Description
In such a detailed explanation in relation to market forces and entrepreneurship can be harnessed.
CASE STUDIES ACROSS
ASSET CLASSES
Investing FOR Impact
Bridges Ventures
Bridges Ventures originated the concept of this report with the goal of contributing to the
greater understanding within the investment community of the opportunities offered by Impact
Investment and to promote the ?ourishing of further investments that can make a difference as
well as making ?nancial returns.
Bridges Ventures is an innovative investment company based in London that invests funds
delivering both ?nancial returns and social and environmental bene?ts. Founded in 2002 and
chaired by Sir Ronald Cohen, a founding partner and the former Chairman of Apax Partners,
the company believes that market forces and entrepreneurship can be harnessed to do well by
doing good. The team pride themselves on working closely with the companies they back and
are committed to helping entrepreneurs achieve long-term success. Bridges Ventures currently
has two venture funds under management that invest in businesses based in regeneration areas
and in sustainable business sectors such as the environment, education and healthcare. They
also recently launched the Bridges Social Entrepreneurs Fund, a quasi-equity fund for social en-
terprises and the Bridges Sustainable Property Fund, which invests in properties in regeneration
areas and environmentally sustainable buildings.
For more information, please visit www.bridgesventures.com.
The Parthenon Group
Parthenon has taken the lead in researching and authoring this report. The work has been done
on a pro bono basis because the report has the potential to leverage more capital into invest-
ments that can produce great social and environmental bene?ts.
The Parthenon Group is a leading advisory ?rm focused on strategy consulting with of?ces in
Boston, London, Mumbai, and San Francisco. Since its inception in 1991, the ?rm has embraced
a unique approach to strategic advisory services; long-term client relationships, a willingness to
share risk with clients, an entrepreneurial spirit, and customised insights are the hallmarks for
which Parthenon has become recognised in the industry. This unique approach has established
the ?rm as the strategic advisor of choice for CEOs and leaders of Global 1000 corporations,
high-potential growth companies, private equity ?rms, healthcare organisations, and non-pro?t
organisations. Our Non-Pro?t Practice assists non-pro?t leaders, foundations and corporations
with strategy development, corporate social responsibility, organisational alignment and other
strategic issues.
For more information, please contact Tracy Palandjian at [email protected] or visit
www.parthenon.com.
Global Impact Investing Network
This report has drawn upon information and case studies provided by the Global Impact Invest-
ing Network (GIIN), which has been extremely open and helpful. The authors would like to
thank the many members and partners of the GIIN who contributed to this work and hope that
they will ?nd that the report, in turn, contributes to their success in growing this exciting new
sector. The GIIN is a newly-formed, independent, non-pro?t organization dedicated to building
industry infrastructure, developing activities, and disseminating research and education that
address systemic barriers to effective impact investing. By measuring the social and environ-
mental performance of impact investments, the GIIN’s IRIS (Impact Reporting and Investment
Standards) initiative brings transparency and credibility to the sector and enables further industry
infrastructure like performance benchmarks and rating systems that help increase the scale and
effectiveness of impact investing.
These efforts are informed by the GIIN Investors’ Council, a membership group comprised of
leading impact investors committed to developing a coherent industry that facilitates more pri-
vate capital investment in businesses addressing social and environmental problems around the
world. By bringing together the large-scale family of?ces, institutional investors, pension funds,
investment banks, wealth managers, private foundations and development ?nance institutions
whose goals lie in the territory between philanthropy and the sole focus on pro?t-maximisation,
the GIIN seeks to drive collectively towards the maturation of a sector that is currently inhibited
by fragmentation.
www.globalimpactinvestingnetwork.org
1
Contents
What is Impact Investment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Impact Investment Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Main Findings and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Case Studies and the
Asset Allocation Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FINANCIAL FIRST
CASH Shorebank Deposit Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SENIOR DEBT BlueOrchard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MEZZANINE/QUASI EQUITY INSTRUMENTS Triodos
Investment Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PUBLIC EQUITIES Generation Investment Management . . . . . . . . . 20
VENTURE CAPITAL Bridges Ventures CDV Funds . . . . . . . . . . . . . . . . . 21
PRIVATE EQUITY ProCredit Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
REAL ESTATE JP Morgan Urban Renaissance Property Fund . . . . . 23
OTHER REAL ASSETS Lyme Northern Forest Fund . . . . . . . . . . . . . . . . 24
ABSOLUTE RETURN (HEDGE FUNDS) BelAir SA Fund . . . . . . . . . . . . . . 25
IMPACT FIRST
CASH Charity Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SENIOR DEBT Root Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
QUASI-EQUITY INSTRUMENTS Bridges Ventures
Social Entrepreneurs Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
VENTURE CAPITAL Aavishkaar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PRIVATE EQUITY Acumen Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
REAL ESTATE Ignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
OTHER REAL ASSETS Pico Bonito . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Layered Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
International Finance Facility for Immunisation (IFFIm) . . . . . . . . . . 34
The New York City Acquisition Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
2
The Rockefeller Foundation sup-
ports innovative solutions to many
of the world’s most intractable
challenges, af?rming its mission, since 1913, to “promote
the well-being” of humanity. During the last several
years, Impact Investing has clearly emerged as one such
solution: an innovation that can help more people tap into
expanding markets while strengthening their resilience to
21st century risks.
Government funding, international aid and philanthropic
donations alone are insuf?cient to achieve the world’s
development aspirations, especially against the backdrop
of global recession. Private investment capital, therefore,
will need to complement traditional resources or solve
problems on a larger scale. Fortunately, the emerging
Impact Investing industry enables investors to direct their
resources toward multiple bottom-line returns – ?nancial
and social or environmental. This means doing good with
the market, not only doing well in it.
The Rockefeller Foundation recently launched a major
initiative on Harnessing the Power of Impact Investing
because we believe the industry could potentially become
a powerful complement to our – and others’ – work.
Through this initiative, we organised an inspiring group of
partners — ranging from entrepreneurs starting Impact In-
vestment banks and wealth management ?rms to leaders
of major pension funds and investment banks — to help
accelerate this new industry’s evolution. A mature impact
investing industry will enable more investors to address a
wider range of social and environmental challenges more
ef?ciently, making our job easier in turn.
This new report, Investing for Impact: Case Studies
Across Asset Classes, is particularly encouraging both
for what it describes and for what it signals about how
Impact Investing is evolving. It provides fresh evidence
of the diversity of investment opportunities now available
and, importantly, the range of investors this industry now
counts among its ranks. The detailed case study approach
complements the Monitor Institute’s analysis, Investing
for Social & Environmental Impact, which was released
earlier this year. Together, this seminal scholarship lays
groundwork for new and clearer understandings of the
industry.
The process by which this report materialised is also
encouraging. The 50 Impact Investing pioneers who
contributed their time – and opened their books – to the
report’s authors exemplify the collaborative commitment
necessary for this new industry to reach its potential.
The Global Impact Investing Network, whose founding
members constitute many of the investors pro?led in this
document, will draw on this commitment and provide a
platform for keeping these case examples “live.” We are
also grateful to the Parthenon Group and Bridges Ventures
for their leadership and generosity in producing this study
as a pro bono contribution to the ?eld.
I hope this publication makes plain exactly why my col-
leagues and I are so excited about Impact Investing’s
possibilities. We look forward to working with you to build
an industry that generates many more promising case
studies of high-Impact Investment.
Judith Rodin
President of the Rockefeller Foundation
FROM DAVID BLOOD, SENIOR PARTNER OF GENERATION INVESTMENT MANAGEMENT
It has never been a more appropriate time to re-consider the role of capital markets
in creating value for society. What has become exceedingly clear to us here at
Generation is that sustainability and long-term value creation are inextricably linked. We hope by our partici-
pation in this study we can help demonstrate that “Impact Investment” makes sense even for mainstream
investors.
Generation Investment Management is proud to support this report by Bridges Ventures and Parthenon,
as well as support the work of the Global Impact Investment Network (GIIN). We look forward to helping
expand the community of Impact Investors, and we think now is the time for these activities to move from
niche to mainstream.
Today, the sustainability challenges the planet faces are extraordinary and completely unprecedented. Even
beyond the bailouts and recent volatility, the challenges of the climate crisis, water scarcity, income dispar-
ity, extreme poverty and disease must command our urgent attention. Philanthropy alone cannot provide
the full set of solutions needed to address these challenges. Now, more than ever, capital markets need to
play a role in addressing global sustainability challenges.
Whether you are a private individual, family of?ce, investment bank, foundation endowment, or pension
fund, this report should be helpful in providing a view across asset classes to highlight the variety of oppor-
tunities and ways to invest for impact. We hope you will join us on the path to create a more sustainable
form of capitalism.
David Blood
Senior Partner of Generation Investment Management
FROM JUDITH RODIN, PRESIDENT OF ROCKEFELLER FOUNDATION
3
What is Impact Investment?
Impact Investment, often referred to using other terms such as social investment or
sustainable investment, is de?ned as “actively placing capital in businesses
and funds that generate social and/or environmental good and a range of
returns, from principal to above market, to the investor.”
1
By leveraging
the private sector, these investments can provide solutions at a scale that purely philan-
thropic interventions usually cannot reach. Investors in Impact Investment Funds include
high-net-worth individuals, institutional investors, corporations or foundations, who
invest in a wide range of asset classes. The intention of Impact Investment vehicles
to make a social/environmental impact is a primary qualifying criterion; investments
that unintentionally result in social good are not regarded as Impact
Investments. Impact Investment is closely allied to but differentiated from Socially
Responsible Investment (SRI) which generally employs negative screening to avoid in-
vesting in harmful companies or shareholder activism/advocacy to encourage corporate
social responsibility practices.
SOME EXAMPLES OF IMPACT INVESTMENT
JP MORGAN URBAN
RENAISSANCE
PROPERTY FUND
($175MM RAISED)
• The fund targets urban development and redevelopment of affordable housing
using “green” speci?cations from solar heating to recycled building materials
• The fund is targeting market rate returns, with a projected return of ~15% net of
fees
• To support local communities, the fund is including cultural amenities such as
partnering with after-school educational providers
IFFIM BONDS
($1.6B RAISED IN 2
ISSUES)
• Launched to support the GAVI (Global Alliance for Vaccines and Immunisation)
Initiative, these bonds use the public markets to support vaccination efforts in the
developing world
• Leveraging future grants from developed countries, these bonds have been issued
at market rates to both commercial and retail investors and hold a AAA/Aaa rating
• The offering has allowed GAVI to frontload committed funds (that have been guar-
anteed over a 20 year time horizon), facilitating more lives to be saved in the near
years and creating the infrastructure to more ef?ciently administer vaccinations
across the developing world
ROOT CAPITAL
($48MM AUM)
• Root Capital provides senior debt to the primarily large co-ops servicing the rural
poor, the “missing middle”, too large for micro?nance and too small or risky for
corporate banks
• Using contracts with agricultural buyers like Starbucks to mitigate the lender’s risk,
Root Capital provides access to funds and also creates sustainable partnerships
between farmers and buyers
• Root Capital provides below market-rate returns to investors (2.5% at present),
but has been able to drive signi?cant impact in farming communities in Tanzania,
contributing to the growth of GDP in poverty-stricken rural areas
More details on these examples and others are found in the Case Study section of this report.
1
Adapted from the Monitor Institute: Investing for Social and Environmental Impact
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
4
Executive Summary
Why Impact Investments?
Governments and charities do not have suf?cient capital nor the complete skill
set required to solve the world’s pressing challenges. At the same time, the
recent economic crisis has shaken established orthodoxies about the risk and
return pro?les of traditional investments. The Impact Investment sector is emerg-
ing as a partial answer to the twin challenges that these two realities present:
Impact Investment unlocks substantial capital to build a more sustainable and
equitable global economy while allowing for diversi?cation across geographies
and asset classes.
A plethora of investments is emerging across multiple asset classes that provide
investors with market-rate investments, or for more altruistic investors, substan-
tial social impact, while still generating positive ?nancial returns. The old binary
system—the widely-held belief that for-pro?t investment could only maximise
?nancial return while social purpose could only be pursued through charity—is
breaking down.
Who is this report for?
This report is intended for the investment community and aims to help inves-
tors understand this emerging industry. Many investors have begun to explore
Impact Investments by investing in micro?nance in developing countries or com-
munity development projects in the US. However, there is still a perception that
Impact Investment always entails a sub-market ?nancial return, which this report
demonstrates is far from the case. For example, Lyme Timber, a forestry fund
based in Hanover, New Hampshire, has been able to utilise conservation con-
tracts, partnerships with the Nature Conservatory, and deep industry experience
to invest in sustainable forestry projects throughout the US. These projects help
conserve local forests, while delivering market to above-market returns to their
investors.
Meanwhile, the industry is developing globally and the ?nancial products avail-
able for investors are diversifying. Investments range from tropical rainforest
preservation in South America, to ?nance for charities in the UK, to low-income
housing development in New York City, to infectious disease prevention in Africa.
5
A case study approach in an asset allocation framework
The report employs a case study approach,
mapping examples of Impact Investments on a
traditional asset allocation framework [pg. 15].
This structure illustrates readily the diversity of
products that are being developed, where they re-
side within a traditional asset allocation framework
and the types of opportunities that are available to
date. From these cases the report draws a series
of ?ndings [pg. 10].
This report, in conjunction with a new monograph
by Rockefeller Philanthropy Advisors, Solutions
for Impact Investors: From Strategy to Implemen-
tation, demonstrates how impact investing can
be integrated across asset classes and equips in-
vestors with the tools to frame their investment
decisions from strategy to implementation and
evaluation.
The growth potential of impact investment
Compared to more traditional investments in established asset classes, Impact
Investment is only now emerging from infancy. Some initiatives have achieved
substantial scale but many others remain small. Questions include how much
the sector can scale and whether achieving greater scale will result in reduction
in either social / environmental impact or ?nancial returns. However, apart from
growing in its own right, the sector has fostered a high level of innovation which
can potentially serve as a catalyst to in?uence how mainstream investments
are made.
The positive momentum of the Impact Investment sector continues, despite
the recent turmoil in global capital markets. While the basic investment infra-
structure needs to be developed, Impact Investment is becoming a stable and
sustainable alternative for institutional investors and high net worth individuals.
As the infrastructure builds further and more funds across asset classes achieve
market-rate performance, the Impact Investment sector stands poised to be-
come a powerful vehicle both to address signi?cant social and environmental
issues and to chart a new course for the ?nancial services industry to reclaim its
stature as an engine of social and economic upliftment.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
6
Investor motivation and returns
Although investors in Impact Investments share the vision of combining ?nancial
returns with positive social/environmental impact, they can be categorised into two
broad groups. The Monitor Institute, in their Investing for Social and Environmental
Impact report, de?nes them as follows:
1. FINANCIAL FIRST INVESTORS, who seek to optimise ?nancial returns with a
?oor for social/environmental impact. This group tends to consist of commer-
cial investors who search for investment vehicles that offer market-rate returns
while yielding some social/environmental good.
2. IMPACT FIRST INVESTORS, who seek to optimise social or environmental
returns with a ?nancial ?oor. This group uses social/environmental good as a
primary objective and may accept a range of returns, from return of principal to
market rate. This group is willing to accept a lower than market rate of return in
investments that may be perceived as higher risk in order to help reach social/
environmental goals that cannot be achieved in combination with market rates
of ?nancial return.
LAYERED STRUCTURES
Sometimes Financial First and Impact First investors collaborate in what we term as
layered structures (also termed “Yin-Yang” investments
2
). These layered struc-
tures are created when the two types of investors work together, combining capital
from Impact First and Financial First motivations, blending different types of
capital with different requirements and motivations. In these deals, Im-
pact First investors accept a sub-market risk-adjusted rate of return enabling other
tranches of the investment to become attractive to Financial First investors. This
symbiotic relationship allows Financial First investors to achieve market rate returns
and Impact First investors to leverage their investment capital thus achieving signi?-
cantly more social impact than they would if investing on their own. It is important
to note that these structures are not limited to Financial First and Impact First inves-
tors, but can include philanthropic organisations pairing grant money with Financial
or Impact First investors to generate high levels of impact.
This segmentation of Impact Investors, as adapted from the Monitor Institute Re-
port, is summarised in the ?gure on page 7.
The Impact Investment Sector
2
Adapted from the Monitor Institute: Investing for Social and Environmental Impact
7
Who can invest in the
impact investment sector?
While we have broken down our investor
groups into Financial First and Impact First
Investors, investors can engage in Impact In-
vestments on either side of this spectrum.
Some investors, such as Prudential’s Social In-
vestment Arm, have internal allocations for the
percentage of their total assets to be placed in
Financial First investments versus Impact First
investments. Investors who have the ?exibility
to invest in either Financial First or Impact First
investments achieve different goals. Financial
First investments deliver strong risk-weighted
returns as well as positive social / environmen-
tal impacts, while Impact First investments
can trail-blaze, to meet tougher social / en-
vironmental challenges by accepting lower
returns or taking initial capital risk to allow new
types of funds to develop a track record. Fi-
nally, some investors are bound by ?duciary
duties either set out in their mission statement
or governed by their legal status and are re-
stricted to only Financial First Investments.
LAYERED STRUCTURES
T
a
r
g
e
t
F
i
n
a
n
c
i
a
l
R
e
t
u
r
n
Target Social Impact
HIGH
NONE
NONE
I
M
P
A
C
T
F
L
O
O
R
HIGH
FINANCIAL FLOOR
(nominal principal)
Solely Return –
Maximizing
Investing
Philanthropy
FINANCIAL FIRST
INVESTORS
Optimize ?nancial returns
with an impact ?oor
IMPACT FIRST
INVESTORS
Optimize social impact
with a ?nancial ?oor
IMPACT
INVESTMENT
SEGMENTS OF IMPACT INVESTORS
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
8
PENSION FUNDS AND OTHER
INSTITUTIONAL INVESTORS
Pension funds and other institutional investors
are normally bound by strong ?duciary duties,
limiting their ability to play in Impact First invest-
ments. Although generally con?ned to Financial
First investments, these investors have a multi-
tude of options available to them for achieving
market-rate return Impact Investments. From
direct investments through to investments in
numerous funds, pension fund managers have
the ability to put together a diversi?ed portfo-
lio of Impact Investments. TIAA-CREF in the
United States is one example of this new op-
portunity for market-rate Impact Investment,
having committed more than $600 million to
Impact Investments across asset classes (from
cash to debt to private equity) that comply with
?duciary responsibility regulations. Layered
structures also give these investors further
opportunities to meet their ?duciary responsi-
bilities while achieving various impact targets.
Pension funds and other
institutional investors are
normally bound by strong
?duciary duties, limiting their
ability to play in Impact First
investments.
ULTRA HIGH NET WORTH INDIVIDUALS
Ultra high net worth individuals and family of-
?ces typically have greater ?exibility in their
investment mandates. Without the same level
of ?duciary duty as many other types of inves-
tors, these investors can invest across different
asset classes. The Impact Investment space
allows these investors to pick multiple strate-
gies for their investments. They, like pension
funds, can look to maximise returns through a
diversi?ed Financial First platform. Or they can
choose a particular social or environmental mis-
sion they wish to undertake, allocating a part
of their investment portfolio to sub-market rate
Impact First funds targeted at their preferred ar-
eas of social/environmental impact. Given their
?exibility, family of?ces were instrumental in
pioneering the early commercial investment ve-
hicles in micro?nance and are proving similarly
in?uential in seeding the rapidly growing ?eld of
Impact Investment funds.
High net worth individuals
and family of?ces typically
have greater ?exibility in their
investment mandates.
9
FOUNDATIONS
Like high net worth individuals, foundations of-
ten have the latitude to take a more specialised
and tailored approach to Impact Investment.
They can invest their endowment in Financial
First investments (sometimes known as “Mis-
sion-Related Investment”) then use a portion
of their grant allocations or assets to invest
in Impact First Investments (often referred
to as “Social Investment” and sometimes as
“Programme-Related Investment” from their
designation in the US tax code). Given the
breadth of opportunities available in the mar-
ket, many foundations have started to invest in
Impact First funds. Like high net worth individ-
uals and family of?ces, foundations can often
achieve strong returns, while creating impact
not just broadly, but in speci?c target missions
that relate to the foundation’s own mission.
Like high net worth individu-
als, foundations often have
the latitude to take a more
specialised and tailored ap-
proach to Impact Investment.
ENTRY POINTS MAY VARY
The wide range of available Impact Investment
opportunities can be daunting for someone new
to the space. According to John Goldstein of
Imprint Capital, “The ?exibility to invest across
asset classes, impact areas, and return pro?les
possessed by some high net worth investors is
both a blessing and a curse. This ability to play
across the whole spectrum can be paralysing,
leaving some thinking ‘Where do I start?’ Find-
ing clear anchors and entry points is essential.”
When the Kellogg Foundation chose to em-
bark on this strategy, they set aside $100MM
of the foundation’s endowment as a deliber-
ate operational learning experiment in Mission
Driven Investing. They saw investments as
an additional tool to drive impact and used
the funds to test various investment vehicles
from deposits in community banks, to funds of
funds, to private ?xed income, to direct venture
capital investment. RSF Social Finance decided
to offer its clients portfolios consisting exclu-
sively of market rate mission managers such as
Beartooth Capital, a real estate investor restor-
ing and protecting ecologically important land.
The Hull Family Foundation employed an asset
class approach as their core strategy, allocat-
ing 100% of its corpus to ?xed income impact
investments, both market rate and below mar-
ket rate. Each strategy ?ts the individual goals
of the investors but demonstrates a de?ned,
thoughtful approach and entry point.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
10
FLOURISHING NEW MODELS OF
IMPACT INVESTMENT
Creativity in the Impact Investment sector has
led to strong increases in investment activity.
From its genesis in community investment
and low-income housing development, clean-
tech and micro?nance, Impact Investment is
now helping to provide the scale-up ?nance
that enables slum schools in India to expand,
farmers in Africa to participate in international
value chains and underprivileged Mexicans to
build better homes. Impact Investors are also
becoming more innovative in designing invest-
ment structures that are drawing institutional
capital to new asset classes. The case studies
in this report have debunked the notion that
socially or environmentally bene?cial projects
always require charity.
Creativity in the Impact In-
vestment sector has led to
strong increases in invest-
ment activity.
IMPACT INVESTMENT IS BECOMING A
GLOBAL MOVEMENT
Impact Investment examples are springing
up across the globe and are ?ourishing both
Main Findings and Conclusions
The emergence of the Impact Investment sector is especially timely.
The current economic crisis has shaken established orthodoxies
about the risk and return of mainstream investments. At the same
time, there has been rising interest among the investment commu-
nity towards social and environmental responsibility in investment,
as illustrated by the growing importance of initiatives such as the
UN Principles for Responsible Investment. As Rockefeller Founda-
tion President Judith Rodin notes in her introductory letter, charitable
donations do not provide enough capital to solve our pressing social
and environmental challenges at scale. The private sector/investors
may be better placed to address certain social/environmental issues
than charities, foundations or governments. With the global economy
hobbled, mobilising all capital ef?ciently will be crucial if we are not to
lose ground in creating a more sustainable and equitable world.
