An Introduction to Impact Investing

Transcription

1 An Introduction to Impact Investing Georgetown Webinar August 23, 2011 Georgette Wong CEO, Correlation Consulting CEO, Take Action! Conference Series The information provided does not constitute investment advice and it should not be relied on as such. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed.

2 What Is Impact Investing? Impact investing is actively placing capital in businesses and projects that seek to generate market-rate financial returns while also creating measurable social and/or environmental impact to address some of the world s most pressing challenges. ENVIRONMENTAL: Clean Tech Climate Conservation Environment ESG/Sustainability Water SOCIAL: Agriculture Community/Economic Dev. Culture Demographics Education Fair Trade Food Systems Gender Equality Health/Healthcare Housing Inclusive Finance Job Creation Impact investing is similar to, but somewhat different from: SRI, ESG, Triple Bottom Line investing, Long-Term Investing Microfinance Racial Equality Sustainable Cities Main differentiators: Expectation of measurable tangible social and/or environmental outcome Across all asset classes 2

3 Two Views of the World Predominant Making Money Doing Good Short-term financial results Talking about money rarely includes values; training in finance is values-neutral. Investments dictate the Natural World Groups work in silos to solve issues Up & Coming Making Money = Doing Good Judge impacts for our grandchildren s children and more Money reflects values & worldviews Natural World dictates the Monetary World Groups work together to solve issues Philanthropy (& Not-For- Profits) Business (& Investments) Government 3

4 Leverage is Key Global Capital Markets $178 Trillion 1 High Net Worth $39 Trillion 2 Global Pension Plans $23 Trillion 3 US Budget $3.69Trillion 4 US Foundation Assets US Foundation $583.4 Billion 5 US Foundation Assets Giving $583.4 Billion 5 $42.9 Billion 6 US Foundation Mission Investing $3 Billion 7 1 Source: (2009) 2 Source: (2010) 3 Source: (2010) 4 Source: (2010) 5-6 Source: (published 2010; 2009 estimated stats) 7 Source: Estimate, GPS Capital Partners, LLC (2010) 4

5 A Hierarchy of Impact Meyer Memorial Trust Maximizing Impact Mission-Related Market Rate Investment Strategy Presented at 2009 Take Action! 5

6 Correlation Consulting Focus on above-market rate financial returns Non-Profit Education (2007) For-Profit Consulting Services (2011) Take Action! Conference Series By Invitation only Non-solicitation annual event Market Research Identify key trends Assess supply and demand Assist Asset Owners and their Trusted Advisors on the following: Clarification of the field of Impact Investing Identification of clients desired areas of impact Introduction to like-minded investors and potential partners in impact. 6

7 Take Action! Conference Series Our Signature Annual Event Year Total Participants Assets Represented Location $4.5 trillion San Francisco $4.1 trillion Boston $2.4 trillion San Francisco $2.7 trillion San Francisco $80 billion San Francisco By-invitation only, non-solicitation Peer Group of Asset Owners (60-70% of the audience) Families, foundations, major pension plans, corporations Focus on investments, specifically premium (above-market rate) financial returns Neutral, Third Party Practical, Action-oriented Since 2007, over $300M in new commitments made (low estimate) 98%+ fulfilled on their goals for attending (3 years in a row) 98%+ say they would attend again (3 years in a row) Next event is Spring 2012 (East Coast) 7

8 Selected Participants Many Individuals & Families Investment Consultants Foundations Asset Managers Pension Plans Government Agencies Motivations Financial Looking for outperformance Reduce investment risk Social/Environmental Alignment with values Use all existing assets financial and non- financial Find like-minded pioneers Orient the financial markets towards the long-term 8

9 Correlation s Asset Owner Study Return of Capital to Premium Financial Returns Advisors Sherwood Dodge, CEO, GE Equity Lala Faiz, Senior Partnerships Advisor, Office of the Secretary of State Janice Hester-Amey, Portfolio Manager, CalSTRS Rob Lake, Director of Strategic Development, Principles for Responsible Investment (UK) Bonny Landers, River Star Foundation (Hong Kong) Jean Oelwang, CEO, Virgin Unite (UK) David Wood, Institute for Responsible Investment, Harvard University Institutional Investors Individuals & Families Pension Plans Corporations Development Finance Institutions Core Questions What are current global best practices? How can we unleash more capital? What distinguishes a good investment from an impact investment? Launch (Fall 2011) PRI in Person State Dept. Forum 9

10 Current Product Landscape Products are continually emerging High Net Worth & Institutional Products Retail Products High Expected Return on Investment Low Generation Investment Management (25 30% Target IRR) Lyme Northern Forest Fund (22% Target IRR) Aperio Public Impact Portfolio (Market Rate) Triodos Products (3 6% Returns) RSF Social Finance Notes (1% Returns) Acumen Funds (0% Returns) African Agriculture Fund (17% Target IRR) Microvest Short Duration Fund (LIBOR+) Root Capital (2.5% Returns) TriLinc Global Impact Investment Funds Target launch Q (6% Target Yield, 8-10% Target IRR) Calvert Social Finance Notes (1 2.5% Returns) RSF Social Finance Notes Calvert Social (1% Returns) Finance Notes (1 2.5% Returns) KIVA Giving Loans (0% Returns) Financial First Impact First 10

11 The Field is Rapidly Developing Foundations Private Investors UNCOORDINATED Religious Groups Financial Financial Consultant Consultant Fund Manager Fund Manager Fund Manager Consultants Pension Plans Corporations Financial Consultant Entrepreneurs Universities Asset Owners Are Beginning To Coordinate Financial Consultants Need Training & Tools Too Few Quality Fund Managers End Beneficiaries Aren t Typically Consulted Industry studies and general market research demonstrate a current demand for Impact Investments of approximately $120 billion 1 growing in the next ten years to $1 trillion Money For Good market study, JP Morgan Research Report, Impact Investing, An emerging asset class 11

12 Asset Owners Are Key There is an opportunity for leadership from all parts of the ecosystem. Foundations Private Investors UNCOORDINATED Religious Groups Financial Financial Consultant Consultant Fund Manager Fund Manager Fund Manager Consultants Pension Plans Corporations Financial Consultant Entrepreneurs Universities Yet, Asset Owners are particularly key, as they incent financial consultants to seek education ( or they move on) incent fund managers/ entrepreneurs to create custom products can ensure end beneficiaries are included Increase in unique partnerships, collaborations and product structures among various asset owners 12

13 Georgette Wong President, Correlation Consulting CEO, Creator & Curator of the Take Action! Impact Investing Conference Series Involved with Impact Investing since 2007, SRI since 2001, and civil rights since Currently assisting the US State Department to catalyze impact investing across the government, private and public sectors. Over the last eighteen years: advised families, foundations and Fortune 100 businesses on public and private investments; developed and funded early stage companies; and created organizations focused on strategic philanthropy and partnerships between the business and social sectors. Founded the Take Action! Impact Investing Conference Series in Just celebrated 5 years of catalyzing impact through Take Action! Planning for the 2012 conference. Currently engaged with the Office of The Secretary of State and the United Nations-backed Principles for Responsible Investment on a study to understand activity of asset owners in impact investing and how to free up more capital for impact investing. Previously engaged with the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of San Francisco s Center for Community Development Investments to catalyze impact investing across sectors. Most recent work published in Community Development Investment Review (Federal Reserve Bank of San Francisco), Solutions for Impact Investors: From Strategy to Implementation (Rockefeller Philanthropy Advisors), Private Asset Management, and Financial Planning Magazine. MBA, UCLA Anderson; BA, magna cum laude, Amherst College 13