Impact Investing FRIDAY, OCTOBER 31, :30 A.M. 11:00 A.M.

Transcription

1 Impact Investing FRIDAY, OCTOBER 31, :30 A.M. 11:00 A.M. 1

2 Impact Investing: Defining the Practice Exponent Philanthropy 2014 National Conference

3 What is Impact Investing? Impact investing uses return-seeking investments to help you accomplish social and environmental goals.

4 Terminology Term Impact Investing Mission Investments Program-Related Investments Double/triple bottom line Socially responsible/ Environmental Social and Governance (ESG) Economically targeted Definition Umbrella term includes all types of investors Foundation impact investments IRS regulations for private foundations, concessionary financial returns Financial, social, environmental returns Screened public equities Insurance company term referring target demographic

5 Industry Timeline 5

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7 Projected market size of Impact Investing Impact Investing in 2013 ~$10 billion Philanthropy (U.S. only) ~$300 billion Impact Investing 5-10 year projection ~$650 billion Total Investing 5-10 year projection ~$100 trillion 7

8 Industry Participants Asset Owners HNW Individuals/Families Corporations Foundations Asset Managers Investment Advisors Fund Managers Family Offices Banks Development Finance Institution Demand Side Players Corporations Small and growing businesses Social enterprises Cooperatives Microfinance institutions Service Providers Networks Standard Setting bodies Consulting firms Community development finance institutions

9 Industry Challenges Leadership Community Measurement and Common Vocabulary High Transaction Costs Awareness

10 Why Impact Investing? Motivation Scale of need outstrips grant resources Interest in aligning investing and values Availability of appropriate capital for nonprofits and other social enterprises Leverage of vast government and capital markets Opportunity Investor outlook Increased awareness and credibility Developing track record Infrastructure and intermediaries New investment products Industry impact metrics 10

11 Impact Investing Continuum Across Traditional Asset Classes Below-Market Investments Higher Risk Lower Risk Lower Risk Higher Risk Market-Rate Investments Source: F.B. Heron Foundation Mission-Related Investing Continuum

12 Mapping the Impact Investing Industry The Sterling Group USA MEXICO UK GERMANY NETHERLANDS INDIA CHINA (HONG KONG) BRAZIL KENYA SOUTH AFRICA SINGAPORE AUSTRALIA 12

13 Millennials and Impact Investing Asset management is in a state of transition. $41 trillion of wealth is estimated to transfer between the Baby Boomer generation and Generation X and millennials in the next 40 years. In a recent survey, millennials ranked to improve society as the number one priority of business. Millennials are likely to prioritize social impact along with financial returns. In order to retain clients as wealth transfer occurs, wealth advisors must be able to address millennials demand for social investment. Source: From the Margins to the Mainstream Assessment of the Impact Investment Sector and Opportunities to Engage Mainstream Investors. World Economic Forum, Money for Good. Hope Consulting, 2010.

14 Social Investment Frameworks Sustainable Investing Responsible Investing Impact Investing Environmental, Social, and Governance ( ESG ) Investing Integrating the evaluation of ESG factors within investment analysis Investments designed to favor companies with superior characteristics within Environment, Social, and Governance practices Socially Responsible ( SRI ) Investing Investments designed to avoid, mitigate, or minimize negative social and environmental impacts Portfolio Screening on a wide range of issues, including: Tobacco Alcohol Weapons Manufacturing Environmental Impact Investment activity designed to have a positive impact on social or environmental issues Focus on direct and high engagement strategies Within public investments, includes corporate engagement initiatives on key sustainability issues, seeking favorable outcomes to both shareholders and society Examples Examples Examples generation

15 Impact Objectives Model Non Impact Impact Beyond Health Health Sector Impact City Specific Health CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

16 Foundations- Uses of Capital Grants Program Related Investments Mission Related Investments 5% payout IRS Tax Code can be counted toward 5% payout Below Market Returns Market rate expected return Double or Triple Bottom Line Investing The 95% CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

17 Foundation Impact Investing Approaches 100% Traditional Investing Hybrid 100% Impact Investing Mission Non Mission Non Mission Mission PRIs PRIs MRIs PRIs MRIs 5% Payout 5% Payout 5% Payout CONFIDENTIAL: NOT FOR EXTERNAL DISTRIBUTION

18 QUESTIONS? Contact Information Cynthia Muller, Arabella Advisors Betsy Moszeter, First Affirmative Twitter: BetsyM11