11
in the developed and the developing worlds.
Impact Investment is also getting more local,
be it a Venture Capital ?rm investing in rural
developers as Aavishkaar is doing in India, or
developing new homes for the poor as Ignia
is doing in Mexico. As new models are ?our-
ishing, new geographies are also coming into
focus. Layered structures are also helping to
drive money into new areas. For example,
IFFIm bonds are currently tapping the reserves
of the wealthier Western world to provide
immunisation for the 70 poorest countries
globally.
ALL ASSET CLASSES ARE NOW SHOWING
DEVELOPMENT OF IMPACT INVESTMENT
The majority of Impact Investment is no lon-
ger composed of micro?nance loans or equity
investments in cleantech start-ups. It is mov-
ing far beyond the quoted asset class in which
Socially Responsible Investment (SRI) has its
roots. Whether through sustainable forestry
or cash lending to community development
banks, investors have more choice than ever
to diversify their portfolios through Impact In-
vestments. There are investments across all
asset classes that provide investors with nu-
merous options to trade off among risk, return
and level of impact.
OLD SECTOR BELIEFS ARE BREAKING DOWN
As these Impact Investments become more
widespread, when faced with a choice be-
tween putting their money in traditional
investments or Impact Investments, founda-
tions, high net worth individuals and institutions
are increasingly opting for the latter. The per-
ception that Impact Investment necessitates
accepting sub-market rate returns is eroding.
For example, many investors choose to invest
in sustainable banks like Triodos, a bank which
provides ?nancing exclusively to companies
and projects that have a social or environmen-
tal impact and delivers market rate returns
to its depositors. Many funds today are rais-
ing their second or third fund after delivering
market-rate or above returns to their investors.
Micro?nance, once viewed as an investment
opportunity only for the benevolent, currently
has over 100 investment funds managing $6.1
billion in assets and draws money from all in-
vestor types as larger institutional investors
are attracted by the diversi?cation, returns,
and social impact generated from these in-
vestments.
3
AS FUNDS MATURE, SOME ARE MOVING FROM
IMPACT FIRST TO FINANCIAL FIRST
Many impact-oriented funds cited their begin-
nings as Impact First funds. Traditionally, their
investor base was made up of foundations and
high net worth individuals that were willing to
receive below-market returns in exchange for
certain levels of impact. As these funds were
able to prove that they could also generate
3
International Association of Micro?nance Investors
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
12
market rate returns, institutional money started
to ?ow in and these funds eventually migrated
to the Financial First segment.
As more impact oriented funds demonstrate
market rate returns made from high-impact
platforms, more institutional funds will look
to invest in this sector. This will attract more
funds to be raised, increasing the social impact
that can be achieved. By pioneering invest-
ment in new fund managers and investment
areas, investors with a risk appetite can help
to accelerate this trajectory and seed the next
generation of Impact Investment funds that can
be accessible to Financial First investors.
As more impact oriented
funds demonstrate market
rate returns made from high-
impact platforms, more
institutional funds will look to
invest in this sector.
CLARITY IS EMERGING
The Impact Investment sector is gaining clar-
ity. Long seen as an investment sector only
for the philanthropic investor, the solid returns
the sector is producing are changing this land-
scape. Numerous success stories have allowed
the sector to break down the stereotypes many
mainstream investors had on Impact Invest-
ments.
Through using the Asset Allocation Framework
presented in this paper, investors can more
easily navigate around the plethora of options
available. Alongside research like this, devel-
opments are being made in the infrastructure
of the sector. Initiatives set forth by the Rock-
efeller Foundation and B Labs are looking to
standardise metrics for measuring the sustain-
ability or relative impact in an attempt to give
investors tools to compare and contrast their
investment options. These developments in
building a sustainable ecosystem for Impact
Investments are driving the con?dence many
institutional investors are starting to gain in the
sector.
IMPACT INVESTMENT IS HELPING ANSWER
CHALLENGES AND CHANGE THE MARKET
By creating mechanisms through which inves-
tors can both make money and address social
and/or environmental challenges, Impact In-
vestment offers the potential to expand the
pool of capital available to fund innovative so-
lutions. Impact Investments often leverage
grants, sometimes in mezzanine ?nancing ar-
rangements that create a large multiplier effect
on the amount of impact generated. However,
as the examples in this report show, Impact In-
vestors are not limited to partnering with grant
makers: from tropical rainforest preservation, to
low-income housing development in New York
City, to infectious disease prevention in Africa,
Impact Investors are also making market-rate
returns on investments that ?t seamlessly into
their portfolios.
13
By creating mechanisms
through which investors
can both make money and
address social and/or envi-
ronmental challenges, Impact
Investment offers the po-
tential to expand the pool of
capital available to fund inno-
vative solutions.
The early pioneer investors are helping ca-
talyse the sector by showing how pro?table
investment portfolios can be compounded
with impact. Early investors have also helped
inspire replication in other areas of impact.
Having seen the success IFFIm was able to
achieve through its bond offering, the Prince of
Wales is currently proposing a similar structure
for rainforest bonds to halt the deforestation of
the world’s endangered rainforests.
IMPACT INVESTMENT IS EMERGING
FROM INFANCY
New capital is employed across the asset
allocation spectrum. In Mexico, Ignia is devel-
oping housing communities for families who
earn less than $10,000 a year while still target-
ing above market-rate returns. In Honduras,
Pico Bonito is looking to receive a 20% IRR
from the regeneration and sustainable forestry
of native forests adjacent to a national park
without the aid of local government subsi-
dies. These investment vehicles are examples
of how expansion into new asset classes is
helping to broaden the reach of Impact Invest-
ment, while allowing investors to diversify
across multiple asset classes.
Opportunities for institutional investors are still
constrained by the relatively small size of many
funds in this emerging sector, but as the sec-
tor matures, larger opportunities are becoming
available. However, as opportunities grow in
scale and number, will the same returns ex-
ist? Will impact be compromised as the sector
grows? The answers to these questions will
prove critical to the future of the sector.
The objective of this report is to map the Im-
pact Investment market in a framework that
resonates with investors. For this reason the
Impact Investment sector and case studies
are mapped along the traditional asset classes,
resulting in an Impact Investment Asset Alloca-
tion Framework (AAF). This Framework aims to
combine the traditional asset classes with the
speci?cities inherent in Impact Investment. The
framework is thus organised along two key di-
mensions: investor motivation (Financial First
vs. Impact First) and asset class (as per tradi-
tional asset allocation)
A representation of this concept is shown
on the opposite page.
Understanding the Asset
Allocation Framework
The objective of this paper is to help potential
investors understand the Impact Investment
market better by describing concrete case
studies for each cell in the AAF. The cases out-
lined in the following pages were chosen to
show the reader the diversity of Impact Invest-
ments in the sector, especially the number of
investments that aim to make returns at the
market rate.
The allocation of case studies to the different
cells in the framework was done on the basis
of the following:
• The investor motivation is used to allocate
case studies to the Financial First or Im-
pact First rows of the AAF.
• Investment funds/vehicles typically have
multiple investors so motivation for the
fund/vehicle is established in the
following way:
- If at least one of the investors of an
investment vehicle/fund has ?duciary
responsibilities, then the fund/vehicle is
deemed Financial First because inves-
tors must have been able to satisfy
themselves that a risk-adjusted market-
rate return is being targeted; otherwise
it is deemed Impact First.
• The allocation to a speci?c asset class was
driven by the speci?c instrument used
in the deal pro?led; in the case studies
presented an effort was made to select
a deal using an instrument that is repre-
sentative of what is commonly used by
the investment fund/vehicle (although it is
worth noting that certain investment funds
may use more than one asset class in their
investments).
The following case studies should not be used
as recommendations for an Impact Investment
portfolio, but rather serve as a guide to the
breadth of opportunities that exist in the sector.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
14
Case Studies and the
Asset Allocation Framework
15
ASSET CLASSES
CASH
SENIOR
DEBT
MEZZANINE
/QUASI
EQUITY
PUBLIC
EQUITY
ALTERNATIVE INSTRUMENTS
VENTURE
CAPITAL
PRIVATE/
GROWTH
EQUITY
REAL
ESTATE
OTHER REAL
ASSETS
ABSOLUTE
RETURN
(HEDGE
FUNDS)
F
I
N
A
N
C
I
A
L
F
I
R
S
T
ShoreBank
$2.1B
Blue
Orchard
Dexia
Micro-
Credit Fund
$2.1B
Triodos
Renew-
ables
Europe
Fund
£30M
Generation
Investment
Management
$3.5B
Bridges
Ventures
CDV Funds
£115MM
ProCredit
Holding
JPMorgan
Urban Re-
naissance
Prop. Fund
$175MM
Lyme
Northern
Forest Fund
$190MM
Harcourt
BelAir SA
Fund
$345MM
I
M
P
A
C
T
F
I
R
S
T
Charity
Bank
Root
Capital
$48MM
Bridges
Ventures
Social
Entre-
preneurs
Fund
£8MM
Aavishkaar
Acumen
Fund
$34.1MM
Ignia
$60MM
Bosques
Pico
Bonito
$5MM
This Framework aims to combine
the traditional asset classes with
the speci?cities inherent in Impact
Investment. It is organized along
two key dimensions: investor mo-
tivation (Financial First vs. Impact
First) and asset class
Asset Allocation Framework
Title
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
16
CASE STUDIES
17
FINANCIAL FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• Financial return is that of a 1-year treasury bond plus a pre-
mium
- The current rate is ~2.5% to TIAA-CREF’s CBD Pro-
gram
• Deposits are made for one year with the option of annual
renewals
• The investment horizon is much shorter and the risk level is
much lower than TIAA-CREF’s typical investments
MULTIPLE INVESTORS
Shorebank’s investor group consists of a varied group including ?nancial institutions, corporations, foundations and
high net worth individuals
TIAA-CREF (http://www.tiaa-cref.org)
TIAA-CREF (Teachers Insurance and Annuity Association - College Retirement Equities Fund) is one of the largest
?nancial services companies in the United States, with ~$400B in assets under management
COMMUNITY BANK DEPOSIT PROGRAM
• TIAA-CREF manages the largest, comprehensively screened social investment vehicle for individuals in the US
with ~$9.6B of assets under management (2007), representing ~2.4% of total assets under management
• This investment is part of the ?rm’s Community Bank Deposit Program under TIAA-CREF’s Socially Responsible
Investing initiative
• The motivation for the ShoreBank investment was that returns include a premium to 1 year treasury bond while
the investment simultaneously yields a social return
• In addition to the investment in ShoreBank, TIAA-CREF has also invested $27MM in six other community banks in
the US
SHOREBANK (http://www.shorebankcorp.org)
• In 2007, TIAA-CREF invested $22MM into ShoreBank of Chicago and ShoreBank Paci?c of Ilwave, WA
• ShoreBank is considered the ?rst and largest community development bank (CDB) in the US with $2.1B in assets
- Most CDBs in the US have special designations as to the social purposes their loans will be used for with
80% of the lending being done in underserved communities
- Loans are made to residential real estate (e.g. affordable housing), small businesses and conservation
projects
- $445MM in total of mission investments were made in 2006
• ShoreBank utilises CDARS (Certi?cate of Deposit Account Registry Service) to place its funds into insured cer-
ti?cates of deposit issued by banks in the network, allowing investments of up to $50MM to be insured by the
Federal Deposit Insurance Corporation (FDIC), whose normal limit is $100K
• TIAA-CREF is in the process of identifying additional banks through which they can expand their overall investment
in this program
GEOGRAPHY
United States
AREA OF IMPACT
Community Banking
~2.5% return
Cash
IMPACT INVESTMENT
VEHICLE
Shorebank
INVESTOR
Multiple Investors
Pro?le: TIAA-CREF
SOCIAL/ENVIRONMENTAL IMPACT
• ShoreBank Corporation measures its success by the amount it invests
to create economic prosperity and a healthy environment, as well as by
its ?nancial performance
• Cumulatively, ShoreBank has ?nanced over $3.7 billion in mission-
related investments, with over $371 million in new mission loans in
2008. These include:
- conservation loans
- community development loans
- loans that achieved both
• Globally, ShoreBank International has provided management advisory
services to the ?nancial sector in over 60 developing countries and has
lent $914 million
Shorebank Deposit Program
CASH
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
18
I
M
P
A
C
T
FINANCIAL FIRST INVESTOR
SENIOR DEBT
FINANCIAL IMPACT
• Financial return objective is 6 month Libor + 100/200 bps
• The fund provided a return of just over 68% in its 10+ year
period
• Annualised return of 6% in USD, net, in 2006-2008
SOCIAL/ENVIRONMENTAL IMPACT
• Over 400,000 micro-entrepreneurs funded by the loans from DMCF
• 41% of the entrepreneurs are in rural areas
• Most loans were typically granted to low-income, unbanked and iso-
lated bene?ciaries
• 52% of the recipients are female
• Almost 20% of the loan volume in 2008 was destined for agriculture
• Micro-entrepreneurs in 31 countries bene?t from the fund
MULTIPLE INVESTORS
60% of the investors in the BlueOrchard Dexia Micro-Credit Fund are institutional investors whereas 40% are high
net worth individuals
DEXIA MICRO-CREDIT FUND (DMCF) (http://www.blueorchard.com)
• Invests in debt instruments of up to 3 years in maturity issued by micro?nance institutions (MFI) in Africa, Asia,
Eastern and Central Europe, and Latin America
• Over 10 years in existence and nearly $500MM in assets under management
• Lends to micro?nance institutions that have a minimum 3-year track record, have their accounts externally au-
dited and rated, possess a minimum of $1MM in assets and are operationally self-sustainable and pro?table
• Loan maturity ranges between 18 months and 3 years and most loans are renewed on expiration
• As of May 2009 there had been no defaults on any loan made by the Fund to MFIs
• The micro loans (provided by MFIs to micro-entrepreneurs) ranged from $50 to $8,000 with an average of $1,584,
and only 3.2% of the loan repayments to MFI lenders were delays over 30 days as of March 31, 2009
• The Fund is a Luxembourg SICAV and has a minimum investment of US $10,000, or CHF 15,000. It is now avail-
able to US accredited investors with a minimum investment of the USD equivalent of £125,000 (~$175,000)
ACEP CAMEROUN S.A.
• MFI that targets urban micro-entrepreneurs in 3 regions of Cameroon
• Launched in 1999 as a government project and transformed into a private company in 2005
• As of February 2009, ACEP had a portfolio of $12M in which
- There were 7.439M clients
- 34% of the clients were women, who often borrow in groups of 3-5 and receive between $105 - $325
6-month loans
- Many of them have now “graduated” to single loans, highlighting the positive impact of the micro-loans
• ACEP’s performance showed a 5.8% ROA and 15% expected return
Equity Equity
GEOGRAPHY
United States
AREA OF IMPACT
Urban Renewal
MULTIPLE INVESTORS
JP Morgan set out to create the fund by drawing investments from a variety of investors
PRUDENTIAL FINANCIAL (http://www.prudential.com/socialinvestments)
• The Social Investments group at Prudential is responsible for investing over $400MM of both the Prudential
Corporation and The Prudential Foundation’s funds
• The SRI group takes a 3-tier approach to investing its money: about 40% of the funds target market returns, 20%
target signi?cantly below-market returns but high impact investments and the remaining 40% target the middle
of the two bookends, usually delivering strong returns, but low compared to the risk undertaken for the
investment
• Prudential purchased $10MM of equity in one of the Fund Investment Vehicles (FIVs) of the JP Morgan Urban
Renaissance Property Fund
• Prudential was attracted to the investment due to the ability to invest in both green certi?ed development and
urban renewal through commercial and residential projects
JP MORGAN URBAN RENAISSANCE PROPERTY FUND
• The investment thesis of the fund is targeted at the development and redevelopment of real estate projects in
market rate, affordable and workforce housing, retail, mixed-use development, hospitality and other real estate
sectors in Urban Renaissance Markets (URMs)
• The fund hopes to target the top twenty URMs in the US including: Manhattan-Bronx, San Francisco, Philadel-
phia, Chicago, Los Angeles, Minneapolis, and Newark
• The Fund intends, when feasible, to invest in residential and retail properties that are subject to “green” speci-
?cations, such as geothermal, and/or solar heating and cooling system, photovoltaic glass, and recycled building
materials
• The Fund is also including cultural amenities and market-based after-school educational providers in its retail and
mixed-use projects
• The Fund has $175MM of fully subscribed capital with $75MM more in the investor pipeline
• The targeted ?nancial returns of the Fund are at market rate levels of ~15% net of fees
880 GLENWOOD AVENUE, ATLANTA
• The Fund made an investment in this 300K square foot luxury mid-rise apartment community in Atlanta
• The apartment complex comprises 325 one and two bedroom units
• The total development cost of the apartments was ~$46MM
DEAL
Various Real Estate
Transactions
IMPACT INVESTMENT
FUND
JP Morgan Urban
Renaissance Property Fund
INVESTOR
Multiple Investors
Pro?le: Prudential
“ The idea behind
investing in the
JP Morgan Urban
Renaissance Fund was
to earn market rate
returns while supporting
a project that propagates
urban renewal and green
development.”
Preston Pinkett
Head of Social Investment
Prudential
JP Morgan Urban Renaissance Property Fund
REAL ESTATE
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
24
FINANCIAL FIRST INVESTOR
I
M
P
A
C
T
“We seek to recover
development and non-
conservation values of
real estate through the
sale of conservation
easements and other
ecosystem services
(e.g. wetland mitigation
credits and carbon
ofsets). We like these
sales to occur within the
?rst two to three years of
our investment. During
this time and afterwards,
we and future owners
are obligated to manage
the property sustainably.
On timberland
properties, our goal is
to demonstrate that
sustainably managed
properties can generate
attractive cash ?ows.”
Jim Hourdequin
Managing Director
The Lyme Timber Company
FINANCIAL IMPACT
• Taking into account operating income and losses, the sale of
the conservation easement, and the sale of property subject
to the conservation easement, the investment produced an
equity internal rate of return of approximately 22% for the
Lyme Northern Forest Fund (does not include asset manage-
ment and promote fees paid to The Lyme Timber Company)
SOCIAL/ENVIRONMENTAL IMPACT
• The sale of the conservation easement to the State of New York (facili-
tated by The Nature Conservancy) will
- allow full public access to 38,400 acres of the property under a
public recreation plan;
- maintain private hunting club leases on the property; and
- restrict all further development of the property.
• The structure of the conservation easement contract requires that
sustainable forestry practices continue under successive owners
• The Forest Stewardship Council (FSC) has certi?ed the property as
adhering to its standards and criteria for forest management
• The Lyme Timber Company has been recognised with multiple awards
for the quality of its management of the Chateaugay lands
MULTIPLE INVESTORS
• The Lyme Northern Forest Fund (LNFF) investors include high net worth individuals, university and college en-
dowments, pension funds and foundations such as the Rockefeller Foundation
THE LYME TIMBER COMPANY (http://www.lymetimber.com)
• The Lyme Timber Company was formed in 1976 to invest in timberland and real estate using its own capital
• In 2002, the Company created its ?rst timberland investment fund, the Lyme Northern Forest Fund, with $65MM
in capital commitments and a 3-year investment window
• In 2005, the Company formed a second fund, The Lyme Forest Fund, with $190MM in capital commitments and
a 3-year investment window
• The Lyme Timber Company’s investment thesis is to make timberland investments in partnership with con-
servation agencies or government entities to mitigate risk. In many investments, Lyme will retain the rights to
sustainably manage the timberland on parts or all of the purchased real estate and will sell an option to a partner
organisation allowing the partner to acquire fee interest portions of the property with high conservation value and
one or more ‘conservation easements’ over the remainder of the property. The conservation easements perma-
nently restrict development and require The Lyme Timber Company and future owners to sustainably manage the
property
• The investments are typically exited by sale to another timberland investor; a part of the real estate is therefore
perpetually conserved as managed timberland
• The deal sizes range from $4MM - $80MM; the nominal return on the investments ranges from 11-25%
CHATEAUGAY WOODLANDS, UPSTATE NEW YORK
• Chateaugay Woodlands is an 85,000 acre property adjoining the Adirondack Park in Northern New York
• The LNFF purchased the property from Domtar, a forests product company, for $18.5MM in late 2004
• The purchase was made in partnership with the Nature Conservancy, a conservation agency, which paid $600K
for the option to subsequently purchase a conservation easement over the woodland property
• LNFF ?nanced half of the investment using $9MM of New Markets Tax Credit Financing at attractive rates
• In late 2008, LNFF sold a conservation easement to the State of New York for $10MM
• In early 2009, LNFF sold the timberlands, subject to the terms of the conservation easement, for $20 million
GEOGRAPHY
United States
AREA OF IMPACT
Sustainable Forestry
Above market rate return Market rate return less Fund fees
Investment in Real Estate
DEAL
Chateaugay Woodlands
IMPACT INVESTMENT
FUND
Lyme Northern Forest
Fund Limited Partnership
INVESTOR
Multiple Investors
Lyme Northern Forest Fund
OTHER REAL ASSETS
25
I
M
P
A
C
T
FINANCIAL FIRST INVESTOR
FINANCIAL IMPACT
• Investors can gain exposure to absolute return hedge fund
strategies while being able to make CSR/SRI investments
• BelAir provides diversi?ed global hedge fund exposure across
asset classes, regions and hedge fund strategies
• Returns: overall portfolio targets returns > Libor +300bp with
limited downside
• Between inception in November 2007 and February 2009,
BelAir has appreciated by 1.1% compared to -55.4% MSCI
World Index
SOCIAL/ENVIRONMENTAL IMPACT
• BelAir implements a strict SRI Policy that results in an approved list of
SRI compliant instruments to which the underlying hedge funds limit
their exposure
• As such, the investor is guaranteed not to be exposed to companies
and countries that are not SRI compliant
• SRI impact affects a broad number of instruments covering over 2,800
companies globally
• BelAir has strong Social and Environmental impacts through the SRI
analysis conducted which includes engagement and dialogue with
companies to improve their practices in a SRI context
MULTIPLE INVESTORS
• The Harcourt BelAir Sustainable Alternatives Fund has several investors – notable lead investors and co-founders
are Folksam (Swedish Insurance Group) and Storebrand (Norwegian Insurance Group)
• Assets in BelAir exceed $345MM (as of March 2009)
• Folksam and Storebrand have a long history of SRI investing and invested seed capital of $200MM as part of their
UN PRI (Principles for Responsible Investment) strategy
• The lead investors take an active role in SRI screening of investment instruments along with Harcourt, which is
the fund manager and specialises in hedge fund manager selection and portfolio management
• Some other well-known investors of Harcourt are Barclays UK, Sumitomo Japan, and Swisscom Pension Fund
THE HARCOURT BELAIR SUSTAINABLE ALTERNATIVES FUND (http://www.harcourt.ch)
• Harcourt was the ?rst fund-of-hedge-funds ?rm to sign the United Nations PRI initiative
- Tracks global hedge fund data and meets over 1,000 hedge fund managers per annum
- Screens the global hedge fund universe to ?nd high quality managers that employ strategies that are
suitable to implement in the internally de?ned SRI (Socially Responsible Investing) Policy developed jointly
with Folksam and Storebrand
- Performs rigorous due-diligence of hedge funds and monitors all the invested funds for SRI compliance
• Investment in hedge funds is based on
- relevance and compliance to the de?ned SRI policy which spans 5 criteria
- ?nancial performance
- quality of the manager
• The BelAir “universe” of screened companies consists of 2,800 companies as of Q1 2009. All underlying hedge
funds in BelAir constrain themselves to only be exposed to the SRI approved list of instruments
• As of March 2009 BelAir portfolio consisted of 24 underlying hedge fund managers
GEOGRAPHY
Global
AREA OF IMPACT
Broad SRI
> Libor+300bp
DEAL
SRI compliant hedge
funds
IMPACT INVESTMENT
FUND
BelAir SA Fund
INVESTOR
Multiple Investors
“SRI is important to
many of our investors
and they have few
options available,
especially in hedge fund
strategies.”
