Category Archives: sustainable investments

Peace Investing, one of the new frontiers in impact investing?

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I had the pleasure to meet recently Liam Foran, CEO and co-founder of the Peace Dividend Initiatives.

The Peace Dividend Initiative (PDI) is a peace-dividend accelerator dedicated to harnessing market forces for peace. PDI bridges the gap between peace mediation and economic actors through dialogue, incubation, and investment. Headquartered in Geneva, PDI is connected to peacemakers, international organizations, governments, investors, and entrepreneurs.

https://www.peacedividends.org/

So PDI has been cultivating peace-supporting economic opportunities in fragile and at-risk countries. In other words, incubating enterprises in places that have signed cease-fire agreements or in conflicts. What has been missing in these places are opportunities and funding to be able to kickstart economic activities/opportunities for the people. For example, ex-soldiers might go back to the militias/terrorists if they have no other alternative to earn a living. In Colombia, PDI has supported the incubation of a premium cacao company as well as a coffee company.

There are currently 40 countries in the World Bank’s “Fragile and Conflict affected Situations” list or in short the FCS list. There is a dire need for peace-making in the world so that all countries can continue to survive, thrive and prosper.

An exciting development is that PDI is joining forces with Symbiotics to launch a Peace Venture Fund. This can allow a blended finance opportunity for governments as well as private sector and philanhtropists to invest in achieving PEACE.

What’s new? Impact-Linked Finance: better terms, better impact

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  • source: Impact Linked Finance Fund

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)

To learn more ILF and Roots of Impact

B Corp Summit 2019: Driving a new agenda for capitalism

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IMG_5318 (1)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!

Takeaways from The GIIN Forum 2018

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Over 1300 delegates attended the GIIN Forum 2018 which took place in Paris on Oct 30-31st. A strong opening message from Amit Bouri, Co-founder and CEO of the GIIN;

We need a new financial system that is accountable for its effects on people and the planet. I believe that impact investing presents a real alternative to the status quo….. 3 priorities for impact investments: mobilize more capital, ensure impact integrity and build the movement…..I hope that every one of you views this movement not just as an opportunity but as a responsibility to lead, to change expectations, & to build a just and sustainable world where everyone uses the full power of their investment capital as a force for good!

As the movement grows and starts mainstreaming there are different forces at play. As my colleague quite cleverly pointed out, there are a few camps looking at impact investment from different perspectives: impact fundamentalists, risk mitigators and impact washers. Thanks to GIIN members, and the thought leaders like Jed Emerson and Sir Roland Cohen there is a strong push to ensure impact integrity.

Sir Cohen commented on “the steps to reach the impact tipping point 2020” that
1) we should start seeing by 2020 the equivalent of impact accounts under GAAP (Generally Accepted Accounting Principles) so that companies can publish alongside their financial accounts their impact financial accounts and 2) Measurable means dependable, not 100% accountable… if 20% of companies measure their impact, that’s a paradigm shift and the rest will follow.

“We need to have a conversation about what value we really want to create. We will stay where we are if we just stay focused on making money with money.” were strong words by Jed Emerson who has recently published “The Purpose of Capital” (the book is free to download!), a very important literature that reminds us to stop and reflect as we are thinking and talking too much about the “how” and getting blurred on the “why”.

Dq1ALNEWsAAdjqP (3)Omydiar Network presented the outstanding series “Beyond Trade-offs” covering perspectives of leading investors who have moved beyond the trade-off debate to invest across the returns continuum.
“We need to move beyond the binary debate of commercial returns vs concessionary – in reality, it’s a continuum.” Roopa Kudva, Partner Omydiar Network

A topic which is appearing more is the role of Blockchain in impact. There were two presentations both moderated by Shaun Conway, President of ixoFoundation. ixo is building the Blockchain for Impact, transforming all measurable changes that have an impact into Verified Impact Data with crypto-economic Proof of Impact. A lot of exciting learnings to come from this area!

ixo: The Blockchain for Impact from ixo foundation on Vimeo.

What does sustainable investments, ESGs, SDGs and impact investments mean?

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Sustainable investing, SRI, impact investing, Sustainable Development Goals (SDGs), Environmental, social and governance (ESG) criteria are words that we are exposed daily as it is used by investors, banks, asset managers, corporations, consultants as well as the media. It is great that this movement is mainstreaming, however, how can we make sense of figures like $23 trillion in SRI assets on one hand and a much smaller figure of $144bn in impact investment assets? It is important to understand the differences so that we can compare apples with apples and gain clarity on this growth area. This article uses the definitions by the two resources that are most established in this area; the Global Sustainable Investment Alliance (GSIA) and the Global Impact Investment Network(GIIN)

Sustainable investing is an approach to investment where environmental, social or governance (ESG) factors, in combination with financial considerations, guide the selection and management of investments.
Sustainable investing is the umbrella term that incorporates social responsible investing, SRI, impact investing and it encompasses the different strategies/activities. According to GSIA, global SRI assets in early 2016 reached $22.89 trillion, a growth of 25% compared to 2014. The strategies and activities under sustainable investments are shown below.

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THe top 3 strategies; negative and exclusionary screening (15 tn), ESG integration (10.3 tn) and corporate engagement/shareholder action (8.3 tn) are very large established strategies while impact/community investment (248 bn) and sustainability themed investing (331 bn) are growing fast but still very small.

ESG (Environmental, social and governance) refers to sustainable investment criteria used alongside traditional financial criteria in managing and selecting investments. ESG is a criterion, the word is also used as ESG factors, ESG metrics and ESG integration, which is one of the largest strategies within sustainable investments.
The use of ESG by institutional investors has been rising over the past 15 years as a result of increasing evidence that integrating ESG factors in the investment process can actually improve the risk/reward of investment portfolios.

Impact Investments – Investments made into companies, organizations and funds with the intention to generate social and environmental impact alongside a financial return (source: GIIN)
Impact investment is an approach to investments and is a fast growing but the smallest subset and strategy within sustainable investments. The differentiator of this approach is the intentionality to generate positive social and environmental impact and the commitment to measure it. In terms of market size there are two benchmarks: 1) GIIN’s $144bn based on their annual survey of assets aggregated by their respondents in 2017, and 2) GSIA 2016 Review which shows the assets of the category Impact and Community investments at $248bn.

Sustainable Development Goals (SDGs)
The SDGs, a set of 17 goals was adopted in Sept 2015 by the UN “to end poverty, protect the planet and ensure prosperity for all “. The goals have specific targets to be achieved by 2030. The development of indicators and monitoring framework for the SDGs which followed has attracted many investors and asset managers to commit to invest in these goals. The SDGs are now being adopted as a framework in many of the sustainable investment strategies including impact investment funds.