needed and what can we do in this period of colossal transformation?
Stay fit physically, emotionally and spiritually
Be adaptable, positive, creative, courageous, empathetic and mindful of others
Connect, communicate and share your ideas and feelings to your loved ones, your colleagues and your community.
Offer help and encouragement to those in need
It is “The Great Reset”. I saw this expression first after the financial crisis of 2008 but I believe this time it is even more the case as it is impacting and transforming everyone’s lives in a massive way. How can we prepare for the future?
Stay positive.
Deal with what is needed today and tomorrow but think and plan for long term.
Master remote working, redefine how you work effectively and build trust with your team, suppliers, customers and investors using the necessary tools.
Discover or learn new skills that you were not aware you would be interested in. (webinars, Coursera, masterclasses)
Search for new opportunities that are surfacing.
Adapt, listen, learn, be empathetic.
We have a great opportunity (The Great Reset) to make our world better and more resilient by reinventing, redefining and improving on ourselves, our businesses and our planet.
The 4th European B Corp Summit took place on Sept 23-24 in Amsterdam. Great energy as this community drives a new agenda for capitalism and it feels that we are close to the tipping point! The B Corp movement using business as a force of good is growing steadily. Today there are 3000 B Corps in 70 countries and 600 in Europe while 100,000 companies are using the B Impact Assessment to improve their businesses. Two main topics were highlighted throughout the summit; 1) the shift from shareholder primacy to a commitment to all stakeholders, and 2) the emergency of the climate change crisis. John Elkington, world authority on corporate responsibility and sustainable development introduced his new concept and book for tomorrow’s capitalism “Green Swans”. The global agenda is changing exponentially, from responsibility and resilience to regeneration. If exponential problems are known as Black Swans, exponential regeneration calls for Green Swans. So, he calls B Corps the ugly ducklings that would likely become the Green Swans.
Jay Coen Gilbert, co-founder of B Lab, stressed the urgency of system change. First, recognize the system failure then fix it: change from shareholder to stakeholder capitalism, from a culture of more to one of enough. Jay also shared the draft of B Lab’s Declaration of Climate Emergency and System Failure to be launched soon, committing further this community to tackle climate as a business strategy.
News: In January 2020, B Lab is launching the SDG Action Manager in partnership with the UN Global Compact. Using this free tool, one can 1) get a clear view of how your operations, supply chain, and business model create positive impact, 2) take action and track progress towards the Sustainable Development Goals 2) New B Corps announced at the summit: Bodyshop, Danone Belgium, Danone Netherlands.
Key actions: collaborate, let’s get working together, B the change!