Erik Eidolf
Executive Director Nordic
Harcourt Investment Consulting AB
BelAir SA Fund
ABSOLUTE RETURN (HEDGE FUNDS)
Private Equity
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
26
IMPACT FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• Returns depend on length of deposit, varying between 0.5%
and 3%
SOCIAL/ENVIRONMENTAL IMPACT
• 100% of deposits used for lending to organisations delivering solutions
to social problems
• Charity Bank has committed over £83.4MM to charities and other
socially driven organisations since its launch in 2002 which has levered
in an extra £48.2MM of funding. The bank’s borrowers work with more
that 3MM people in the UK
• Charity Bank is currently devising a formal reporting system to measure
the impact its loans create
“Perhaps now more
than ever there is a
need for intermediaries
like Charity Bank that
ofer alternatives to the
traditional commercial
banks. People who are
as concerned about the
impact their money
achieves as the ?nancial
return they seek can
place their money with
con?dence in such
institutions.”
Julia Novy-Hildesley
Executive Director
Lemelson Foundation
“Talking to participants
of schemes enabled by
Charity Bank allows me
to better understand the
diference that my and
others investments have
made to people’s lives.”
Depositor
Charity Bank
MULTIPLE INVESTORS
• Charity Bank is unusual among charities in having share capital
• Shares are held by Charities Aid Foundation, the National Council for Voluntary Organisations (NCVO), 15 chari-
table trusts and foundations, and Barclays Bank (not for its own pro?t but in trust for charity)
• Shareholder types include ordinary, non-cumulative B and C preference shareholders and holders of 10-year
subordinated loan notes
• Charity Bank is currently raising capital from HNWI’s and already has commitments in principle of £2MM in pref-
erence share capital. The Bank is aiming to raise up to £12MM of core capital long term
• In 2007, Charity Bank received £3MM of capital investment, as including share capital from the LankellyChase
Foundation, Community Foundation for Northern Ireland and DB Microcredit Development Fund
CHARITY BANK (http://www.charitybank.org)
• By saving with Charity Bank, depositors can earn a modest amount of interest to protect their capital, knowing
that they can get their money back at the end of the term
• Returns depend on the length of the deposit and can vary between 0.5% and 3%, some opt for zero
• Deposits can be made into a variety of products, including savings accounts, Charity ISA, CITRA and
Deposit Bonds
• 100% of personal deposits of up to £50k are protected under the ?nancial services compensation scheme
• 100% of deposits are used to provide affordable loan ?nance and advice to enable charities, community associa-
tions, voluntary organisations, community businesses and social enterprises predominantly across the UK to grow
• Loans are mostly made to organisations within the areas of social/health care, affordable housing, education,
sustainable development, community transport, the arts and community regeneration
- For example, Charity Bank provided a loan of £300k to a charity (CHICKS) that organises respite breaks for
disadvantaged inner-city children
- The loan enabled the charity to purchase a much-needed building to house its operations
- CHICKS are on target to provide 1,000 breaks per year from 2010 – they currently provide 800
GEOGRAPHY
Predominantly UK
AREA OF IMPACT
Various Sectors
Cash
0.5-3% return
IMPACT INVESTMENT
VEHICLE
Charity Bank
INVESTOR
Multiple Investors
Charity Bank
CASH
27
AREA OF IMPACT
“Missing Middle”
GEOGRAPHY
Africa
2.5% expected return 9% return
Senior Debt
IMPACT FIRST INVESTOR
I
M
P
A
C
T
“Currently nearly
90% of our funds are
given out as grants and
only 10% are spent for
investments. We are
however looking to
increase our investments
and move that ratio to
70-30 or 60-40.”
Julia Novy-Hildesley
Executive Director
Lemelson Foundation
“Our ?rst screen
involves validating that
there will be a net social
and environmental
return. We then follow
that with ?nancial due
diligence including
micro and macro risk
assessment.”
Namrita Kapur
Vice President
Root Capital
FINANCIAL IMPACT
• The loan was disbursed at an interest rate of 9% (in line with
local market rates)
• Kilicafe has repaid its short term loan and is on track to
repay its long term loans; in general, it is a borrower in
good standing
SOCIAL/ENVIRONMENTAL IMPACT
• Membership in Kilicafe has grown approximately 28% from 2006
to 2008
• Turnover has outpaced membership growth, adding $1MM to the local
rural economy
• Overall income per member has increased providing easier access to
education and health services
• The pulperies have decreased water usage by 80%, critical to a region
with scarce water resources
MULTIPLE INVESTORS
• Root Capital attracts investments from industry partners, foundations such as the Lemelson Foundation, SRI
funds and high net worth individuals
THE LEMELSON FOUNDATION (http://www.lemelson.org)
• The Lemelson Foundation focuses on investing in entrepreneurs and technology dissemination
• The foundation has an asset allocation of 5% for mission related investments and is particularly keen on making
cleantech investments
• The foundation was impressed with Root Capital’s operating history and was keen to invest in its project of
propagating water ef?cient technology for coffee farmers in Tanzania
ROOT CAPITAL (http://www.rootcapital.org)
• Root Capital targets the “missing middle”, a gap existing between micro?nance and corporate banking
• It bridges this gap by providing capital, delivering ?nancial education, and strengthening market connections of
rural small and growing businesses
• It employs a form of value chain ?nance where the main security is future sales contracts from buyers, primarily
in North America and Europe. It provides short-term and long-term loans against factoring agreements or signed
purchase orders between grassroots businesses and their buyers
• It provides an average return of 2.5% to investors
KILICAFE (http://www.kilicafe.com)
• Kilicafe provides support services to ~100 farmer groups, representing approximately 8,000 small-scale coffee
farmers in Tanzania
• With loans amounting to over $1MM, Root Capital ?nanced acquisitions of central pulperies which process raw
coffee beans (2006 and 2008) and the construction of a warehouse (2007)
• The pulperies use a fraction of the water required by conventional technology. This step in coffee processing is
critical to managing the quality of the product
• Root Capital used Starbucks purchase contracts as collateral for the loans
DEAL
Kilicafe
IMPACT INVESTMENT
FUND
Root Capital
INVESTOR
Multiple Investors Pro?le:
Lemelson
Root Capital
SENIOR DEBT
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
28
IMPACT FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• The Fund aims to maximise social impact whilst seeking a
positive ?nancial return
• The ?nancial returns target for the Fund, net of fees and
losses, is 3-5%
SOCIAL/ENVIRONMENTAL IMPACT
• Social Impact is measured using the Bridges Social IMPACT Scorecard
MULTIPLE INVESTORS
• The Bridges Social Entrepreneurs Fund has raised over £8MM from leading individuals, institutions and founda-
tions from the ?nancial sector, government and NESTA, the National Endowment for Science, Technology and
the Arts
• The funds have been raised through a mixture of donations to the Bridges Charitable Trust and Investments into a
Limited Partnership structure. If the fund can demonstrate a track record of returns, Bridges Ventures believes it
can raise further funding from socially motivated investors rather than further philanthropy
THE BRIDGES VENTURES SOCIAL ENTREPRENEURS FUND (http://www.bridgesventures.com)
• Social enterprises are businesses with social objectives whose surpluses are principally reinvested for that pur-
pose in the business or community, rather than being driven by the need to maximise pro?t for shareholders and
owners
• Successful social enterprises deliver an important and innovative means of achieving a sustained social impact
• Bridges Social Entrepreneurs Fund seeks to address the funding gap that exists for social enterprises that are
looking to scale up but cannot generate market rate returns or offer the usual exit opportunities and therefore
cannot attract commercial equity
• The fund targets enterprises based in England that deliver high social impacts and that operate scalable and
sustainable business models
• The fund expects to make around 10-15 investments in the £500K - £1.5MM range over the next 4-5 years
• The investments will be through equity or quasi-equity instruments with ?exible structures, such as subordinated
debt with royalty payments that rise with revenues
• The fund will also play an active role in providing strategic and operational assistance to the social enterprises
that it backs
• The fund will maintain a balanced portfolio of early stage and growth capital investments and acquisitions;
the investments will also be made in a wide variety of sectors and models
GEOGRAPHY
United Kingdom
AREA OF IMPACT
Scaling Up Social Enterprises
3-5%
IMPACT INVESTMENT
FUND
Bridges Ventures Social
Entrepreneurs Fund
INVESTOR
Multiple Investors
“While Bridges
Ventures’ CDV Funds
aim to maximise
?nancial returns
subject to a social
screen, the Bridges
Social Entrepreneurs
Fund aims to maximise
social impact subject
to ?nancial criteria,
including a sustainable
business model.”
Skye Heller
Associate
Bridges Ventures
Bridges Ventures Social Entrepreneurs Fund
QUASI-EQUITY INSTRUMENTS
29
IMPACT FIRST INVESTOR
I
M
P
A
C
T
“At Aavishkaar we
wouldn’t want to think
of ourselves separating
the social impact from
the ?nancial one or
seeing one as distinct
from the other. We see
social impact as being
implicit in the business
model of the enterprise.
The growth in the
business fortunes of
this company is directly
linked to the social
impact it makes; more
products sold means
higher energy efciency
to poor households and
therefore improvement
in their quality of life.”
Pradeep Pathiyamveetil
COO
Aavishkaar
FINANCIAL IMPACT
• Starting with no revenues in 2003, the company has grown to
a turnover of INR 11.4 MM (~$225K) in 2008
• The working capital bridge loan offered by Aavishkaar was
repaid in full by the company
• Aavishkaar has received strong dividend payback from the
investment after revenues have started to grow
• Aavishkaar looks to exit the investment close to 5 years after
the initial equity round
SOCIAL/ENVIRONMENTAL IMPACT
• The products sold by Servals have impacted 450,000 low income
households
• Average fuel savings have been around 72L of kerosene annually per
household
• Financial savings have been INR 3000 (~$70) annually per household
• Servals currently has 60 employees, of whom 60% are women
MULTIPLE INVESTORS
• Aavishkaar’s investor base includes foundations, high net worth individuals and other impact-oriented investors
ROCKEFELLER FOUNDATION (http://www.rockfund.org)
• Rockefeller Foundation has invested in numerous socially motivated investment vehicles through their program-
related investing (PRI) work
AAVISHKAAR (http://www.aavishkaar.org)
• Aavishkaar is a micro economic fund, targeting investments in India
• Aavishkaar also runs a micro?nance fund as a joint venture with Goodwell, a Netherlands-based micro?nance
company
• Looks to invest in SMEs and very small companies engaging in entrepreneurship
• Screens companies from an impact perspective ?rst, and after convincing themselves of strong impact, looks at
the ?nancial metrics like growth and pro?tability
• Typical investment size of INR 1MM (~$25K)
• Primarily equity players, but permitted to provide debt in deals where equity is already present
• Due to Indian regulations on venture capital ?rms, pure debt can only make up 20% of deals, so debt funding
tends to be bridge loans to take care of small requirements for limited time periods
SERVALS AUTOMATION PVT LTD (http://www.servalsgroup.blogspot.com/)
• Servals Automation was founded by P Mukundan as a platform to launch rural innovations
• Servals products include a kerosene saving stove burner targeting the rural poor and a rain gun which at half the
price of imported products which uses water more ef?ciently at half the price of imported products
• The company, headquartered in Chennai, is aligned with the Rural Innovation Network (RIN)
• Servals approached Aavishkaar for an equity investment to help strengthen its assembling, marketing and distri-
bution channels as well as to help promote its products
• Aavishkaar has invested INR 1.119MM (~$25K) in the company through two rounds of equity investment.
It has also extended a bridge loan to Servals in order to cover working capital gaps
GEOGRAPHY
India
AREA OF IMPACT
Rural Poverty
Below market return Below market return
less fund fees
Equity
DEAL
Servals Automation
IMPACT INVESTMENT
FUND
Aavishkaar
INVESTOR
Multiple Investors
Pro?le: Rockefeller Foundation
Aavishkaar
VENTURE CAPITAL
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
30
IMPACT FIRST INVESTOR
I
M
P
A
C
T
“We look at investments
that don’t just have a
social impact in them but
also are breakthrough
innovations or business
models.”
Sasha Dichter
Director of Business Development
Acumen Fund
10-15% return
Private Equity
FINANCIAL IMPACT
• The investment horizon is from ?ve to ten years, usually with
rights that allow investors to seek an exit around year 5
• IPOs are preferred exit strategy although trade sales are more
common
• Overall portfolio of equity investments has a gross return
potential of 10-15%
SOCIAL/ENVIRONMENTAL IMPACT
• About 50,000 calls have been made in the last 3 years
• Increased in ambulances from 10 (Q1 2007) to 81 (Q4 2008); another
14 expected by Q1 2009
• 1298 plans to scale to 7 more cities in India by adding more than 400
ambulances in the next 2 years
• 1298 has also developed training programs, certi?ed by the American
Heart Association and New York Presbyterian Hospital, to train its own
emergency care doctors as well as educate the general public
MULTIPLE INVESTORS
• Acumen has a wide variety of investors who have invested between $10k and $5MM+ into the Fund
• Investors include foundations, family of?ces and corporations
ACUMEN FUND (http://www.acumenfund.org)
• The total fund size is $34.1MM
• Acumen Fund is a non-pro?t global venture fund that uses entrepreneurial approaches to solve the problems of
global poverty
- Established in 2001 with seed capital from the Rockefeller Foundation, Cisco Systems Foundation and
three individual philanthropists
• Invests exclusively in businesses that
- directly serve the poor
- have economically sustainable business models
- have a signi?cant innovation element to them
• Has created portfolios in four areas: Health, Water, Energy and Housing. In each area it identi?es and supports
social innovators
- Capital commitments range from $300,000 to $2MM in equity or debt with a payback or exit in roughly
?ve to seven years
ZIQITZA HEALTHCARE: 1298 AMBULANCES (http://www.1298.in)
• In 2007, Acumen invested equity to help the company grow their services and ?eet of ambulances
• The total investment amount is ~$1.5MM, as part of the Health Portfolio
• Up until recently, Mumbai lacked in any reliable ambulance or emergency medical response service
• 1298 provides affordable ambulance services for all by using a sliding price scale driven by the patient’s ability to
pay for a certain kind of hospital
- The poorest patients who are typically admitted to general wards of a government hospital, pay a reduced
rate (50%) or do not have to pay
- Approximately 20% of the services are offered free of charge or at subsidised rates
GEOGRAPHY
India
AREA OF IMPACT
Health Services
DEAL
Ziqitza Healthcare
IMPACT INVESTMENT
FUND
Acumen Fund
INVESTOR
Multiple Investors
Acumen Fund
PRIVATE EQUITY
31
IMPACT FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• Ignia expects to earn above market rate returns on the project
• Ignia believes that generating high returns is imperative in the
low income segment because:
- the market perceives the segment to be high risk:
- the customers in this segment do not have a lot of
choice and so high margins are sustainable:
- it is the best way to achieve scale when creating prod-
ucts and services serving poor people.
SOCIAL/ENVIRONMENTAL IMPACT
• Around 1,800 families have been provided access to affordable but
quality housing
• The 1,800 families were also provided with affordable mortgages
• While Ignia does not capture any other speci?c metric for social impact,
it is always conscious of the need to serve the low income segment
that is underserved and of making sure that the impact is scalable
“Ignia’s potential to act
as a model for other VC
?rms looking to invest in
businesses serving the
low income segment in
Mexico is great.”
Matt Bannick
Managing Partner
Omidyar Network
“We are big believers
in ?nding business
solutions to social
problems... We found
that there are many
services that the poor
simply do not have
access to. We thought a
catalyst was needed –
the answer was a fund.”
Alvaro Rodríguez Arregui
Managing Director
Ignia
MULTIPLE INVESTORS
• Ignia’s investors include institutional investors, multilateral institutions, high net worth individuals and foundations
such as the Inter-American Development Bank and Omidyar Network
OMIDYAR NETWORK (http://www.omidyar.com)
• Omidyar Network (ON) is a philanthropic investment ?rm that makes investments in the areas of access to capital
in developing countries and media, markets and transparency in the developed world
• ON’s spending is split between grants and for-pro?t investments; it believes that for-pro?t models do a better job
of achieving scale and sustainability and also in staying responsive to customer needs
• For all investments, the primary aim is to achieve maximum social impact. There is a simultaneous drive towards
achieving market rate ?nancial returns for the for-pro?t investments
• The way Omidyar measures social impact depends on the investment area. The number of people impacted and
depth of impact are the basic metrics
• ON was impressed with Ignia’s management expertise and the fact that social impact was embedded in its
business plan
IGNIA (http://www.ignia.com.mx)
• Ignia is a Mexican Venture Capital ?rm that invests in businesses that provide products and services to the under-
served low income population of Latin America
• It aims to invest in pro?table and scalable businesses that create social impact by achieving systemic change
• It believes that there is a strong market for high quality products and services delivered to the poor at affordable
rates
• Ignia raised an initial fund of about $60MM and has completed 2 investments in the areas of affordable housing
and healthcare services and it hopes to have completed 6 investments by the end of 2009
PREMIN - JARDINES DEL GRIJALVA PROJECT
• In 2008, Ignia made a $2MM investment in Premin for its Jardines del Grijalva housing project in Chiapas, Mexico
• The homes are being built for families that earn less than $10,000 a year
• The idea behind the investment is that small local developers of affordable housing suffer from a lack of capital
and large developers seldom go into the South of Mexico or into smaller communities. As a consequence, there
is a shortage of housing and families are forced to build their own homes
• Ignia also identi?ed a micro?nance institution that would provide mortgages to families without access to them
GEOGRAPHY
Latin America & Mexico
AREA OF IMPACT
Affordable Housing
Market rate return less
fund/management fees
Market rate return
Investment in Real Estate
DEAL
Premin, Mexico
IMPACT INVESTMENT
FUND
Ignia
INVESTOR
Multiple Investors
Pro?le: Omidyar
Ignia
REAL ESTATE
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
32
IMPACT FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• The project has an overall expected IRR of 20% which is
signi?cantly above the risk-adjusted market rate for the
timber sector
• Revenue streams include carbon offsets and sales from sus-
tainable forestry including timber, cherry, mahogany,
and rosewood
SOCIAL/ENVIRONMENTAL IMPACT
• The company has already planted 500K trees and aims to plant
another 500K
• It employs over 150 people from the local communities around the park
• The company was one of the ?rst to have its tropical forestry carbon
sequestration methodology approved by the United Nations Clean De-
velopment Mechanism which has generated signi?cant carbon offsets
• Local farmers have been trained in agro-forestry techniques, soil con-
servation and pest management
• The project has also gone a long way in protecting the water supply for
the region around the park
“We are moving down
the learning curve
quickly and are con?dent
that we can do similar
projects on a larger
scale.”
Robert Lapides
Chairman and CEO
Pico Bonito LLC
Investment in Operating Entity
> 20% expected return 20% projected return
MULTIPLE INVESTORS
• Pico Bonito’s investors include institutions, multilateral organisations, high net worth individuals, and foundations
PICO BONITO, LLC
• The Pico Bonito project was founded in 2006 by the Pico Bonito National Park Foundation, an NGO based at
the project site in Honduras, and the Ecologic Development Fund, a U.S. non-pro?t focussing on environmental
stewardship with local community collaboration in Latin America
• The mission of the company is to establish and manage business models that achieve triple-bottom-line results in
the areas of sustainable forestry, environmental and biodiversity restoration and protection, and social equity
• Future plans include establishing a portfolio of 6-12 projects in multiple Central and South American markets
utilising capital in the $50-75MM range
BOSQUES PICO BONITO SRL (http://www.bosquespicobonito.com)
• The main idea behind the project was to develop a sustainable business solution to the problems plaguing the
areas in and around the Pico Bonito National Park in Honduras including deforestation, endangerment of rare plant
and animal species, pollution, and rural poverty that drives further environmental destruction
• The company raised approximately $5MM in capital and developed a for-pro?t model to establish and sustainably
manage native species and generate carbon offsets, while preserving the natural environment and biodiversity of
the park and engaging local communities to enable them to share in the bene?ts achieved by the project
• The company operates in and around the buffer zone of the national park by acquiring threatened or already dam-
aged and deforested land areas and establishing sustainable forestry practices
• To establish sustainable land management practices and create short term food supplies and cash crops for the
local communities, the company initiated agro forestry activities which yield such crops such as coffee, corn
and beans
GEOGRAPHY
Honduras
AREA OF IMPACT
Sustainable Forestry
DEAL
Bosques Pico Bonito SrL
IMPACT INVESTMENT
FUND
Pico Bonito, LLC
INVESTOR
Multiple Investors
Pico Bonito
OTHER REAL ASSETS
33
Is it possible to structure a deal that satis?es the needs of both Financial First
investors and Impact First investors? This is a common question that arises when
investors contemplate Impact Investment. The AAF extends not only to singu-
lar examples that serve a speci?c intention and asset class, but also to cases
that are layered in nature. In these deals Financial First and Impact First investors
(sometimes even pure philanthropists using grants) come together to set-up deal
structures that otherwise would not be possible or as effective.
Below we discuss a few examples of how these layered structures can work to
satisfy the motivations and objectives of different Impact Investors.
Layered Structures
Root Capital
SENIOR DEBT
Asset Allocation Framework
1 International Finance Facility for Immunisation (IFFIm)
2 The New York City Acquisition Fund
ASSET CLASSES
CASH
SENIOR
DEBT
MEZZANINE
/QUASI
EQUITY
PUBLIC
EQUITY
ALTERNATIVE INSTRUMENTS
VENTURE
CAPITAL
PRIVATE/
GROWTH
EQUITY
REAL
ESTATE
OTHER REAL
ASSETS
ABSOLUTE
RETURN
(HEDGE
FUNDS)
F
I
N
A
N
C
I
A
L
F
I
R
S
T
2 Bank
Consortium
1 Retail
& Comm.
Investors
(IFFIm
Bonds)
I
M
P
A
C
T
F
I
R
S
T
1 Various
Countries
2 City
of NY +
Founda-
tions
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
34
I
M
P
A
C
T
IMPACT FIRST INVESTOR FINANCIAL FIRST INVESTOR
Prime Rate
$1.6 B
RETAIL AND COMMERCIAL
INVESTORS
FINANCIAL IMPACT
• IFFIm has been able to raise $1.6B through three offerings to
date
• Due to contractual guarantees from various governments,
IFFIm has been able to retain their AAA/Aaa status
SOCIAL/ENVIRONMENTAL IMPACT
• With money from IFFIm and donors such as the Gates Foundation,
GAVI has been able to protect 213MM additional children with new
vaccines since 2000
• Due to increased vaccination, GAVI has been able to prevent more than
3.4MM premature deaths
• New and underused vaccine coverage has risen substantially, doubling
in most areas
“There certainly is
no discount; each
transaction is priced
at market so someone
doesn’t have to
diferentiate between
our product and another
based upon returns.
When faced with a
decision between
buying a government
bond or an IFFIm bond
with a slightly higher
yield and helping the
immunisation efort,
most people will take the
second .”
George Richardson
World Bank
INTERNATIONAL FINANCE FACILITY FOR IMMUNISATION (IFFIM)
(http://www.iff-immunisation.org)
• IFFIm was launched in 2006 through an initiative of the United Kingdom government to support the GAVI
Initiative
- The GAVI Initiative was launched with a $1.5B grant from the Gates Foundation to fund immunisation
in the world’s 70 poorest nations
• Realising that the social impact of their committed funds will be greater immediately vs. over the 20 year
commitment period, the government sponsors decided to set up IFFIm to tap the ?nancial markets to access
funds immediately
• The World Bank, as IFFIm’s agent, manages IFFIm’s ?nances and capital markets activities. The World Bank
also coordinates with IFFIm’s donors, manages their pledges and payments as well as IFFIm’s disbursements
for immunisation and health programmes through the GAVI Alliance
GRANT PROVIDERS (VARIOUS NATIONS)
• IFFIm was able to gather $5.3B in grants from 6 European nations (UK, France, Italy, Spain, Sweden and
Norway) when IFFIm was set up, as well as South Africa who joined later
• The grant money was donated over a 20 year period through legally binding payment obligations, starting in
2006 and growing in aggregate amount every year until 2021 before declining through 2026
• Encouraged by the large donations from the Gates Foundation, the nations wanted to provide support to the
global immunisation effort underway by the GAVI Alliance partners
RETAIL AND COMMERCIAL INVESTORS
• IFFIm so far has tapped the ?nancial markets to help raise immediate funds based on the $5.3B in
committed dollars
• With a AAA/Aaa rating from numerous rating agencies, they are able to offer returns at a slight premium to
government bonds, offering slightly higher than market returns for their rating compared to governments
with the same rating
• So far IFFIm has been able to raise funds from investors in the US, Europe and Asia through its inaugural
transaction in 2006 and in Japan through two issues speci?cally for the Japanese market. The latest offering
will target both retail and commercial customers in the UK with an offering by HSBC
GEOGRAPHY
70 Poorest Nations
AREA OF IMPACT
Vaccination
International Finance Facility for
Immunisation (IFFIm)
GRANT PROVIDERS
(VARIOUS NATIONS)
Bonds
20 year
grants
$5.3 B
2006 2026
35
I
M
P
A
C
T
IMPACT FIRST INVESTOR FINANCIAL FIRST INVESTOR
Prime Rate
Sub-Market Rate
BANK CONSORTIUM
FINANCIAL FIRST
INVESTORS
FINANCIAL IMPACT
• The interest rate on loans disbursed by the banks is indexed
to the prime lending rate
SOCIAL/ENVIRONMENTAL IMPACT
• The fund aims to develop 30,000 units of affordable housing in a 10
year time span in New York City
• The success of the fund has spurred the creation of similar funds in
Los Angeles, Atlanta and Louisiana
INVESTORS
• The New York City Acquisition Fund is an example of a layered structure where Financial First and Impact First
investors invest together in a project with the former earning market rate returns and the latter earning sub-
market returns
• The Financial First investors in the New York City Acquisition Fund are a consortium of banks including Bank of
America, JP Morgan Chase and HSBC
• The group of Impact First investors is led by the City of New York and includes a number of foundations including
the Ford Foundation and the Rockefeller Foundation
THE NEW YORK CITY ACQUISITION FUND (http://www.nycacquisitionfund.com)
• The New York City Acquisition Fund was formed in 2006 to overcome the shortage of property available for the
development of affordable housing in New York City
• The fund seeks to facilitate affordable housing development by providing ?exible, advantageous capital for the
acquisition of property to developers of affordable housing
• The fund is worth approximately $200MM with $162MM provided by the bank consortium and the balance
provided by the Impact First investors led by the City of New York and allied foundations
• The bank consortium provides senior debt as lending capital while the group of Impact Investors provides
guarantees in the form of low-interest subordinated loans
• Developers either refurbish existing affordable housing units or engage in new construction of affordable housing
• The maximum loan amount is $15MM for the acquisition of existing occupied buildings and $7.5MM for the
acquisition of vacant land although the Fund has the ?exibility to provide exceptions to these limits
• The fund lends to both for-pro?t and non-pro?t developers; for-pro?t developers are eligible for loans up to 95%
of the lesser of appraised value or purchase price while the number goes up to 130% for non-pro?t developers
• All borrowers must contribute 5% of the total acquisition and pre-development costs as equity
GEOGRAPHY
United States
AREA OF IMPACT
Affordable Housing
The New York City
Acquisition Fund
IMPACT FIRST
INVESTORS
CITY OF NY +
FOUNDATIONS
Senior
Debt
Sub. Debt +
Guarantees
~$160MM
~$40MM
NYC ACQUISITION
FUND
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
36
Acknowledgements
While this report was spearheaded by Bridges Ventures and the Parthenon Group, it was very much a collective
effort among many experts in the industry. Through feedback and guidance we received from many, we were
able to paint a clearer picture of the history and key trends in the sector, as well as provide insights that will
hopefully serve as guidance and education for those investors who are beginning to explore this sector. The
thoughts and ideas presented here are the work of many great minds and no single individual or institution can
claim them as their own.
Tracy Palandjian, Managing Director at The Parthenon Group and Michele Giddens, Executive Director at Bridg-
es Ventures provided leadership for the report. The case team was led by Pedro Sanches and included JJ
O’Brien, Venugopal Mruthyunjaya, Lisa Heidemanns, and Srivaths Swaminathan, all of The Parthenon Group.
Antony Bugg-Levine of The Rockefeller Foundation and Lila Preston of Generation Investment Management
played crucial roles as key advisors to this paper and, from its inception, helped shape many of the ideas pre-
sented throughout this work.
We would also like to thank those who helped shape our main theses and took time reviewing drafts of the
report, including Doug Bauer, David Carrington, Katherine Collins, Jed Emerson, Jessica Freireich, Katherine
Fulton, John Goldstein, Charly Kleissner, John Kingston, Andrew Robinson, Jason Scott, and Helen Wildsmith.
INTERVIEWS
Without the help of numerous experts in the sector, this report would never have reached fruition. We would
like to thank all those listed below who spent valuable time with the team on the phone or in person, helping
make this report as impactful and insightful as possible.
Pradeep Pathiyamveetil, AAVISHKAAR
Sasha Dichter, ACUMEN FUND
Brad Presner, ACUMEN FUND
Ben Powell, AGORA PARTNERSHIPS
Christa Velasquez, ANNE E. CASEY
FOUNDATION
Demmy Adesina, AQUIFER
Arthur Wood, ASHOKA
Alvaro Rodriguez ARREGUI, IGNIA
Bill Marvel, BALDWIN BROTHERS
John Campagna, BENCHMARK CAPITAL
Roger Frank, BENCHMARK CAPITAL
Lynn Martin, BLUE ORCHARD FINANCE
Michele Giddens, BRIDGES VENTURES
Skye Heller, BRIDGES SOCIAL
ENTREPRENEURS FUND
Yasmin Tong, CALIFORNIA COMMUNITY
FOUNDATION
Malcolm Hayday, CHARITY BANK (UK)
Christine Eibs-Singer, E + CO
Terry O’Day, ENVIRONMENT NOW
David Blood, GENERATION IM
Lila Preston, GENERATION IM
Amit Bouri, GLOBAL IMPACT INVESTING
NETWORK
Steven Godeke, GODEKE CONSULTING
Steve Hardgrave, GRAY MATTER
CAPITAL
Raul Pomares, GUGGENHEIM PARTNERS
Eric Eidolf, HARCOURT
John Goldstein, IMPRINT CAPITAL
Pawan Mehra, INTELLECAP
Geoff Burnand, INVESTING FOR GOOD
Teddy Rice, IRONWOOD EQUITY
Tom Reiss, KELLOGG FOUNDATION
Oliver Karius, LGT VENTURE
PHILANTHROPY
Jim Hourdequin, LYME TIMBER
Gavin Watson, NEW ENERGIES (E + CO)
Matt Banick, OMIDYAR NETWORK
Jim Bunch, OMIDYAR NETWORK
Rob Lapides, PICO BONITO
Preston Pinkett, PRUDENTIAL
Antony Bugg-Levine, ROCKEFELLER
FOUNDATION
William Foote, ROOT CAPITAL
Namrita Kapur, ROOT CAPITAL
Monica Pressley, SAN FRANCISCO
FOUNDATION
Mark Campanale, SOCIAL STOCK
EXCHANGE
Dan Crisafulli, THE SKOLL FOUNDATION
Richard Fahey, THE SKOLL FOUNDATION
Scott Budde, TIAA-CREF
Cherie Santos, TIAA-CREF
Bob Assenberg, TRIODOS BANK
Alex Connor, TRIODOS BANK
Adam Ognall, UKSIF
John Kingston, VENTURESOME
Anders Ferguson, VERIS
Patricia Frivas, VERIS
David Carrington
Katherine Collins
37
Further Reading
RESEARCH PAPERS
• Monitor Institute: Investing for Social & Environmental Impact, 2009
Examines the emergence of impact investing, exploring how it might develop and how leaders can accelerate the
industry’s evolutionhttp://www.monitorinstitute.com/imp...stingforSocialandEnvImpact_FullReport_004.pdf
• Good Capitalist: February Newsletter, 2009
Update on social capital market including participants’ initiativeshttp://archive.constantcontact.com/fs047/1101902708153/archive/1102453118973.html
• UKSIF: Review of Activities, 2008
Review of UK Social Investment Forum’s 2008 activities including useful ?gures on the sectorhttp://www.uksif.org/cmsfles/uksif/UKSIF_Review_of_Activities_2008.pdf
• UKSIF: Sustainable Investment Opportunities for Pension Funds in Alternative Asset Classes, 2008
Aims to increase pension funds’ awareness of sustainable investment options available across asset classeshttp://www.uksif.org/cmsfles/281411/SustainableAlternatives.pdf
• Boston College: Handbook on Responsible Investment Across Asset Classes, 2008
Aims to help investors understand sustainable investment and identify opportunities within it across asset classeshttp://www.cof.org/fles/images/ExecEd/bcrespinvesthndbk.pdf
• Rockefeller Philanthropy Advisors: Solutions for Impact Investors: From Strategy to Implementationhttp://rockpa.org/ideas_and_perspectives/publications
Appendix
Methodology
The Investing for Impact: Case Studies Across Asset Classes report builds on the work previously developed
by the Monitor Institute and also draws on the work conducted by Rockefeller Foundation and F.B. Heron
Foundation on the Impact Investment sector. The report aims to educate key stakeholders and practitioners on
the opportunities they have in Impact Investment. These groups include potential investors (High Net Worth
Individuals, Foundations and Institutional Investors) and investment gatekeepers (private bankers and invest-
ment advisors).
The report takes an empirical approach by mapping the Impact Investment market along two key dimensions:
investor motivation (Financial First vs. Impact First) and asset class (as per traditional asset allocation). The paper
proposes an Asset Allocation Framework (AAF) combining the two dimensions to illustrate a comprehensive
perspective of the Impact Investment market using language familiar to investors. The report provides detailed
case studies in each of the “cells” in the AAF, including pro?les of an investor (LP), the Impact Investment fund
(GP) and an underlying investment, as well as ?nancial return and impact to society.
The report was created after an extensive review of existing literature on Impact Investment as well as a large
number of original interviews with sector participants. It re?ects more than 40 interviews conducted with a
range of investors - including foundations, high net worth individuals, institutional investors, advisors, consul-
tants and family of?ce representatives - about their experiences with Impact Investment and their motivations
for particular investments made across various asset classes.
The interviews were subsequently translated into case studies to provide concrete examples of the Impact
Investments that are being developed in each asset class. Cases selected were from existing funds rather than
the many that are currently in the fund-raising process. In each asset class, there are other compelling case
studies that have not been covered and the authors do not seek to make investment recommendations through
this report; rather they wish to illustrate the range and breadth that is emerging in the sector.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
38
• Rockefeller Philanthropy Advisors: MRI - A Policy and Implementation Guide for Foundation Trustees, 2008
Policy and implementation guide for foundation trusteeshttp://www.cof.org/fles/images/ExecEd/RockefellerPhilAdvisors.pdf
• Stanford Social Innovation Review: The Power of Strategic Mission Investing, 2007
Suggests that foundations should make strategic mission investments to complement grant makinghttp://www.ssireview.org/images/articles/2007FA_feature_kramer_cooch.pdf
• Commission of Unclaimed Assets: Social Investment Bank, 2007
Overview of the Third Sector and role of a social bank within ithttp://www.unclaimedassets.org.uk/downloads/CUA_report_FINAL.pdf
• F.B. Heron Foundation: Impact Across the Mission-Related Investment Portfolio, 2007
Illustrates a spectrum of asset classes within which mission-related investment can take placehttp://www.fbheron.org/documents/ar.2007.mri_gatefold.pdf
• Said Business School: From Fragmentation to Function, 2007
Paper on the social capital’s market structure, operation and innovationhttp://www.universitynetwork.org/si...es/fles/Skoll_FromFragmentationtoFunction.pdf
• Jed Emerson: The Blended Value Map, 2003
Snapshot of international players and institutions within the social investment sectorhttp://www.blendedvalue.org/media/pdf-bv-map.pdf
• New Economics Foundation: Mission Possible, 2008
Considers how foundations use part of their endowments for mission connected investmenthttp://www.cof.org/fles/images/ExecEd/NewEconomicsFoundation08.pdf
• Margaret Bolton: Foundations and social investment—making money work harder in order to achieve more,
2003
Providing foundations with information about social investment and its relevance to their goals and strategieshttp://www.esmeefairbairn.org.uk/docs/EFF_foundations_report.pdf
• Venturesome: Financing Civil Society, 2008
Practitioner’s view of the UK social investment markethttp://www.cafonline.org/pdf/Venturesome - Financing Civil Society - Sept 08.pdf
• Venturesome: The Three Models of Social Enterprises, 2008
Examines how to create social impact through trading activities using three theoretical modelshttp://www.cafonline.org/pdf/Ventursome - 3 Models Of Social Enterprise_Part1 - Jan
08.pdf andhttp://www.cafonline.org/PDF/Venturesome - 3 Models Of Social Enterprise_Part2 -
July%202008.pdf
• FSG: Aggregating Impact: A Funder’s Guide to Mission Investment Intermediaries
Guide to mission investment intermediaries that foundations or funders may employhttp://www.fsg-impact.org/ideas/section/277
• Antony Bugg-Levine: Impact Investing - Harnessing Capital Markets to Drive Development at Scale
Provides an overview of the proliferation of innovation occurring in the Impact Investment sector globally and ad-
dresses the structural causes and likely prospects of the sector’s growth in light of the current ?nancial crisishttp://www.rockfound.org/efforts/impact_investing/beyond_proft_bugg_levine.pdf
39
Websites
• Bridges Ventures:http://www.bridgesventures.com/
• Rockefeller Foundation:http://www.rockfound.org/
• Generation IM:http://www.generationim.com/
• Global Impact Investing Network: www.globalimpactinvestingnetwork.org
• Skoll Foundation:http://www.skollfoundation.org/
• Heron Foundation:http://www.fbheron.org/
• Annie E. Casey Foundation:http://www.aecf.org/
• More for Mission Investing:http://www.moreformission.org/
• Working with legislators to encourage passage of L3C acts:http://www.americansforcommunitydevelopment.
org/
• Non-proft organisation offering interesting research perspectives:http://www.lightyearsip.net/index.shtml
• UK Social Investment Forum:http://www.uksif.org/
• US Social Investment Forum:http://www.socialinvest.org/
• European Social Investment Forum:http://www.eurosif.org/
• European Foundation Centre:http://www.efc.be/
• International Association of Microfnance Investors:http://www.iamf.com/
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
40
Appendix: Market Benchmarking
Impact Investors, whether they are Financial
First or Impact First in their motivations, have
a keen interest in measuring and reporting
the ?nancial and social returns on their invest-
ments. It is critical to benchmark these returns
against commonly accepted standards as this
facilitates meaningful comparisons between
investments and, moreover, allows for judge-
ment of the extent of impact or relative success
of an investment.
On the ?nancial returns side, investment
returns are typically measured against bench-
mark indices corresponding to speci?c asset
classes. The indices are typically composites of
representative investment instruments in that
asset class; for example, the MSCI World In-
dex is a market capitalisation weighted index of
public equities in 23 developed countries. The
year on year change of the representative index
provides a measure of ‘market rate’ returns on
average for that asset class; the growth in the
MSCI World Index provides a measure of the
average return of investing in a public equity
strategy in a developed market.
It is important to note that for most asset
classes, the market return benchmark can vary
signi?cantly with geography and the actual sec-
tor in which the investment is made. The return
rate for a real estate investment can be quite
different depending on whether the invest-
ment was made in a developed or developing
country and an agricultural commodity can
yield signi?cantly different returns as compared
to a precious metal. There can also be cases
where no meaningful benchmark exists. When
Omidyar Network was considering investing
in Ignia, a Mexican Venture Capital ?rm that
makes investments in businesses that cater
to the low income segment of the population,
Omidyar found that there were insuf?cient
precedents of Latin American Venture Capital
?rms investing in social enterprises. Says Matt
Bannick, Managing Partner at Omidyar, “We
found that there were no historical datasets
corresponding to our investment space and as
a result there was no benchmark to draw from.
We built our own ?nancial model and by testing
the sensitivity of our assumptions, narrowed
down to a target range for ?nancial return.”
On the social and environmental impact front,
the metrics used to measure return vary quite
widely. Common metrics include jobs created
and extra income and carbon offsets gener-
ated. But the lack of standardisation of these
metrics renders the process of benchmark-
ing social and environmental returns dif?cult.
However efforts such as those by the B Lab,
Veris, Rockefeller Foundation, Global Impact In-
vesting Network and Acumen are underway to
create standardised metrics and this will help
make benchmarking social impact feasible.
The following table provides the average upper
and lower bounds of 5-year compounded annu-
al growth rates of benchmark indices
4
in each
asset class by decade. It must be reiterated
that the market return benchmarks presented
here may not be applicable across all geogra-
phies and sectors.
4
Benchmark Returns/Indices used:
Cash: 3 month discount rate on US Treasury bills
Quasi Equity, Buyout, VC: Cum. Vintage Year Return, US Private
Equity Performance Index, Thomson Financial
Public Equity: MSCI World Index
Real Estate: Dow Jones Wilshire US REIT Index
Commodities: Dow Jones AIG Commodity Index
41
C
A
S
H
Q
U
A
S
I
E
Q
U
I
T
Y
P
U
B
L
I
C
E
Q
U
I
T
Y
B
U
Y
O
U
T
V
C
R
E
A
L
E
S
T
A
T
E
C
O
M
M
O
D
I
T
I
E
S
1981-1990
Average Lower
Bound
6% 7% 10% 16% 8% 5% N/A
Average Upper
Bound
10% 13% 16% 22% 18% 15% N/A
1991-2000
Average Lower
Bound
3% 4% 5% 8% 25% 8% 3%
Average Upper
Bound
6% 8% 10% 14% 45% 15% 12%
2001-2005
Average Lower
Bound
1% 5% 4% -10% -12% 12% 5%
Average Upper
Bound
4% 10% 10% 2% 2% 20% 15%
5
Range considered was 2001-2008 for Quasi Equity, Buyout and VC
All photos purchased from istockphoto.com.
Photographer credits listed from top to bottom, left to right on each page.
Cover: Alberto L. Pomares G., blackred, Rob Belknap, brytta
Page 4: Denis Jr. Tangney, blackred, Terraxplorer, Johnny Lye
Page 7: Peter Ramsey, Michael Flippo, Keith Lamond
Page 8: Peter Ramsey, Michael Flippo
Page 9: Keith Lamond
Page 10: blackred, Greg Randles, Vikram Raghuvanshi, Keith Lamond, Mark Kuipers
Page 11: King Ho Yim, Christa Brunt, blackred, Melodie Sheppard, Simon Owler
Page 12: Terraxplorer
Back Cover: brytta, Alberto L. Pomares G.
Bridges Ventures
www.bridgesventures.com
Parthenon Group
www.parthenon.com
Global Impact Investing Network
www.globalimpactinvestingnetwork.org
Copyright Designation: This work is licensed under
a Creative Commons copyright that allows the
copying, distribution and display of this material if
credit is given to the authors.
Printed on Revive Pure Offset, a recycled grade
containing 100% post consumer waste, using veg-
etable based inks. This document has been printed
by Impress Print who are FSC certi?ed.
Design: J Sherman Studio LLC
Impact investing, de?ned as actively placing capital
in businesses and funds that generate social and/
or environmental good as well as ?nancial returns,
is a growing industry. Impact investment funds are
attracting investors ranging from high-net-worth
individuals to institutional investors, corporations
and foundations. Diverse impact investments are
emerging across multiple asset classes.
This report is intended for the investment
community. It takes a case study approach,
mapping examples of Impact Investments on
a traditional asset allocation framework to help
investors understand this emerging industry.
doc_454115543.pdf
In such a detailed explanation in relation to market forces and entrepreneurship can be harnessed.
CASE STUDIES ACROSS
ASSET CLASSES
Investing FOR Impact
Bridges Ventures
Bridges Ventures originated the concept of this report with the goal of contributing to the
greater understanding within the investment community of the opportunities offered by Impact
Investment and to promote the ?ourishing of further investments that can make a difference as
well as making ?nancial returns.
Bridges Ventures is an innovative investment company based in London that invests funds
delivering both ?nancial returns and social and environmental bene?ts. Founded in 2002 and
chaired by Sir Ronald Cohen, a founding partner and the former Chairman of Apax Partners,
the company believes that market forces and entrepreneurship can be harnessed to do well by
doing good. The team pride themselves on working closely with the companies they back and
are committed to helping entrepreneurs achieve long-term success. Bridges Ventures currently
has two venture funds under management that invest in businesses based in regeneration areas
and in sustainable business sectors such as the environment, education and healthcare. They
also recently launched the Bridges Social Entrepreneurs Fund, a quasi-equity fund for social en-
terprises and the Bridges Sustainable Property Fund, which invests in properties in regeneration
areas and environmentally sustainable buildings.
For more information, please visit www.bridgesventures.com.
The Parthenon Group
Parthenon has taken the lead in researching and authoring this report. The work has been done
on a pro bono basis because the report has the potential to leverage more capital into invest-
ments that can produce great social and environmental bene?ts.
The Parthenon Group is a leading advisory ?rm focused on strategy consulting with of?ces in
Boston, London, Mumbai, and San Francisco. Since its inception in 1991, the ?rm has embraced
a unique approach to strategic advisory services; long-term client relationships, a willingness to
share risk with clients, an entrepreneurial spirit, and customised insights are the hallmarks for
which Parthenon has become recognised in the industry. This unique approach has established
the ?rm as the strategic advisor of choice for CEOs and leaders of Global 1000 corporations,
high-potential growth companies, private equity ?rms, healthcare organisations, and non-pro?t
organisations. Our Non-Pro?t Practice assists non-pro?t leaders, foundations and corporations
with strategy development, corporate social responsibility, organisational alignment and other
strategic issues.
For more information, please contact Tracy Palandjian at [email protected] or visit
www.parthenon.com.
Global Impact Investing Network
This report has drawn upon information and case studies provided by the Global Impact Invest-
ing Network (GIIN), which has been extremely open and helpful. The authors would like to
thank the many members and partners of the GIIN who contributed to this work and hope that
they will ?nd that the report, in turn, contributes to their success in growing this exciting new
sector. The GIIN is a newly-formed, independent, non-pro?t organization dedicated to building
industry infrastructure, developing activities, and disseminating research and education that
address systemic barriers to effective impact investing. By measuring the social and environ-
mental performance of impact investments, the GIIN’s IRIS (Impact Reporting and Investment
Standards) initiative brings transparency and credibility to the sector and enables further industry
infrastructure like performance benchmarks and rating systems that help increase the scale and
effectiveness of impact investing.
These efforts are informed by the GIIN Investors’ Council, a membership group comprised of
leading impact investors committed to developing a coherent industry that facilitates more pri-
vate capital investment in businesses addressing social and environmental problems around the
world. By bringing together the large-scale family of?ces, institutional investors, pension funds,
investment banks, wealth managers, private foundations and development ?nance institutions
whose goals lie in the territory between philanthropy and the sole focus on pro?t-maximisation,
the GIIN seeks to drive collectively towards the maturation of a sector that is currently inhibited
by fragmentation.
www.globalimpactinvestingnetwork.org
1
Contents
What is Impact Investment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Impact Investment Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Main Findings and Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Case Studies and the
Asset Allocation Framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
FINANCIAL FIRST
CASH Shorebank Deposit Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SENIOR DEBT BlueOrchard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
MEZZANINE/QUASI EQUITY INSTRUMENTS Triodos
Investment Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PUBLIC EQUITIES Generation Investment Management . . . . . . . . . 20
VENTURE CAPITAL Bridges Ventures CDV Funds . . . . . . . . . . . . . . . . . 21
PRIVATE EQUITY ProCredit Holding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
REAL ESTATE JP Morgan Urban Renaissance Property Fund . . . . . 23
OTHER REAL ASSETS Lyme Northern Forest Fund . . . . . . . . . . . . . . . . 24
ABSOLUTE RETURN (HEDGE FUNDS) BelAir SA Fund . . . . . . . . . . . . . . 25
IMPACT FIRST
CASH Charity Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SENIOR DEBT Root Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
QUASI-EQUITY INSTRUMENTS Bridges Ventures
Social Entrepreneurs Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
VENTURE CAPITAL Aavishkaar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PRIVATE EQUITY Acumen Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
REAL ESTATE Ignia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
OTHER REAL ASSETS Pico Bonito . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Layered Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
International Finance Facility for Immunisation (IFFIm) . . . . . . . . . . 34
The New York City Acquisition Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
2
The Rockefeller Foundation sup-
ports innovative solutions to many
of the world’s most intractable
challenges, af?rming its mission, since 1913, to “promote
the well-being” of humanity. During the last several
years, Impact Investing has clearly emerged as one such
solution: an innovation that can help more people tap into
expanding markets while strengthening their resilience to
21st century risks.
Government funding, international aid and philanthropic
donations alone are insuf?cient to achieve the world’s
development aspirations, especially against the backdrop
of global recession. Private investment capital, therefore,
will need to complement traditional resources or solve
problems on a larger scale. Fortunately, the emerging
Impact Investing industry enables investors to direct their
resources toward multiple bottom-line returns – ?nancial
and social or environmental. This means doing good with
the market, not only doing well in it.
The Rockefeller Foundation recently launched a major
initiative on Harnessing the Power of Impact Investing
because we believe the industry could potentially become
a powerful complement to our – and others’ – work.
Through this initiative, we organised an inspiring group of
partners — ranging from entrepreneurs starting Impact In-
vestment banks and wealth management ?rms to leaders
of major pension funds and investment banks — to help
accelerate this new industry’s evolution. A mature impact
investing industry will enable more investors to address a
wider range of social and environmental challenges more
ef?ciently, making our job easier in turn.
This new report, Investing for Impact: Case Studies
Across Asset Classes, is particularly encouraging both
for what it describes and for what it signals about how
Impact Investing is evolving. It provides fresh evidence
of the diversity of investment opportunities now available
and, importantly, the range of investors this industry now
counts among its ranks. The detailed case study approach
complements the Monitor Institute’s analysis, Investing
for Social & Environmental Impact, which was released
earlier this year. Together, this seminal scholarship lays
groundwork for new and clearer understandings of the
industry.
The process by which this report materialised is also
encouraging. The 50 Impact Investing pioneers who
contributed their time – and opened their books – to the
report’s authors exemplify the collaborative commitment
necessary for this new industry to reach its potential.
The Global Impact Investing Network, whose founding
members constitute many of the investors pro?led in this
document, will draw on this commitment and provide a
platform for keeping these case examples “live.” We are
also grateful to the Parthenon Group and Bridges Ventures
for their leadership and generosity in producing this study
as a pro bono contribution to the ?eld.
I hope this publication makes plain exactly why my col-
leagues and I are so excited about Impact Investing’s
possibilities. We look forward to working with you to build
an industry that generates many more promising case
studies of high-Impact Investment.
Judith Rodin
President of the Rockefeller Foundation
FROM DAVID BLOOD, SENIOR PARTNER OF GENERATION INVESTMENT MANAGEMENT
It has never been a more appropriate time to re-consider the role of capital markets
in creating value for society. What has become exceedingly clear to us here at
Generation is that sustainability and long-term value creation are inextricably linked. We hope by our partici-
pation in this study we can help demonstrate that “Impact Investment” makes sense even for mainstream
investors.
Generation Investment Management is proud to support this report by Bridges Ventures and Parthenon,
as well as support the work of the Global Impact Investment Network (GIIN). We look forward to helping
expand the community of Impact Investors, and we think now is the time for these activities to move from
niche to mainstream.
Today, the sustainability challenges the planet faces are extraordinary and completely unprecedented. Even
beyond the bailouts and recent volatility, the challenges of the climate crisis, water scarcity, income dispar-
ity, extreme poverty and disease must command our urgent attention. Philanthropy alone cannot provide
the full set of solutions needed to address these challenges. Now, more than ever, capital markets need to
play a role in addressing global sustainability challenges.
Whether you are a private individual, family of?ce, investment bank, foundation endowment, or pension
fund, this report should be helpful in providing a view across asset classes to highlight the variety of oppor-
tunities and ways to invest for impact. We hope you will join us on the path to create a more sustainable
form of capitalism.
David Blood
Senior Partner of Generation Investment Management
FROM JUDITH RODIN, PRESIDENT OF ROCKEFELLER FOUNDATION
3
What is Impact Investment?
Impact Investment, often referred to using other terms such as social investment or
sustainable investment, is de?ned as “actively placing capital in businesses
and funds that generate social and/or environmental good and a range of
returns, from principal to above market, to the investor.”
1
By leveraging
the private sector, these investments can provide solutions at a scale that purely philan-
thropic interventions usually cannot reach. Investors in Impact Investment Funds include
high-net-worth individuals, institutional investors, corporations or foundations, who
invest in a wide range of asset classes. The intention of Impact Investment vehicles
to make a social/environmental impact is a primary qualifying criterion; investments
that unintentionally result in social good are not regarded as Impact
Investments. Impact Investment is closely allied to but differentiated from Socially
Responsible Investment (SRI) which generally employs negative screening to avoid in-
vesting in harmful companies or shareholder activism/advocacy to encourage corporate
social responsibility practices.
SOME EXAMPLES OF IMPACT INVESTMENT
JP MORGAN URBAN
RENAISSANCE
PROPERTY FUND
($175MM RAISED)
• The fund targets urban development and redevelopment of affordable housing
using “green” speci?cations from solar heating to recycled building materials
• The fund is targeting market rate returns, with a projected return of ~15% net of
fees
• To support local communities, the fund is including cultural amenities such as
partnering with after-school educational providers
IFFIM BONDS
($1.6B RAISED IN 2
ISSUES)
• Launched to support the GAVI (Global Alliance for Vaccines and Immunisation)
Initiative, these bonds use the public markets to support vaccination efforts in the
developing world
• Leveraging future grants from developed countries, these bonds have been issued
at market rates to both commercial and retail investors and hold a AAA/Aaa rating
• The offering has allowed GAVI to frontload committed funds (that have been guar-
anteed over a 20 year time horizon), facilitating more lives to be saved in the near
years and creating the infrastructure to more ef?ciently administer vaccinations
across the developing world
ROOT CAPITAL
($48MM AUM)
• Root Capital provides senior debt to the primarily large co-ops servicing the rural
poor, the “missing middle”, too large for micro?nance and too small or risky for
corporate banks
• Using contracts with agricultural buyers like Starbucks to mitigate the lender’s risk,
Root Capital provides access to funds and also creates sustainable partnerships
between farmers and buyers
• Root Capital provides below market-rate returns to investors (2.5% at present),
but has been able to drive signi?cant impact in farming communities in Tanzania,
contributing to the growth of GDP in poverty-stricken rural areas
More details on these examples and others are found in the Case Study section of this report.
1
Adapted from the Monitor Institute: Investing for Social and Environmental Impact
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
4
Executive Summary
Why Impact Investments?
Governments and charities do not have suf?cient capital nor the complete skill
set required to solve the world’s pressing challenges. At the same time, the
recent economic crisis has shaken established orthodoxies about the risk and
return pro?les of traditional investments. The Impact Investment sector is emerg-
ing as a partial answer to the twin challenges that these two realities present:
Impact Investment unlocks substantial capital to build a more sustainable and
equitable global economy while allowing for diversi?cation across geographies
and asset classes.
A plethora of investments is emerging across multiple asset classes that provide
investors with market-rate investments, or for more altruistic investors, substan-
tial social impact, while still generating positive ?nancial returns. The old binary
system—the widely-held belief that for-pro?t investment could only maximise
?nancial return while social purpose could only be pursued through charity—is
breaking down.
Who is this report for?
This report is intended for the investment community and aims to help inves-
tors understand this emerging industry. Many investors have begun to explore
Impact Investments by investing in micro?nance in developing countries or com-
munity development projects in the US. However, there is still a perception that
Impact Investment always entails a sub-market ?nancial return, which this report
demonstrates is far from the case. For example, Lyme Timber, a forestry fund
based in Hanover, New Hampshire, has been able to utilise conservation con-
tracts, partnerships with the Nature Conservatory, and deep industry experience
to invest in sustainable forestry projects throughout the US. These projects help
conserve local forests, while delivering market to above-market returns to their
investors.
Meanwhile, the industry is developing globally and the ?nancial products avail-
able for investors are diversifying. Investments range from tropical rainforest
preservation in South America, to ?nance for charities in the UK, to low-income
housing development in New York City, to infectious disease prevention in Africa.
5
A case study approach in an asset allocation framework
The report employs a case study approach,
mapping examples of Impact Investments on a
traditional asset allocation framework [pg. 15].
This structure illustrates readily the diversity of
products that are being developed, where they re-
side within a traditional asset allocation framework
and the types of opportunities that are available to
date. From these cases the report draws a series
of ?ndings [pg. 10].
This report, in conjunction with a new monograph
by Rockefeller Philanthropy Advisors, Solutions
for Impact Investors: From Strategy to Implemen-
tation, demonstrates how impact investing can
be integrated across asset classes and equips in-
vestors with the tools to frame their investment
decisions from strategy to implementation and
evaluation.
The growth potential of impact investment
Compared to more traditional investments in established asset classes, Impact
Investment is only now emerging from infancy. Some initiatives have achieved
substantial scale but many others remain small. Questions include how much
the sector can scale and whether achieving greater scale will result in reduction
in either social / environmental impact or ?nancial returns. However, apart from
growing in its own right, the sector has fostered a high level of innovation which
can potentially serve as a catalyst to in?uence how mainstream investments
are made.
The positive momentum of the Impact Investment sector continues, despite
the recent turmoil in global capital markets. While the basic investment infra-
structure needs to be developed, Impact Investment is becoming a stable and
sustainable alternative for institutional investors and high net worth individuals.
As the infrastructure builds further and more funds across asset classes achieve
market-rate performance, the Impact Investment sector stands poised to be-
come a powerful vehicle both to address signi?cant social and environmental
issues and to chart a new course for the ?nancial services industry to reclaim its
stature as an engine of social and economic upliftment.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
6
Investor motivation and returns
Although investors in Impact Investments share the vision of combining ?nancial
returns with positive social/environmental impact, they can be categorised into two
broad groups. The Monitor Institute, in their Investing for Social and Environmental
Impact report, de?nes them as follows:
1. FINANCIAL FIRST INVESTORS, who seek to optimise ?nancial returns with a
?oor for social/environmental impact. This group tends to consist of commer-
cial investors who search for investment vehicles that offer market-rate returns
while yielding some social/environmental good.
2. IMPACT FIRST INVESTORS, who seek to optimise social or environmental
returns with a ?nancial ?oor. This group uses social/environmental good as a
primary objective and may accept a range of returns, from return of principal to
market rate. This group is willing to accept a lower than market rate of return in
investments that may be perceived as higher risk in order to help reach social/
environmental goals that cannot be achieved in combination with market rates
of ?nancial return.
LAYERED STRUCTURES
Sometimes Financial First and Impact First investors collaborate in what we term as
layered structures (also termed “Yin-Yang” investments
2
). These layered struc-
tures are created when the two types of investors work together, combining capital
from Impact First and Financial First motivations, blending different types of
capital with different requirements and motivations. In these deals, Im-
pact First investors accept a sub-market risk-adjusted rate of return enabling other
tranches of the investment to become attractive to Financial First investors. This
symbiotic relationship allows Financial First investors to achieve market rate returns
and Impact First investors to leverage their investment capital thus achieving signi?-
cantly more social impact than they would if investing on their own. It is important
to note that these structures are not limited to Financial First and Impact First inves-
tors, but can include philanthropic organisations pairing grant money with Financial
or Impact First investors to generate high levels of impact.
This segmentation of Impact Investors, as adapted from the Monitor Institute Re-
port, is summarised in the ?gure on page 7.
The Impact Investment Sector
2
Adapted from the Monitor Institute: Investing for Social and Environmental Impact
7
Who can invest in the
impact investment sector?
While we have broken down our investor
groups into Financial First and Impact First
Investors, investors can engage in Impact In-
vestments on either side of this spectrum.
Some investors, such as Prudential’s Social In-
vestment Arm, have internal allocations for the
percentage of their total assets to be placed in
Financial First investments versus Impact First
investments. Investors who have the ?exibility
to invest in either Financial First or Impact First
investments achieve different goals. Financial
First investments deliver strong risk-weighted
returns as well as positive social / environmen-
tal impacts, while Impact First investments
can trail-blaze, to meet tougher social / en-
vironmental challenges by accepting lower
returns or taking initial capital risk to allow new
types of funds to develop a track record. Fi-
nally, some investors are bound by ?duciary
duties either set out in their mission statement
or governed by their legal status and are re-
stricted to only Financial First Investments.
LAYERED STRUCTURES
T
a
r
g
e
t
F
i
n
a
n
c
i
a
l
R
e
t
u
r
n
Target Social Impact
HIGH
NONE
NONE
I
M
P
A
C
T
F
L
O
O
R
HIGH
FINANCIAL FLOOR
(nominal principal)
Solely Return –
Maximizing
Investing
Philanthropy
FINANCIAL FIRST
INVESTORS
Optimize ?nancial returns
with an impact ?oor
IMPACT FIRST
INVESTORS
Optimize social impact
with a ?nancial ?oor
IMPACT
INVESTMENT
SEGMENTS OF IMPACT INVESTORS
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
8
PENSION FUNDS AND OTHER
INSTITUTIONAL INVESTORS
Pension funds and other institutional investors
are normally bound by strong ?duciary duties,
limiting their ability to play in Impact First invest-
ments. Although generally con?ned to Financial
First investments, these investors have a multi-
tude of options available to them for achieving
market-rate return Impact Investments. From
direct investments through to investments in
numerous funds, pension fund managers have
the ability to put together a diversi?ed portfo-
lio of Impact Investments. TIAA-CREF in the
United States is one example of this new op-
portunity for market-rate Impact Investment,
having committed more than $600 million to
Impact Investments across asset classes (from
cash to debt to private equity) that comply with
?duciary responsibility regulations. Layered
structures also give these investors further
opportunities to meet their ?duciary responsi-
bilities while achieving various impact targets.
Pension funds and other
institutional investors are
normally bound by strong
?duciary duties, limiting their
ability to play in Impact First
investments.
ULTRA HIGH NET WORTH INDIVIDUALS
Ultra high net worth individuals and family of-
?ces typically have greater ?exibility in their
investment mandates. Without the same level
of ?duciary duty as many other types of inves-
tors, these investors can invest across different
asset classes. The Impact Investment space
allows these investors to pick multiple strate-
gies for their investments. They, like pension
funds, can look to maximise returns through a
diversi?ed Financial First platform. Or they can
choose a particular social or environmental mis-
sion they wish to undertake, allocating a part
of their investment portfolio to sub-market rate
Impact First funds targeted at their preferred ar-
eas of social/environmental impact. Given their
?exibility, family of?ces were instrumental in
pioneering the early commercial investment ve-
hicles in micro?nance and are proving similarly
in?uential in seeding the rapidly growing ?eld of
Impact Investment funds.
High net worth individuals
and family of?ces typically
have greater ?exibility in their
investment mandates.
9
FOUNDATIONS
Like high net worth individuals, foundations of-
ten have the latitude to take a more specialised
and tailored approach to Impact Investment.
They can invest their endowment in Financial
First investments (sometimes known as “Mis-
sion-Related Investment”) then use a portion
of their grant allocations or assets to invest
in Impact First Investments (often referred
to as “Social Investment” and sometimes as
“Programme-Related Investment” from their
designation in the US tax code). Given the
breadth of opportunities available in the mar-
ket, many foundations have started to invest in
Impact First funds. Like high net worth individ-
uals and family of?ces, foundations can often
achieve strong returns, while creating impact
not just broadly, but in speci?c target missions
that relate to the foundation’s own mission.
Like high net worth individu-
als, foundations often have
the latitude to take a more
specialised and tailored ap-
proach to Impact Investment.
ENTRY POINTS MAY VARY
The wide range of available Impact Investment
opportunities can be daunting for someone new
to the space. According to John Goldstein of
Imprint Capital, “The ?exibility to invest across
asset classes, impact areas, and return pro?les
possessed by some high net worth investors is
both a blessing and a curse. This ability to play
across the whole spectrum can be paralysing,
leaving some thinking ‘Where do I start?’ Find-
ing clear anchors and entry points is essential.”
When the Kellogg Foundation chose to em-
bark on this strategy, they set aside $100MM
of the foundation’s endowment as a deliber-
ate operational learning experiment in Mission
Driven Investing. They saw investments as
an additional tool to drive impact and used
the funds to test various investment vehicles
from deposits in community banks, to funds of
funds, to private ?xed income, to direct venture
capital investment. RSF Social Finance decided
to offer its clients portfolios consisting exclu-
sively of market rate mission managers such as
Beartooth Capital, a real estate investor restor-
ing and protecting ecologically important land.
The Hull Family Foundation employed an asset
class approach as their core strategy, allocat-
ing 100% of its corpus to ?xed income impact
investments, both market rate and below mar-
ket rate. Each strategy ?ts the individual goals
of the investors but demonstrates a de?ned,
thoughtful approach and entry point.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
10
FLOURISHING NEW MODELS OF
IMPACT INVESTMENT
Creativity in the Impact Investment sector has
led to strong increases in investment activity.
From its genesis in community investment
and low-income housing development, clean-
tech and micro?nance, Impact Investment is
now helping to provide the scale-up ?nance
that enables slum schools in India to expand,
farmers in Africa to participate in international
value chains and underprivileged Mexicans to
build better homes. Impact Investors are also
becoming more innovative in designing invest-
ment structures that are drawing institutional
capital to new asset classes. The case studies
in this report have debunked the notion that
socially or environmentally bene?cial projects
always require charity.
Creativity in the Impact In-
vestment sector has led to
strong increases in invest-
ment activity.
IMPACT INVESTMENT IS BECOMING A
GLOBAL MOVEMENT
Impact Investment examples are springing
up across the globe and are ?ourishing both
Main Findings and Conclusions
The emergence of the Impact Investment sector is especially timely.
The current economic crisis has shaken established orthodoxies
about the risk and return of mainstream investments. At the same
time, there has been rising interest among the investment commu-
nity towards social and environmental responsibility in investment,
as illustrated by the growing importance of initiatives such as the
UN Principles for Responsible Investment. As Rockefeller Founda-
tion President Judith Rodin notes in her introductory letter, charitable
donations do not provide enough capital to solve our pressing social
and environmental challenges at scale. The private sector/investors
may be better placed to address certain social/environmental issues
than charities, foundations or governments. With the global economy
hobbled, mobilising all capital ef?ciently will be crucial if we are not to
lose ground in creating a more sustainable and equitable world.
11
in the developed and the developing worlds.
Impact Investment is also getting more local,
be it a Venture Capital ?rm investing in rural
developers as Aavishkaar is doing in India, or
developing new homes for the poor as Ignia
is doing in Mexico. As new models are ?our-
ishing, new geographies are also coming into
focus. Layered structures are also helping to
drive money into new areas. For example,
IFFIm bonds are currently tapping the reserves
of the wealthier Western world to provide
immunisation for the 70 poorest countries
globally.
ALL ASSET CLASSES ARE NOW SHOWING
DEVELOPMENT OF IMPACT INVESTMENT
The majority of Impact Investment is no lon-
ger composed of micro?nance loans or equity
investments in cleantech start-ups. It is mov-
ing far beyond the quoted asset class in which
Socially Responsible Investment (SRI) has its
roots. Whether through sustainable forestry
or cash lending to community development
banks, investors have more choice than ever
to diversify their portfolios through Impact In-
vestments. There are investments across all
asset classes that provide investors with nu-
merous options to trade off among risk, return
and level of impact.
OLD SECTOR BELIEFS ARE BREAKING DOWN
As these Impact Investments become more
widespread, when faced with a choice be-
tween putting their money in traditional
investments or Impact Investments, founda-
tions, high net worth individuals and institutions
are increasingly opting for the latter. The per-
ception that Impact Investment necessitates
accepting sub-market rate returns is eroding.
For example, many investors choose to invest
in sustainable banks like Triodos, a bank which
provides ?nancing exclusively to companies
and projects that have a social or environmen-
tal impact and delivers market rate returns
to its depositors. Many funds today are rais-
ing their second or third fund after delivering
market-rate or above returns to their investors.
Micro?nance, once viewed as an investment
opportunity only for the benevolent, currently
has over 100 investment funds managing $6.1
billion in assets and draws money from all in-
vestor types as larger institutional investors
are attracted by the diversi?cation, returns,
and social impact generated from these in-
vestments.
3
AS FUNDS MATURE, SOME ARE MOVING FROM
IMPACT FIRST TO FINANCIAL FIRST
Many impact-oriented funds cited their begin-
nings as Impact First funds. Traditionally, their
investor base was made up of foundations and
high net worth individuals that were willing to
receive below-market returns in exchange for
certain levels of impact. As these funds were
able to prove that they could also generate
3
International Association of Micro?nance Investors
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
12
market rate returns, institutional money started
to ?ow in and these funds eventually migrated
to the Financial First segment.
As more impact oriented funds demonstrate
market rate returns made from high-impact
platforms, more institutional funds will look
to invest in this sector. This will attract more
funds to be raised, increasing the social impact
that can be achieved. By pioneering invest-
ment in new fund managers and investment
areas, investors with a risk appetite can help
to accelerate this trajectory and seed the next
generation of Impact Investment funds that can
be accessible to Financial First investors.
As more impact oriented
funds demonstrate market
rate returns made from high-
impact platforms, more
institutional funds will look to
invest in this sector.
CLARITY IS EMERGING
The Impact Investment sector is gaining clar-
ity. Long seen as an investment sector only
for the philanthropic investor, the solid returns
the sector is producing are changing this land-
scape. Numerous success stories have allowed
the sector to break down the stereotypes many
mainstream investors had on Impact Invest-
ments.
Through using the Asset Allocation Framework
presented in this paper, investors can more
easily navigate around the plethora of options
available. Alongside research like this, devel-
opments are being made in the infrastructure
of the sector. Initiatives set forth by the Rock-
efeller Foundation and B Labs are looking to
standardise metrics for measuring the sustain-
ability or relative impact in an attempt to give
investors tools to compare and contrast their
investment options. These developments in
building a sustainable ecosystem for Impact
Investments are driving the con?dence many
institutional investors are starting to gain in the
sector.
IMPACT INVESTMENT IS HELPING ANSWER
CHALLENGES AND CHANGE THE MARKET
By creating mechanisms through which inves-
tors can both make money and address social
and/or environmental challenges, Impact In-
vestment offers the potential to expand the
pool of capital available to fund innovative so-
lutions. Impact Investments often leverage
grants, sometimes in mezzanine ?nancing ar-
rangements that create a large multiplier effect
on the amount of impact generated. However,
as the examples in this report show, Impact In-
vestors are not limited to partnering with grant
makers: from tropical rainforest preservation, to
low-income housing development in New York
City, to infectious disease prevention in Africa,
Impact Investors are also making market-rate
returns on investments that ?t seamlessly into
their portfolios.
13
By creating mechanisms
through which investors
can both make money and
address social and/or envi-
ronmental challenges, Impact
Investment offers the po-
tential to expand the pool of
capital available to fund inno-
vative solutions.
The early pioneer investors are helping ca-
talyse the sector by showing how pro?table
investment portfolios can be compounded
with impact. Early investors have also helped
inspire replication in other areas of impact.
Having seen the success IFFIm was able to
achieve through its bond offering, the Prince of
Wales is currently proposing a similar structure
for rainforest bonds to halt the deforestation of
the world’s endangered rainforests.
IMPACT INVESTMENT IS EMERGING
FROM INFANCY
New capital is employed across the asset
allocation spectrum. In Mexico, Ignia is devel-
oping housing communities for families who
earn less than $10,000 a year while still target-
ing above market-rate returns. In Honduras,
Pico Bonito is looking to receive a 20% IRR
from the regeneration and sustainable forestry
of native forests adjacent to a national park
without the aid of local government subsi-
dies. These investment vehicles are examples
of how expansion into new asset classes is
helping to broaden the reach of Impact Invest-
ment, while allowing investors to diversify
across multiple asset classes.
Opportunities for institutional investors are still
constrained by the relatively small size of many
funds in this emerging sector, but as the sec-
tor matures, larger opportunities are becoming
available. However, as opportunities grow in
scale and number, will the same returns ex-
ist? Will impact be compromised as the sector
grows? The answers to these questions will
prove critical to the future of the sector.
The objective of this report is to map the Im-
pact Investment market in a framework that
resonates with investors. For this reason the
Impact Investment sector and case studies
are mapped along the traditional asset classes,
resulting in an Impact Investment Asset Alloca-
tion Framework (AAF). This Framework aims to
combine the traditional asset classes with the
speci?cities inherent in Impact Investment. The
framework is thus organised along two key di-
mensions: investor motivation (Financial First
vs. Impact First) and asset class (as per tradi-
tional asset allocation)
A representation of this concept is shown
on the opposite page.
Understanding the Asset
Allocation Framework
The objective of this paper is to help potential
investors understand the Impact Investment
market better by describing concrete case
studies for each cell in the AAF. The cases out-
lined in the following pages were chosen to
show the reader the diversity of Impact Invest-
ments in the sector, especially the number of
investments that aim to make returns at the
market rate.
The allocation of case studies to the different
cells in the framework was done on the basis
of the following:
• The investor motivation is used to allocate
case studies to the Financial First or Im-
pact First rows of the AAF.
• Investment funds/vehicles typically have
multiple investors so motivation for the
fund/vehicle is established in the
following way:
- If at least one of the investors of an
investment vehicle/fund has ?duciary
responsibilities, then the fund/vehicle is
deemed Financial First because inves-
tors must have been able to satisfy
themselves that a risk-adjusted market-
rate return is being targeted; otherwise
it is deemed Impact First.
• The allocation to a speci?c asset class was
driven by the speci?c instrument used
in the deal pro?led; in the case studies
presented an effort was made to select
a deal using an instrument that is repre-
sentative of what is commonly used by
the investment fund/vehicle (although it is
worth noting that certain investment funds
may use more than one asset class in their
investments).
The following case studies should not be used
as recommendations for an Impact Investment
portfolio, but rather serve as a guide to the
breadth of opportunities that exist in the sector.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
14
Case Studies and the
Asset Allocation Framework
15
ASSET CLASSES
CASH
SENIOR
DEBT
MEZZANINE
/QUASI
EQUITY
PUBLIC
EQUITY
ALTERNATIVE INSTRUMENTS
VENTURE
CAPITAL
PRIVATE/
GROWTH
EQUITY
REAL
ESTATE
OTHER REAL
ASSETS
ABSOLUTE
RETURN
(HEDGE
FUNDS)
F
I
N
A
N
C
I
A
L
F
I
R
S
T
ShoreBank
$2.1B
Blue
Orchard
Dexia
Micro-
Credit Fund
$2.1B
Triodos
Renew-
ables
Europe
Fund
£30M
Generation
Investment
Management
$3.5B
Bridges
Ventures
CDV Funds
£115MM
ProCredit
Holding
JPMorgan
Urban Re-
naissance
Prop. Fund
$175MM
Lyme
Northern
Forest Fund
$190MM
Harcourt
BelAir SA
Fund
$345MM
I
M
P
A
C
T
F
I
R
S
T
Charity
Bank
Root
Capital
$48MM
Bridges
Ventures
Social
Entre-
preneurs
Fund
£8MM
Aavishkaar
Acumen
Fund
$34.1MM
Ignia
$60MM
Bosques
Pico
Bonito
$5MM
This Framework aims to combine
the traditional asset classes with
the speci?cities inherent in Impact
Investment. It is organized along
two key dimensions: investor mo-
tivation (Financial First vs. Impact
First) and asset class
Asset Allocation Framework
Title
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
16
CASE STUDIES
17
FINANCIAL FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• Financial return is that of a 1-year treasury bond plus a pre-
mium
- The current rate is ~2.5% to TIAA-CREF’s CBD Pro-
gram
• Deposits are made for one year with the option of annual
renewals
• The investment horizon is much shorter and the risk level is
much lower than TIAA-CREF’s typical investments
MULTIPLE INVESTORS
Shorebank’s investor group consists of a varied group including ?nancial institutions, corporations, foundations and
high net worth individuals
TIAA-CREF (http://www.tiaa-cref.org)
TIAA-CREF (Teachers Insurance and Annuity Association - College Retirement Equities Fund) is one of the largest
?nancial services companies in the United States, with ~$400B in assets under management
COMMUNITY BANK DEPOSIT PROGRAM
• TIAA-CREF manages the largest, comprehensively screened social investment vehicle for individuals in the US
with ~$9.6B of assets under management (2007), representing ~2.4% of total assets under management
• This investment is part of the ?rm’s Community Bank Deposit Program under TIAA-CREF’s Socially Responsible
Investing initiative
• The motivation for the ShoreBank investment was that returns include a premium to 1 year treasury bond while
the investment simultaneously yields a social return
• In addition to the investment in ShoreBank, TIAA-CREF has also invested $27MM in six other community banks in
the US
SHOREBANK (http://www.shorebankcorp.org)
• In 2007, TIAA-CREF invested $22MM into ShoreBank of Chicago and ShoreBank Paci?c of Ilwave, WA
• ShoreBank is considered the ?rst and largest community development bank (CDB) in the US with $2.1B in assets
- Most CDBs in the US have special designations as to the social purposes their loans will be used for with
80% of the lending being done in underserved communities
- Loans are made to residential real estate (e.g. affordable housing), small businesses and conservation
projects
- $445MM in total of mission investments were made in 2006
• ShoreBank utilises CDARS (Certi?cate of Deposit Account Registry Service) to place its funds into insured cer-
ti?cates of deposit issued by banks in the network, allowing investments of up to $50MM to be insured by the
Federal Deposit Insurance Corporation (FDIC), whose normal limit is $100K
• TIAA-CREF is in the process of identifying additional banks through which they can expand their overall investment
in this program
GEOGRAPHY
United States
AREA OF IMPACT
Community Banking
~2.5% return
Cash
IMPACT INVESTMENT
VEHICLE
Shorebank
INVESTOR
Multiple Investors
Pro?le: TIAA-CREF
SOCIAL/ENVIRONMENTAL IMPACT
• ShoreBank Corporation measures its success by the amount it invests
to create economic prosperity and a healthy environment, as well as by
its ?nancial performance
• Cumulatively, ShoreBank has ?nanced over $3.7 billion in mission-
related investments, with over $371 million in new mission loans in
2008. These include:
- conservation loans
- community development loans
- loans that achieved both
• Globally, ShoreBank International has provided management advisory
services to the ?nancial sector in over 60 developing countries and has
lent $914 million
Shorebank Deposit Program
CASH
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
18
I
M
P
A
C
T
FINANCIAL FIRST INVESTOR
SENIOR DEBT
FINANCIAL IMPACT
• Financial return objective is 6 month Libor + 100/200 bps
• The fund provided a return of just over 68% in its 10+ year
period
• Annualised return of 6% in USD, net, in 2006-2008
SOCIAL/ENVIRONMENTAL IMPACT
• Over 400,000 micro-entrepreneurs funded by the loans from DMCF
• 41% of the entrepreneurs are in rural areas
• Most loans were typically granted to low-income, unbanked and iso-
lated bene?ciaries
• 52% of the recipients are female
• Almost 20% of the loan volume in 2008 was destined for agriculture
• Micro-entrepreneurs in 31 countries bene?t from the fund
MULTIPLE INVESTORS
60% of the investors in the BlueOrchard Dexia Micro-Credit Fund are institutional investors whereas 40% are high
net worth individuals
DEXIA MICRO-CREDIT FUND (DMCF) (http://www.blueorchard.com)
• Invests in debt instruments of up to 3 years in maturity issued by micro?nance institutions (MFI) in Africa, Asia,
Eastern and Central Europe, and Latin America
• Over 10 years in existence and nearly $500MM in assets under management
• Lends to micro?nance institutions that have a minimum 3-year track record, have their accounts externally au-
dited and rated, possess a minimum of $1MM in assets and are operationally self-sustainable and pro?table
• Loan maturity ranges between 18 months and 3 years and most loans are renewed on expiration
• As of May 2009 there had been no defaults on any loan made by the Fund to MFIs
• The micro loans (provided by MFIs to micro-entrepreneurs) ranged from $50 to $8,000 with an average of $1,584,
and only 3.2% of the loan repayments to MFI lenders were delays over 30 days as of March 31, 2009
• The Fund is a Luxembourg SICAV and has a minimum investment of US $10,000, or CHF 15,000. It is now avail-
able to US accredited investors with a minimum investment of the USD equivalent of £125,000 (~$175,000)
ACEP CAMEROUN S.A.
• MFI that targets urban micro-entrepreneurs in 3 regions of Cameroon
• Launched in 1999 as a government project and transformed into a private company in 2005
• As of February 2009, ACEP had a portfolio of $12M in which
- There were 7.439M clients
- 34% of the clients were women, who often borrow in groups of 3-5 and receive between $105 - $325
6-month loans
- Many of them have now “graduated” to single loans, highlighting the positive impact of the micro-loans
• ACEP’s performance showed a 5.8% ROA and 15% expected return
Equity Equity
GEOGRAPHY
United States
AREA OF IMPACT
Urban Renewal
MULTIPLE INVESTORS
JP Morgan set out to create the fund by drawing investments from a variety of investors
PRUDENTIAL FINANCIAL (http://www.prudential.com/socialinvestments)
• The Social Investments group at Prudential is responsible for investing over $400MM of both the Prudential
Corporation and The Prudential Foundation’s funds
• The SRI group takes a 3-tier approach to investing its money: about 40% of the funds target market returns, 20%
target signi?cantly below-market returns but high impact investments and the remaining 40% target the middle
of the two bookends, usually delivering strong returns, but low compared to the risk undertaken for the
investment
• Prudential purchased $10MM of equity in one of the Fund Investment Vehicles (FIVs) of the JP Morgan Urban
Renaissance Property Fund
• Prudential was attracted to the investment due to the ability to invest in both green certi?ed development and
urban renewal through commercial and residential projects
JP MORGAN URBAN RENAISSANCE PROPERTY FUND
• The investment thesis of the fund is targeted at the development and redevelopment of real estate projects in
market rate, affordable and workforce housing, retail, mixed-use development, hospitality and other real estate
sectors in Urban Renaissance Markets (URMs)
• The fund hopes to target the top twenty URMs in the US including: Manhattan-Bronx, San Francisco, Philadel-
phia, Chicago, Los Angeles, Minneapolis, and Newark
• The Fund intends, when feasible, to invest in residential and retail properties that are subject to “green” speci-
?cations, such as geothermal, and/or solar heating and cooling system, photovoltaic glass, and recycled building
materials
• The Fund is also including cultural amenities and market-based after-school educational providers in its retail and
mixed-use projects
• The Fund has $175MM of fully subscribed capital with $75MM more in the investor pipeline
• The targeted ?nancial returns of the Fund are at market rate levels of ~15% net of fees
880 GLENWOOD AVENUE, ATLANTA
• The Fund made an investment in this 300K square foot luxury mid-rise apartment community in Atlanta
• The apartment complex comprises 325 one and two bedroom units
• The total development cost of the apartments was ~$46MM
DEAL
Various Real Estate
Transactions
IMPACT INVESTMENT
FUND
JP Morgan Urban
Renaissance Property Fund
INVESTOR
Multiple Investors
Pro?le: Prudential
“ The idea behind
investing in the
JP Morgan Urban
Renaissance Fund was
to earn market rate
returns while supporting
a project that propagates
urban renewal and green
development.”
Preston Pinkett
Head of Social Investment
Prudential
JP Morgan Urban Renaissance Property Fund
REAL ESTATE
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
24
FINANCIAL FIRST INVESTOR
I
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“We seek to recover
development and non-
conservation values of
real estate through the
sale of conservation
easements and other
ecosystem services
(e.g. wetland mitigation
credits and carbon
ofsets). We like these
sales to occur within the
?rst two to three years of
our investment. During
this time and afterwards,
we and future owners
are obligated to manage
the property sustainably.
On timberland
properties, our goal is
to demonstrate that
sustainably managed
properties can generate
attractive cash ?ows.”
Jim Hourdequin
Managing Director
The Lyme Timber Company
FINANCIAL IMPACT
• Taking into account operating income and losses, the sale of
the conservation easement, and the sale of property subject
to the conservation easement, the investment produced an
equity internal rate of return of approximately 22% for the
Lyme Northern Forest Fund (does not include asset manage-
ment and promote fees paid to The Lyme Timber Company)
SOCIAL/ENVIRONMENTAL IMPACT
• The sale of the conservation easement to the State of New York (facili-
tated by The Nature Conservancy) will
- allow full public access to 38,400 acres of the property under a
public recreation plan;
- maintain private hunting club leases on the property; and
- restrict all further development of the property.
• The structure of the conservation easement contract requires that
sustainable forestry practices continue under successive owners
• The Forest Stewardship Council (FSC) has certi?ed the property as
adhering to its standards and criteria for forest management
• The Lyme Timber Company has been recognised with multiple awards
for the quality of its management of the Chateaugay lands
MULTIPLE INVESTORS
• The Lyme Northern Forest Fund (LNFF) investors include high net worth individuals, university and college en-
dowments, pension funds and foundations such as the Rockefeller Foundation
THE LYME TIMBER COMPANY (http://www.lymetimber.com)
• The Lyme Timber Company was formed in 1976 to invest in timberland and real estate using its own capital
• In 2002, the Company created its ?rst timberland investment fund, the Lyme Northern Forest Fund, with $65MM
in capital commitments and a 3-year investment window
• In 2005, the Company formed a second fund, The Lyme Forest Fund, with $190MM in capital commitments and
a 3-year investment window
• The Lyme Timber Company’s investment thesis is to make timberland investments in partnership with con-
servation agencies or government entities to mitigate risk. In many investments, Lyme will retain the rights to
sustainably manage the timberland on parts or all of the purchased real estate and will sell an option to a partner
organisation allowing the partner to acquire fee interest portions of the property with high conservation value and
one or more ‘conservation easements’ over the remainder of the property. The conservation easements perma-
nently restrict development and require The Lyme Timber Company and future owners to sustainably manage the
property
• The investments are typically exited by sale to another timberland investor; a part of the real estate is therefore
perpetually conserved as managed timberland
• The deal sizes range from $4MM - $80MM; the nominal return on the investments ranges from 11-25%
CHATEAUGAY WOODLANDS, UPSTATE NEW YORK
• Chateaugay Woodlands is an 85,000 acre property adjoining the Adirondack Park in Northern New York
• The LNFF purchased the property from Domtar, a forests product company, for $18.5MM in late 2004
• The purchase was made in partnership with the Nature Conservancy, a conservation agency, which paid $600K
for the option to subsequently purchase a conservation easement over the woodland property
• LNFF ?nanced half of the investment using $9MM of New Markets Tax Credit Financing at attractive rates
• In late 2008, LNFF sold a conservation easement to the State of New York for $10MM
• In early 2009, LNFF sold the timberlands, subject to the terms of the conservation easement, for $20 million
GEOGRAPHY
United States
AREA OF IMPACT
Sustainable Forestry
Above market rate return Market rate return less Fund fees
Investment in Real Estate
DEAL
Chateaugay Woodlands
IMPACT INVESTMENT
FUND
Lyme Northern Forest
Fund Limited Partnership
INVESTOR
Multiple Investors
Lyme Northern Forest Fund
OTHER REAL ASSETS
25
I
M
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FINANCIAL FIRST INVESTOR
FINANCIAL IMPACT
• Investors can gain exposure to absolute return hedge fund
strategies while being able to make CSR/SRI investments
• BelAir provides diversi?ed global hedge fund exposure across
asset classes, regions and hedge fund strategies
• Returns: overall portfolio targets returns > Libor +300bp with
limited downside
• Between inception in November 2007 and February 2009,
BelAir has appreciated by 1.1% compared to -55.4% MSCI
World Index
SOCIAL/ENVIRONMENTAL IMPACT
• BelAir implements a strict SRI Policy that results in an approved list of
SRI compliant instruments to which the underlying hedge funds limit
their exposure
• As such, the investor is guaranteed not to be exposed to companies
and countries that are not SRI compliant
• SRI impact affects a broad number of instruments covering over 2,800
companies globally
• BelAir has strong Social and Environmental impacts through the SRI
analysis conducted which includes engagement and dialogue with
companies to improve their practices in a SRI context
MULTIPLE INVESTORS
• The Harcourt BelAir Sustainable Alternatives Fund has several investors – notable lead investors and co-founders
are Folksam (Swedish Insurance Group) and Storebrand (Norwegian Insurance Group)
• Assets in BelAir exceed $345MM (as of March 2009)
• Folksam and Storebrand have a long history of SRI investing and invested seed capital of $200MM as part of their
UN PRI (Principles for Responsible Investment) strategy
• The lead investors take an active role in SRI screening of investment instruments along with Harcourt, which is
the fund manager and specialises in hedge fund manager selection and portfolio management
• Some other well-known investors of Harcourt are Barclays UK, Sumitomo Japan, and Swisscom Pension Fund
THE HARCOURT BELAIR SUSTAINABLE ALTERNATIVES FUND (http://www.harcourt.ch)
• Harcourt was the ?rst fund-of-hedge-funds ?rm to sign the United Nations PRI initiative
- Tracks global hedge fund data and meets over 1,000 hedge fund managers per annum
- Screens the global hedge fund universe to ?nd high quality managers that employ strategies that are
suitable to implement in the internally de?ned SRI (Socially Responsible Investing) Policy developed jointly
with Folksam and Storebrand
- Performs rigorous due-diligence of hedge funds and monitors all the invested funds for SRI compliance
• Investment in hedge funds is based on
- relevance and compliance to the de?ned SRI policy which spans 5 criteria
- ?nancial performance
- quality of the manager
• The BelAir “universe” of screened companies consists of 2,800 companies as of Q1 2009. All underlying hedge
funds in BelAir constrain themselves to only be exposed to the SRI approved list of instruments
• As of March 2009 BelAir portfolio consisted of 24 underlying hedge fund managers
GEOGRAPHY
Global
AREA OF IMPACT
Broad SRI
> Libor+300bp
DEAL
SRI compliant hedge
funds
IMPACT INVESTMENT
FUND
BelAir SA Fund
INVESTOR
Multiple Investors
“SRI is important to
many of our investors
and they have few
options available,
especially in hedge fund
strategies.”
Erik Eidolf
Executive Director Nordic
Harcourt Investment Consulting AB
BelAir SA Fund
ABSOLUTE RETURN (HEDGE FUNDS)
Private Equity
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
26
IMPACT FIRST INVESTOR
I
M
P
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TFINANCIAL IMPACT
• Returns depend on length of deposit, varying between 0.5%
and 3%
SOCIAL/ENVIRONMENTAL IMPACT
• 100% of deposits used for lending to organisations delivering solutions
to social problems
• Charity Bank has committed over £83.4MM to charities and other
socially driven organisations since its launch in 2002 which has levered
in an extra £48.2MM of funding. The bank’s borrowers work with more
that 3MM people in the UK
• Charity Bank is currently devising a formal reporting system to measure
the impact its loans create
“Perhaps now more
than ever there is a
need for intermediaries
like Charity Bank that
ofer alternatives to the
traditional commercial
banks. People who are
as concerned about the
impact their money
achieves as the ?nancial
return they seek can
place their money with
con?dence in such
institutions.”
Julia Novy-Hildesley
Executive Director
Lemelson Foundation
“Talking to participants
of schemes enabled by
Charity Bank allows me
to better understand the
diference that my and
others investments have
made to people’s lives.”
Depositor
Charity Bank
MULTIPLE INVESTORS
• Charity Bank is unusual among charities in having share capital
• Shares are held by Charities Aid Foundation, the National Council for Voluntary Organisations (NCVO), 15 chari-
table trusts and foundations, and Barclays Bank (not for its own pro?t but in trust for charity)
• Shareholder types include ordinary, non-cumulative B and C preference shareholders and holders of 10-year
subordinated loan notes
• Charity Bank is currently raising capital from HNWI’s and already has commitments in principle of £2MM in pref-
erence share capital. The Bank is aiming to raise up to £12MM of core capital long term
• In 2007, Charity Bank received £3MM of capital investment, as including share capital from the LankellyChase
Foundation, Community Foundation for Northern Ireland and DB Microcredit Development Fund
CHARITY BANK (http://www.charitybank.org)
• By saving with Charity Bank, depositors can earn a modest amount of interest to protect their capital, knowing
that they can get their money back at the end of the term
• Returns depend on the length of the deposit and can vary between 0.5% and 3%, some opt for zero
• Deposits can be made into a variety of products, including savings accounts, Charity ISA, CITRA and
Deposit Bonds
• 100% of personal deposits of up to £50k are protected under the ?nancial services compensation scheme
• 100% of deposits are used to provide affordable loan ?nance and advice to enable charities, community associa-
tions, voluntary organisations, community businesses and social enterprises predominantly across the UK to grow
• Loans are mostly made to organisations within the areas of social/health care, affordable housing, education,
sustainable development, community transport, the arts and community regeneration
- For example, Charity Bank provided a loan of £300k to a charity (CHICKS) that organises respite breaks for
disadvantaged inner-city children
- The loan enabled the charity to purchase a much-needed building to house its operations
- CHICKS are on target to provide 1,000 breaks per year from 2010 – they currently provide 800
GEOGRAPHY
Predominantly UK
AREA OF IMPACT
Various Sectors
Cash
0.5-3% return
IMPACT INVESTMENT
VEHICLE
Charity Bank
INVESTOR
Multiple Investors
Charity Bank
CASH
27
AREA OF IMPACT
“Missing Middle”
GEOGRAPHY
Africa
2.5% expected return 9% return
Senior Debt
IMPACT FIRST INVESTOR
I
M
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“Currently nearly
90% of our funds are
given out as grants and
only 10% are spent for
investments. We are
however looking to
increase our investments
and move that ratio to
70-30 or 60-40.”
Julia Novy-Hildesley
Executive Director
Lemelson Foundation
“Our ?rst screen
involves validating that
there will be a net social
and environmental
return. We then follow
that with ?nancial due
diligence including
micro and macro risk
assessment.”
Namrita Kapur
Vice President
Root Capital
FINANCIAL IMPACT
• The loan was disbursed at an interest rate of 9% (in line with
local market rates)
• Kilicafe has repaid its short term loan and is on track to
repay its long term loans; in general, it is a borrower in
good standing
SOCIAL/ENVIRONMENTAL IMPACT
• Membership in Kilicafe has grown approximately 28% from 2006
to 2008
• Turnover has outpaced membership growth, adding $1MM to the local
rural economy
• Overall income per member has increased providing easier access to
education and health services
• The pulperies have decreased water usage by 80%, critical to a region
with scarce water resources
MULTIPLE INVESTORS
• Root Capital attracts investments from industry partners, foundations such as the Lemelson Foundation, SRI
funds and high net worth individuals
THE LEMELSON FOUNDATION (http://www.lemelson.org)
• The Lemelson Foundation focuses on investing in entrepreneurs and technology dissemination
• The foundation has an asset allocation of 5% for mission related investments and is particularly keen on making
cleantech investments
• The foundation was impressed with Root Capital’s operating history and was keen to invest in its project of
propagating water ef?cient technology for coffee farmers in Tanzania
ROOT CAPITAL (http://www.rootcapital.org)
• Root Capital targets the “missing middle”, a gap existing between micro?nance and corporate banking
• It bridges this gap by providing capital, delivering ?nancial education, and strengthening market connections of
rural small and growing businesses
• It employs a form of value chain ?nance where the main security is future sales contracts from buyers, primarily
in North America and Europe. It provides short-term and long-term loans against factoring agreements or signed
purchase orders between grassroots businesses and their buyers
• It provides an average return of 2.5% to investors
KILICAFE (http://www.kilicafe.com)
• Kilicafe provides support services to ~100 farmer groups, representing approximately 8,000 small-scale coffee
farmers in Tanzania
• With loans amounting to over $1MM, Root Capital ?nanced acquisitions of central pulperies which process raw
coffee beans (2006 and 2008) and the construction of a warehouse (2007)
• The pulperies use a fraction of the water required by conventional technology. This step in coffee processing is
critical to managing the quality of the product
• Root Capital used Starbucks purchase contracts as collateral for the loans
DEAL
Kilicafe
IMPACT INVESTMENT
FUND
Root Capital
INVESTOR
Multiple Investors Pro?le:
Lemelson
Root Capital
SENIOR DEBT
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
28
IMPACT FIRST INVESTOR
I
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P
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TFINANCIAL IMPACT
• The Fund aims to maximise social impact whilst seeking a
positive ?nancial return
• The ?nancial returns target for the Fund, net of fees and
losses, is 3-5%
SOCIAL/ENVIRONMENTAL IMPACT
• Social Impact is measured using the Bridges Social IMPACT Scorecard
MULTIPLE INVESTORS
• The Bridges Social Entrepreneurs Fund has raised over £8MM from leading individuals, institutions and founda-
tions from the ?nancial sector, government and NESTA, the National Endowment for Science, Technology and
the Arts
• The funds have been raised through a mixture of donations to the Bridges Charitable Trust and Investments into a
Limited Partnership structure. If the fund can demonstrate a track record of returns, Bridges Ventures believes it
can raise further funding from socially motivated investors rather than further philanthropy
THE BRIDGES VENTURES SOCIAL ENTREPRENEURS FUND (http://www.bridgesventures.com)
• Social enterprises are businesses with social objectives whose surpluses are principally reinvested for that pur-
pose in the business or community, rather than being driven by the need to maximise pro?t for shareholders and
owners
• Successful social enterprises deliver an important and innovative means of achieving a sustained social impact
• Bridges Social Entrepreneurs Fund seeks to address the funding gap that exists for social enterprises that are
looking to scale up but cannot generate market rate returns or offer the usual exit opportunities and therefore
cannot attract commercial equity
• The fund targets enterprises based in England that deliver high social impacts and that operate scalable and
sustainable business models
• The fund expects to make around 10-15 investments in the £500K - £1.5MM range over the next 4-5 years
• The investments will be through equity or quasi-equity instruments with ?exible structures, such as subordinated
debt with royalty payments that rise with revenues
• The fund will also play an active role in providing strategic and operational assistance to the social enterprises
that it backs
• The fund will maintain a balanced portfolio of early stage and growth capital investments and acquisitions;
the investments will also be made in a wide variety of sectors and models
GEOGRAPHY
United Kingdom
AREA OF IMPACT
Scaling Up Social Enterprises
3-5%
IMPACT INVESTMENT
FUND
Bridges Ventures Social
Entrepreneurs Fund
INVESTOR
Multiple Investors
“While Bridges
Ventures’ CDV Funds
aim to maximise
?nancial returns
subject to a social
screen, the Bridges
Social Entrepreneurs
Fund aims to maximise
social impact subject
to ?nancial criteria,
including a sustainable
business model.”
Skye Heller
Associate
Bridges Ventures
Bridges Ventures Social Entrepreneurs Fund
QUASI-EQUITY INSTRUMENTS
29
IMPACT FIRST INVESTOR
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“At Aavishkaar we
wouldn’t want to think
of ourselves separating
the social impact from
the ?nancial one or
seeing one as distinct
from the other. We see
social impact as being
implicit in the business
model of the enterprise.
The growth in the
business fortunes of
this company is directly
linked to the social
impact it makes; more
products sold means
higher energy efciency
to poor households and
therefore improvement
in their quality of life.”
Pradeep Pathiyamveetil
COO
Aavishkaar
FINANCIAL IMPACT
• Starting with no revenues in 2003, the company has grown to
a turnover of INR 11.4 MM (~$225K) in 2008
• The working capital bridge loan offered by Aavishkaar was
repaid in full by the company
• Aavishkaar has received strong dividend payback from the
investment after revenues have started to grow
• Aavishkaar looks to exit the investment close to 5 years after
the initial equity round
SOCIAL/ENVIRONMENTAL IMPACT
• The products sold by Servals have impacted 450,000 low income
households
• Average fuel savings have been around 72L of kerosene annually per
household
• Financial savings have been INR 3000 (~$70) annually per household
• Servals currently has 60 employees, of whom 60% are women
MULTIPLE INVESTORS
• Aavishkaar’s investor base includes foundations, high net worth individuals and other impact-oriented investors
ROCKEFELLER FOUNDATION (http://www.rockfund.org)
• Rockefeller Foundation has invested in numerous socially motivated investment vehicles through their program-
related investing (PRI) work
AAVISHKAAR (http://www.aavishkaar.org)
• Aavishkaar is a micro economic fund, targeting investments in India
• Aavishkaar also runs a micro?nance fund as a joint venture with Goodwell, a Netherlands-based micro?nance
company
• Looks to invest in SMEs and very small companies engaging in entrepreneurship
• Screens companies from an impact perspective ?rst, and after convincing themselves of strong impact, looks at
the ?nancial metrics like growth and pro?tability
• Typical investment size of INR 1MM (~$25K)
• Primarily equity players, but permitted to provide debt in deals where equity is already present
• Due to Indian regulations on venture capital ?rms, pure debt can only make up 20% of deals, so debt funding
tends to be bridge loans to take care of small requirements for limited time periods
SERVALS AUTOMATION PVT LTD (http://www.servalsgroup.blogspot.com/)
• Servals Automation was founded by P Mukundan as a platform to launch rural innovations
• Servals products include a kerosene saving stove burner targeting the rural poor and a rain gun which at half the
price of imported products which uses water more ef?ciently at half the price of imported products
• The company, headquartered in Chennai, is aligned with the Rural Innovation Network (RIN)
• Servals approached Aavishkaar for an equity investment to help strengthen its assembling, marketing and distri-
bution channels as well as to help promote its products
• Aavishkaar has invested INR 1.119MM (~$25K) in the company through two rounds of equity investment.
It has also extended a bridge loan to Servals in order to cover working capital gaps
GEOGRAPHY
India
AREA OF IMPACT
Rural Poverty
Below market return Below market return
less fund fees
Equity
DEAL
Servals Automation
IMPACT INVESTMENT
FUND
Aavishkaar
INVESTOR
Multiple Investors
Pro?le: Rockefeller Foundation
Aavishkaar
VENTURE CAPITAL
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
30
IMPACT FIRST INVESTOR
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“We look at investments
that don’t just have a
social impact in them but
also are breakthrough
innovations or business
models.”
Sasha Dichter
Director of Business Development
Acumen Fund
10-15% return
Private Equity
FINANCIAL IMPACT
• The investment horizon is from ?ve to ten years, usually with
rights that allow investors to seek an exit around year 5
• IPOs are preferred exit strategy although trade sales are more
common
• Overall portfolio of equity investments has a gross return
potential of 10-15%
SOCIAL/ENVIRONMENTAL IMPACT
• About 50,000 calls have been made in the last 3 years
• Increased in ambulances from 10 (Q1 2007) to 81 (Q4 2008); another
14 expected by Q1 2009
• 1298 plans to scale to 7 more cities in India by adding more than 400
ambulances in the next 2 years
• 1298 has also developed training programs, certi?ed by the American
Heart Association and New York Presbyterian Hospital, to train its own
emergency care doctors as well as educate the general public
MULTIPLE INVESTORS
• Acumen has a wide variety of investors who have invested between $10k and $5MM+ into the Fund
• Investors include foundations, family of?ces and corporations
ACUMEN FUND (http://www.acumenfund.org)
• The total fund size is $34.1MM
• Acumen Fund is a non-pro?t global venture fund that uses entrepreneurial approaches to solve the problems of
global poverty
- Established in 2001 with seed capital from the Rockefeller Foundation, Cisco Systems Foundation and
three individual philanthropists
• Invests exclusively in businesses that
- directly serve the poor
- have economically sustainable business models
- have a signi?cant innovation element to them
• Has created portfolios in four areas: Health, Water, Energy and Housing. In each area it identi?es and supports
social innovators
- Capital commitments range from $300,000 to $2MM in equity or debt with a payback or exit in roughly
?ve to seven years
ZIQITZA HEALTHCARE: 1298 AMBULANCES (http://www.1298.in)
• In 2007, Acumen invested equity to help the company grow their services and ?eet of ambulances
• The total investment amount is ~$1.5MM, as part of the Health Portfolio
• Up until recently, Mumbai lacked in any reliable ambulance or emergency medical response service
• 1298 provides affordable ambulance services for all by using a sliding price scale driven by the patient’s ability to
pay for a certain kind of hospital
- The poorest patients who are typically admitted to general wards of a government hospital, pay a reduced
rate (50%) or do not have to pay
- Approximately 20% of the services are offered free of charge or at subsidised rates
GEOGRAPHY
India
AREA OF IMPACT
Health Services
DEAL
Ziqitza Healthcare
IMPACT INVESTMENT
FUND
Acumen Fund
INVESTOR
Multiple Investors
Acumen Fund
PRIVATE EQUITY
31
IMPACT FIRST INVESTOR
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P
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TFINANCIAL IMPACT
• Ignia expects to earn above market rate returns on the project
• Ignia believes that generating high returns is imperative in the
low income segment because:
- the market perceives the segment to be high risk:
- the customers in this segment do not have a lot of
choice and so high margins are sustainable:
- it is the best way to achieve scale when creating prod-
ucts and services serving poor people.
SOCIAL/ENVIRONMENTAL IMPACT
• Around 1,800 families have been provided access to affordable but
quality housing
• The 1,800 families were also provided with affordable mortgages
• While Ignia does not capture any other speci?c metric for social impact,
it is always conscious of the need to serve the low income segment
that is underserved and of making sure that the impact is scalable
“Ignia’s potential to act
as a model for other VC
?rms looking to invest in
businesses serving the
low income segment in
Mexico is great.”
Matt Bannick
Managing Partner
Omidyar Network
“We are big believers
in ?nding business
solutions to social
problems... We found
that there are many
services that the poor
simply do not have
access to. We thought a
catalyst was needed –
the answer was a fund.”
Alvaro Rodríguez Arregui
Managing Director
Ignia
MULTIPLE INVESTORS
• Ignia’s investors include institutional investors, multilateral institutions, high net worth individuals and foundations
such as the Inter-American Development Bank and Omidyar Network
OMIDYAR NETWORK (http://www.omidyar.com)
• Omidyar Network (ON) is a philanthropic investment ?rm that makes investments in the areas of access to capital
in developing countries and media, markets and transparency in the developed world
• ON’s spending is split between grants and for-pro?t investments; it believes that for-pro?t models do a better job
of achieving scale and sustainability and also in staying responsive to customer needs
• For all investments, the primary aim is to achieve maximum social impact. There is a simultaneous drive towards
achieving market rate ?nancial returns for the for-pro?t investments
• The way Omidyar measures social impact depends on the investment area. The number of people impacted and
depth of impact are the basic metrics
• ON was impressed with Ignia’s management expertise and the fact that social impact was embedded in its
business plan
IGNIA (http://www.ignia.com.mx)
• Ignia is a Mexican Venture Capital ?rm that invests in businesses that provide products and services to the under-
served low income population of Latin America
• It aims to invest in pro?table and scalable businesses that create social impact by achieving systemic change
• It believes that there is a strong market for high quality products and services delivered to the poor at affordable
rates
• Ignia raised an initial fund of about $60MM and has completed 2 investments in the areas of affordable housing
and healthcare services and it hopes to have completed 6 investments by the end of 2009
PREMIN - JARDINES DEL GRIJALVA PROJECT
• In 2008, Ignia made a $2MM investment in Premin for its Jardines del Grijalva housing project in Chiapas, Mexico
• The homes are being built for families that earn less than $10,000 a year
• The idea behind the investment is that small local developers of affordable housing suffer from a lack of capital
and large developers seldom go into the South of Mexico or into smaller communities. As a consequence, there
is a shortage of housing and families are forced to build their own homes
• Ignia also identi?ed a micro?nance institution that would provide mortgages to families without access to them
GEOGRAPHY
Latin America & Mexico
AREA OF IMPACT
Affordable Housing
Market rate return less
fund/management fees
Market rate return
Investment in Real Estate
DEAL
Premin, Mexico
IMPACT INVESTMENT
FUND
Ignia
INVESTOR
Multiple Investors
Pro?le: Omidyar
Ignia
REAL ESTATE
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
32
IMPACT FIRST INVESTOR
I
M
P
A
C
TFINANCIAL IMPACT
• The project has an overall expected IRR of 20% which is
signi?cantly above the risk-adjusted market rate for the
timber sector
• Revenue streams include carbon offsets and sales from sus-
tainable forestry including timber, cherry, mahogany,
and rosewood
SOCIAL/ENVIRONMENTAL IMPACT
• The company has already planted 500K trees and aims to plant
another 500K
• It employs over 150 people from the local communities around the park
• The company was one of the ?rst to have its tropical forestry carbon
sequestration methodology approved by the United Nations Clean De-
velopment Mechanism which has generated signi?cant carbon offsets
• Local farmers have been trained in agro-forestry techniques, soil con-
servation and pest management
• The project has also gone a long way in protecting the water supply for
the region around the park
“We are moving down
the learning curve
quickly and are con?dent
that we can do similar
projects on a larger
scale.”
Robert Lapides
Chairman and CEO
Pico Bonito LLC
Investment in Operating Entity
> 20% expected return 20% projected return
MULTIPLE INVESTORS
• Pico Bonito’s investors include institutions, multilateral organisations, high net worth individuals, and foundations
PICO BONITO, LLC
• The Pico Bonito project was founded in 2006 by the Pico Bonito National Park Foundation, an NGO based at
the project site in Honduras, and the Ecologic Development Fund, a U.S. non-pro?t focussing on environmental
stewardship with local community collaboration in Latin America
• The mission of the company is to establish and manage business models that achieve triple-bottom-line results in
the areas of sustainable forestry, environmental and biodiversity restoration and protection, and social equity
• Future plans include establishing a portfolio of 6-12 projects in multiple Central and South American markets
utilising capital in the $50-75MM range
BOSQUES PICO BONITO SRL (http://www.bosquespicobonito.com)
• The main idea behind the project was to develop a sustainable business solution to the problems plaguing the
areas in and around the Pico Bonito National Park in Honduras including deforestation, endangerment of rare plant
and animal species, pollution, and rural poverty that drives further environmental destruction
• The company raised approximately $5MM in capital and developed a for-pro?t model to establish and sustainably
manage native species and generate carbon offsets, while preserving the natural environment and biodiversity of
the park and engaging local communities to enable them to share in the bene?ts achieved by the project
• The company operates in and around the buffer zone of the national park by acquiring threatened or already dam-
aged and deforested land areas and establishing sustainable forestry practices
• To establish sustainable land management practices and create short term food supplies and cash crops for the
local communities, the company initiated agro forestry activities which yield such crops such as coffee, corn
and beans
GEOGRAPHY
Honduras
AREA OF IMPACT
Sustainable Forestry
DEAL
Bosques Pico Bonito SrL
IMPACT INVESTMENT
FUND
Pico Bonito, LLC
INVESTOR
Multiple Investors
Pico Bonito
OTHER REAL ASSETS
33
Is it possible to structure a deal that satis?es the needs of both Financial First
investors and Impact First investors? This is a common question that arises when
investors contemplate Impact Investment. The AAF extends not only to singu-
lar examples that serve a speci?c intention and asset class, but also to cases
that are layered in nature. In these deals Financial First and Impact First investors
(sometimes even pure philanthropists using grants) come together to set-up deal
structures that otherwise would not be possible or as effective.
Below we discuss a few examples of how these layered structures can work to
satisfy the motivations and objectives of different Impact Investors.
Layered Structures
Root Capital
SENIOR DEBT
Asset Allocation Framework
1 International Finance Facility for Immunisation (IFFIm)
2 The New York City Acquisition Fund
ASSET CLASSES
CASH
SENIOR
DEBT
MEZZANINE
/QUASI
EQUITY
PUBLIC
EQUITY
ALTERNATIVE INSTRUMENTS
VENTURE
CAPITAL
PRIVATE/
GROWTH
EQUITY
REAL
ESTATE
OTHER REAL
ASSETS
ABSOLUTE
RETURN
(HEDGE
FUNDS)
F
I
N
A
N
C
I
A
L
F
I
R
S
T
2 Bank
Consortium
1 Retail
& Comm.
Investors
(IFFIm
Bonds)
I
M
P
A
C
T
F
I
R
S
T
1 Various
Countries
2 City
of NY +
Founda-
tions
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
34
I
M
P
A
C
T
IMPACT FIRST INVESTOR FINANCIAL FIRST INVESTOR
Prime Rate
$1.6 B
RETAIL AND COMMERCIAL
INVESTORS
FINANCIAL IMPACT
• IFFIm has been able to raise $1.6B through three offerings to
date
• Due to contractual guarantees from various governments,
IFFIm has been able to retain their AAA/Aaa status
SOCIAL/ENVIRONMENTAL IMPACT
• With money from IFFIm and donors such as the Gates Foundation,
GAVI has been able to protect 213MM additional children with new
vaccines since 2000
• Due to increased vaccination, GAVI has been able to prevent more than
3.4MM premature deaths
• New and underused vaccine coverage has risen substantially, doubling
in most areas
“There certainly is
no discount; each
transaction is priced
at market so someone
doesn’t have to
diferentiate between
our product and another
based upon returns.
When faced with a
decision between
buying a government
bond or an IFFIm bond
with a slightly higher
yield and helping the
immunisation efort,
most people will take the
second .”
George Richardson
World Bank
INTERNATIONAL FINANCE FACILITY FOR IMMUNISATION (IFFIM)
(http://www.iff-immunisation.org)
• IFFIm was launched in 2006 through an initiative of the United Kingdom government to support the GAVI
Initiative
- The GAVI Initiative was launched with a $1.5B grant from the Gates Foundation to fund immunisation
in the world’s 70 poorest nations
• Realising that the social impact of their committed funds will be greater immediately vs. over the 20 year
commitment period, the government sponsors decided to set up IFFIm to tap the ?nancial markets to access
funds immediately
• The World Bank, as IFFIm’s agent, manages IFFIm’s ?nances and capital markets activities. The World Bank
also coordinates with IFFIm’s donors, manages their pledges and payments as well as IFFIm’s disbursements
for immunisation and health programmes through the GAVI Alliance
GRANT PROVIDERS (VARIOUS NATIONS)
• IFFIm was able to gather $5.3B in grants from 6 European nations (UK, France, Italy, Spain, Sweden and
Norway) when IFFIm was set up, as well as South Africa who joined later
• The grant money was donated over a 20 year period through legally binding payment obligations, starting in
2006 and growing in aggregate amount every year until 2021 before declining through 2026
• Encouraged by the large donations from the Gates Foundation, the nations wanted to provide support to the
global immunisation effort underway by the GAVI Alliance partners
RETAIL AND COMMERCIAL INVESTORS
• IFFIm so far has tapped the ?nancial markets to help raise immediate funds based on the $5.3B in
committed dollars
• With a AAA/Aaa rating from numerous rating agencies, they are able to offer returns at a slight premium to
government bonds, offering slightly higher than market returns for their rating compared to governments
with the same rating
• So far IFFIm has been able to raise funds from investors in the US, Europe and Asia through its inaugural
transaction in 2006 and in Japan through two issues speci?cally for the Japanese market. The latest offering
will target both retail and commercial customers in the UK with an offering by HSBC
GEOGRAPHY
70 Poorest Nations
AREA OF IMPACT
Vaccination
International Finance Facility for
Immunisation (IFFIm)
GRANT PROVIDERS
(VARIOUS NATIONS)
Bonds
20 year
grants
$5.3 B
2006 2026
35
I
M
P
A
C
T
IMPACT FIRST INVESTOR FINANCIAL FIRST INVESTOR
Prime Rate
Sub-Market Rate
BANK CONSORTIUM
FINANCIAL FIRST
INVESTORS
FINANCIAL IMPACT
• The interest rate on loans disbursed by the banks is indexed
to the prime lending rate
SOCIAL/ENVIRONMENTAL IMPACT
• The fund aims to develop 30,000 units of affordable housing in a 10
year time span in New York City
• The success of the fund has spurred the creation of similar funds in
Los Angeles, Atlanta and Louisiana
INVESTORS
• The New York City Acquisition Fund is an example of a layered structure where Financial First and Impact First
investors invest together in a project with the former earning market rate returns and the latter earning sub-
market returns
• The Financial First investors in the New York City Acquisition Fund are a consortium of banks including Bank of
America, JP Morgan Chase and HSBC
• The group of Impact First investors is led by the City of New York and includes a number of foundations including
the Ford Foundation and the Rockefeller Foundation
THE NEW YORK CITY ACQUISITION FUND (http://www.nycacquisitionfund.com)
• The New York City Acquisition Fund was formed in 2006 to overcome the shortage of property available for the
development of affordable housing in New York City
• The fund seeks to facilitate affordable housing development by providing ?exible, advantageous capital for the
acquisition of property to developers of affordable housing
• The fund is worth approximately $200MM with $162MM provided by the bank consortium and the balance
provided by the Impact First investors led by the City of New York and allied foundations
• The bank consortium provides senior debt as lending capital while the group of Impact Investors provides
guarantees in the form of low-interest subordinated loans
• Developers either refurbish existing affordable housing units or engage in new construction of affordable housing
• The maximum loan amount is $15MM for the acquisition of existing occupied buildings and $7.5MM for the
acquisition of vacant land although the Fund has the ?exibility to provide exceptions to these limits
• The fund lends to both for-pro?t and non-pro?t developers; for-pro?t developers are eligible for loans up to 95%
of the lesser of appraised value or purchase price while the number goes up to 130% for non-pro?t developers
• All borrowers must contribute 5% of the total acquisition and pre-development costs as equity
GEOGRAPHY
United States
AREA OF IMPACT
Affordable Housing
The New York City
Acquisition Fund
IMPACT FIRST
INVESTORS
CITY OF NY +
FOUNDATIONS
Senior
Debt
Sub. Debt +
Guarantees
~$160MM
~$40MM
NYC ACQUISITION
FUND
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
36
Acknowledgements
While this report was spearheaded by Bridges Ventures and the Parthenon Group, it was very much a collective
effort among many experts in the industry. Through feedback and guidance we received from many, we were
able to paint a clearer picture of the history and key trends in the sector, as well as provide insights that will
hopefully serve as guidance and education for those investors who are beginning to explore this sector. The
thoughts and ideas presented here are the work of many great minds and no single individual or institution can
claim them as their own.
Tracy Palandjian, Managing Director at The Parthenon Group and Michele Giddens, Executive Director at Bridg-
es Ventures provided leadership for the report. The case team was led by Pedro Sanches and included JJ
O’Brien, Venugopal Mruthyunjaya, Lisa Heidemanns, and Srivaths Swaminathan, all of The Parthenon Group.
Antony Bugg-Levine of The Rockefeller Foundation and Lila Preston of Generation Investment Management
played crucial roles as key advisors to this paper and, from its inception, helped shape many of the ideas pre-
sented throughout this work.
We would also like to thank those who helped shape our main theses and took time reviewing drafts of the
report, including Doug Bauer, David Carrington, Katherine Collins, Jed Emerson, Jessica Freireich, Katherine
Fulton, John Goldstein, Charly Kleissner, John Kingston, Andrew Robinson, Jason Scott, and Helen Wildsmith.
INTERVIEWS
Without the help of numerous experts in the sector, this report would never have reached fruition. We would
like to thank all those listed below who spent valuable time with the team on the phone or in person, helping
make this report as impactful and insightful as possible.
Pradeep Pathiyamveetil, AAVISHKAAR
Sasha Dichter, ACUMEN FUND
Brad Presner, ACUMEN FUND
Ben Powell, AGORA PARTNERSHIPS
Christa Velasquez, ANNE E. CASEY
FOUNDATION
Demmy Adesina, AQUIFER
Arthur Wood, ASHOKA
Alvaro Rodriguez ARREGUI, IGNIA
Bill Marvel, BALDWIN BROTHERS
John Campagna, BENCHMARK CAPITAL
Roger Frank, BENCHMARK CAPITAL
Lynn Martin, BLUE ORCHARD FINANCE
Michele Giddens, BRIDGES VENTURES
Skye Heller, BRIDGES SOCIAL
ENTREPRENEURS FUND
Yasmin Tong, CALIFORNIA COMMUNITY
FOUNDATION
Malcolm Hayday, CHARITY BANK (UK)
Christine Eibs-Singer, E + CO
Terry O’Day, ENVIRONMENT NOW
David Blood, GENERATION IM
Lila Preston, GENERATION IM
Amit Bouri, GLOBAL IMPACT INVESTING
NETWORK
Steven Godeke, GODEKE CONSULTING
Steve Hardgrave, GRAY MATTER
CAPITAL
Raul Pomares, GUGGENHEIM PARTNERS
Eric Eidolf, HARCOURT
John Goldstein, IMPRINT CAPITAL
Pawan Mehra, INTELLECAP
Geoff Burnand, INVESTING FOR GOOD
Teddy Rice, IRONWOOD EQUITY
Tom Reiss, KELLOGG FOUNDATION
Oliver Karius, LGT VENTURE
PHILANTHROPY
Jim Hourdequin, LYME TIMBER
Gavin Watson, NEW ENERGIES (E + CO)
Matt Banick, OMIDYAR NETWORK
Jim Bunch, OMIDYAR NETWORK
Rob Lapides, PICO BONITO
Preston Pinkett, PRUDENTIAL
Antony Bugg-Levine, ROCKEFELLER
FOUNDATION
William Foote, ROOT CAPITAL
Namrita Kapur, ROOT CAPITAL
Monica Pressley, SAN FRANCISCO
FOUNDATION
Mark Campanale, SOCIAL STOCK
EXCHANGE
Dan Crisafulli, THE SKOLL FOUNDATION
Richard Fahey, THE SKOLL FOUNDATION
Scott Budde, TIAA-CREF
Cherie Santos, TIAA-CREF
Bob Assenberg, TRIODOS BANK
Alex Connor, TRIODOS BANK
Adam Ognall, UKSIF
John Kingston, VENTURESOME
Anders Ferguson, VERIS
Patricia Frivas, VERIS
David Carrington
Katherine Collins
37
Further Reading
RESEARCH PAPERS
• Monitor Institute: Investing for Social & Environmental Impact, 2009
Examines the emergence of impact investing, exploring how it might develop and how leaders can accelerate the
industry’s evolutionhttp://www.monitorinstitute.com/imp...stingforSocialandEnvImpact_FullReport_004.pdf
• Good Capitalist: February Newsletter, 2009
Update on social capital market including participants’ initiativeshttp://archive.constantcontact.com/fs047/1101902708153/archive/1102453118973.html
• UKSIF: Review of Activities, 2008
Review of UK Social Investment Forum’s 2008 activities including useful ?gures on the sectorhttp://www.uksif.org/cmsfles/uksif/UKSIF_Review_of_Activities_2008.pdf
• UKSIF: Sustainable Investment Opportunities for Pension Funds in Alternative Asset Classes, 2008
Aims to increase pension funds’ awareness of sustainable investment options available across asset classeshttp://www.uksif.org/cmsfles/281411/SustainableAlternatives.pdf
• Boston College: Handbook on Responsible Investment Across Asset Classes, 2008
Aims to help investors understand sustainable investment and identify opportunities within it across asset classeshttp://www.cof.org/fles/images/ExecEd/bcrespinvesthndbk.pdf
• Rockefeller Philanthropy Advisors: Solutions for Impact Investors: From Strategy to Implementationhttp://rockpa.org/ideas_and_perspectives/publications
Appendix
Methodology
The Investing for Impact: Case Studies Across Asset Classes report builds on the work previously developed
by the Monitor Institute and also draws on the work conducted by Rockefeller Foundation and F.B. Heron
Foundation on the Impact Investment sector. The report aims to educate key stakeholders and practitioners on
the opportunities they have in Impact Investment. These groups include potential investors (High Net Worth
Individuals, Foundations and Institutional Investors) and investment gatekeepers (private bankers and invest-
ment advisors).
The report takes an empirical approach by mapping the Impact Investment market along two key dimensions:
investor motivation (Financial First vs. Impact First) and asset class (as per traditional asset allocation). The paper
proposes an Asset Allocation Framework (AAF) combining the two dimensions to illustrate a comprehensive
perspective of the Impact Investment market using language familiar to investors. The report provides detailed
case studies in each of the “cells” in the AAF, including pro?les of an investor (LP), the Impact Investment fund
(GP) and an underlying investment, as well as ?nancial return and impact to society.
The report was created after an extensive review of existing literature on Impact Investment as well as a large
number of original interviews with sector participants. It re?ects more than 40 interviews conducted with a
range of investors - including foundations, high net worth individuals, institutional investors, advisors, consul-
tants and family of?ce representatives - about their experiences with Impact Investment and their motivations
for particular investments made across various asset classes.
The interviews were subsequently translated into case studies to provide concrete examples of the Impact
Investments that are being developed in each asset class. Cases selected were from existing funds rather than
the many that are currently in the fund-raising process. In each asset class, there are other compelling case
studies that have not been covered and the authors do not seek to make investment recommendations through
this report; rather they wish to illustrate the range and breadth that is emerging in the sector.
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
38
• Rockefeller Philanthropy Advisors: MRI - A Policy and Implementation Guide for Foundation Trustees, 2008
Policy and implementation guide for foundation trusteeshttp://www.cof.org/fles/images/ExecEd/RockefellerPhilAdvisors.pdf
• Stanford Social Innovation Review: The Power of Strategic Mission Investing, 2007
Suggests that foundations should make strategic mission investments to complement grant makinghttp://www.ssireview.org/images/articles/2007FA_feature_kramer_cooch.pdf
• Commission of Unclaimed Assets: Social Investment Bank, 2007
Overview of the Third Sector and role of a social bank within ithttp://www.unclaimedassets.org.uk/downloads/CUA_report_FINAL.pdf
• F.B. Heron Foundation: Impact Across the Mission-Related Investment Portfolio, 2007
Illustrates a spectrum of asset classes within which mission-related investment can take placehttp://www.fbheron.org/documents/ar.2007.mri_gatefold.pdf
• Said Business School: From Fragmentation to Function, 2007
Paper on the social capital’s market structure, operation and innovationhttp://www.universitynetwork.org/si...es/fles/Skoll_FromFragmentationtoFunction.pdf
• Jed Emerson: The Blended Value Map, 2003
Snapshot of international players and institutions within the social investment sectorhttp://www.blendedvalue.org/media/pdf-bv-map.pdf
• New Economics Foundation: Mission Possible, 2008
Considers how foundations use part of their endowments for mission connected investmenthttp://www.cof.org/fles/images/ExecEd/NewEconomicsFoundation08.pdf
• Margaret Bolton: Foundations and social investment—making money work harder in order to achieve more,
2003
Providing foundations with information about social investment and its relevance to their goals and strategieshttp://www.esmeefairbairn.org.uk/docs/EFF_foundations_report.pdf
• Venturesome: Financing Civil Society, 2008
Practitioner’s view of the UK social investment markethttp://www.cafonline.org/pdf/Venturesome - Financing Civil Society - Sept 08.pdf
• Venturesome: The Three Models of Social Enterprises, 2008
Examines how to create social impact through trading activities using three theoretical modelshttp://www.cafonline.org/pdf/Ventursome - 3 Models Of Social Enterprise_Part1 - Jan
08.pdf andhttp://www.cafonline.org/PDF/Venturesome - 3 Models Of Social Enterprise_Part2 -
July%202008.pdf
• FSG: Aggregating Impact: A Funder’s Guide to Mission Investment Intermediaries
Guide to mission investment intermediaries that foundations or funders may employhttp://www.fsg-impact.org/ideas/section/277
• Antony Bugg-Levine: Impact Investing - Harnessing Capital Markets to Drive Development at Scale
Provides an overview of the proliferation of innovation occurring in the Impact Investment sector globally and ad-
dresses the structural causes and likely prospects of the sector’s growth in light of the current ?nancial crisishttp://www.rockfound.org/efforts/impact_investing/beyond_proft_bugg_levine.pdf
39
Websites
• Bridges Ventures:http://www.bridgesventures.com/
• Rockefeller Foundation:http://www.rockfound.org/
• Generation IM:http://www.generationim.com/
• Global Impact Investing Network: www.globalimpactinvestingnetwork.org
• Skoll Foundation:http://www.skollfoundation.org/
• Heron Foundation:http://www.fbheron.org/
• Annie E. Casey Foundation:http://www.aecf.org/
• More for Mission Investing:http://www.moreformission.org/
• Working with legislators to encourage passage of L3C acts:http://www.americansforcommunitydevelopment.
org/
• Non-proft organisation offering interesting research perspectives:http://www.lightyearsip.net/index.shtml
• UK Social Investment Forum:http://www.uksif.org/
• US Social Investment Forum:http://www.socialinvest.org/
• European Social Investment Forum:http://www.eurosif.org/
• European Foundation Centre:http://www.efc.be/
• International Association of Microfnance Investors:http://www.iamf.com/
INVESTING FOR IMPACT: CASE STUDIES ACROSS ASSET CLASSES
40
Appendix: Market Benchmarking
Impact Investors, whether they are Financial
First or Impact First in their motivations, have
a keen interest in measuring and reporting
the ?nancial and social returns on their invest-
ments. It is critical to benchmark these returns
against commonly accepted standards as this
facilitates meaningful comparisons between
investments and, moreover, allows for judge-
ment of the extent of impact or relative success
of an investment.
On the ?nancial returns side, investment
returns are typically measured against bench-
mark indices corresponding to speci?c asset
classes. The indices are typically composites of
representative investment instruments in that
asset class; for example, the MSCI World In-
dex is a market capitalisation weighted index of
public equities in 23 developed countries. The
year on year change of the representative index
provides a measure of ‘market rate’ returns on
average for that asset class; the growth in the
MSCI World Index provides a measure of the
average return of investing in a public equity
strategy in a developed market.
It is important to note that for most asset
classes, the market return benchmark can vary
signi?cantly with geography and the actual sec-
tor in which the investment is made. The return
rate for a real estate investment can be quite
different depending on whether the invest-
ment was made in a developed or developing
country and an agricultural commodity can
yield signi?cantly different returns as compared
to a precious metal. There can also be cases
where no meaningful benchmark exists. When
Omidyar Network was considering investing
in Ignia, a Mexican Venture Capital ?rm that
makes investments in businesses that cater
to the low income segment of the population,
Omidyar found that there were insuf?cient
precedents of Latin American Venture Capital
?rms investing in social enterprises. Says Matt
Bannick, Managing Partner at Omidyar, “We
found that there were no historical datasets
corresponding to our investment space and as
a result there was no benchmark to draw from.
We built our own ?nancial model and by testing
the sensitivity of our assumptions, narrowed
down to a target range for ?nancial return.”
On the social and environmental impact front,
the metrics used to measure return vary quite
widely. Common metrics include jobs created
and extra income and carbon offsets gener-
ated. But the lack of standardisation of these
metrics renders the process of benchmark-
ing social and environmental returns dif?cult.
However efforts such as those by the B Lab,
Veris, Rockefeller Foundation, Global Impact In-
vesting Network and Acumen are underway to
create standardised metrics and this will help
make benchmarking social impact feasible.
The following table provides the average upper
and lower bounds of 5-year compounded annu-
al growth rates of benchmark indices
4
in each
asset class by decade. It must be reiterated
that the market return benchmarks presented
here may not be applicable across all geogra-
phies and sectors.
4
Benchmark Returns/Indices used:
Cash: 3 month discount rate on US Treasury bills
Quasi Equity, Buyout, VC: Cum. Vintage Year Return, US Private
Equity Performance Index, Thomson Financial
Public Equity: MSCI World Index
Real Estate: Dow Jones Wilshire US REIT Index
Commodities: Dow Jones AIG Commodity Index
41
C
A
S
H
Q
U
A
S
I
E
Q
U
I
T
Y
P
U
B
L
I
C
E
Q
U
I
T
Y
B
U
Y
O
U
T
V
C
R
E
A
L
E
S
T
A
T
E
C
O
M
M
O
D
I
T
I
E
S
1981-1990
Average Lower
Bound
6% 7% 10% 16% 8% 5% N/A
Average Upper
Bound
10% 13% 16% 22% 18% 15% N/A
1991-2000
Average Lower
Bound
3% 4% 5% 8% 25% 8% 3%
Average Upper
Bound
6% 8% 10% 14% 45% 15% 12%
2001-2005
Average Lower
Bound
1% 5% 4% -10% -12% 12% 5%
Average Upper
Bound
4% 10% 10% 2% 2% 20% 15%
5
Range considered was 2001-2008 for Quasi Equity, Buyout and VC
All photos purchased from istockphoto.com.
Photographer credits listed from top to bottom, left to right on each page.
Cover: Alberto L. Pomares G., blackred, Rob Belknap, brytta
Page 4: Denis Jr. Tangney, blackred, Terraxplorer, Johnny Lye
Page 7: Peter Ramsey, Michael Flippo, Keith Lamond
Page 8: Peter Ramsey, Michael Flippo
Page 9: Keith Lamond
Page 10: blackred, Greg Randles, Vikram Raghuvanshi, Keith Lamond, Mark Kuipers
Page 11: King Ho Yim, Christa Brunt, blackred, Melodie Sheppard, Simon Owler
Page 12: Terraxplorer
Back Cover: brytta, Alberto L. Pomares G.
Bridges Ventures
www.bridgesventures.com
Parthenon Group
www.parthenon.com
Global Impact Investing Network
www.globalimpactinvestingnetwork.org
Copyright Designation: This work is licensed under
a Creative Commons copyright that allows the
copying, distribution and display of this material if
credit is given to the authors.
Printed on Revive Pure Offset, a recycled grade
containing 100% post consumer waste, using veg-
etable based inks. This document has been printed
by Impress Print who are FSC certi?ed.
Design: J Sherman Studio LLC
Impact investing, de?ned as actively placing capital
in businesses and funds that generate social and/
or environmental good as well as ?nancial returns,
is a growing industry. Impact investment funds are
attracting investors ranging from high-net-worth
individuals to institutional investors, corporations
and foundations. Diverse impact investments are
emerging across multiple asset classes.
This report is intended for the investment
community. It takes a case study approach,
mapping examples of Impact Investments on
a traditional asset allocation framework to help
investors understand this emerging industry.
doc_454115543.pdf