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Blended Value, Capital Investing and the Pursuit of Multiple Returns

Blended Value, Capital Investing and the Pursuit of Multiple Returns. Transforming Philanthropy Forum Cartagena, Colombia. Jed Emerson ImpactAssets. May 11, 2011. Overview. A Notion of Value Capital and Corporate Considerations

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Blended Value, Capital Investing and the Pursuit of Multiple Returns

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  1. Blended Value, Capital Investing and the Pursuit of Multiple Returns Transforming Philanthropy Forum Cartagena, Colombia Jed Emerson ImpactAssets May 11, 2011

  2. Overview • A Notion of Value • Capital and Corporate Considerations • Appendix: Tracking Integrated Performance

  3. Perspectives on A Notion of Value • Senior Advisor, The Sterling Group, Hong Kong (Family Office) • Executive Vice-President, ImpactAssets, (Nonprofit Financial Services) • Managing Director, Integrated Performance • Uhuru Capital Management (Fund of Hedge Funds) • Senior Fellow, Generation Investment Management Foundation, London/New York (Global Public Equity) • Strategic Advisor, Sustainable Private Equity Funds (PE, Sustainability-Focused) • Founding Board, Pacific Community Ventures (VC, Community Development-Focused) • Founding Director, REDF/HEDF (Venture Philanthropy) • Advisor, Strategic/Venture Philanthropy Funds/Foundations (Philanthropy) • Founding Director, Larkin Street Services (Social Enterprise/Social Entrepreneurship) • Faculty Appointments (Thought Leader, Academic Researcher) • Harvard/Stanford Business Schools • Visiting Research Fellow, Oxford University • CSI-Heidelberg University

  4. At the Beginning and End of the Day, there are really only 2 questions: • Are you and your assets maximizing your full, potential value? • Are all your assets strategically aligned to achieve your 10 year goals and attain your 30+ year vision?

  5. What does it mean to be a Fiduciary? • Definition of Fiduciary Responsibility has evolved over time • Fiduciaries may consider not only financial return, but how extra-financial factors could effect that return over time • Fiduciaries often also involved in defining mission and intent of foundations, investment funds, family offices and so on… • Trustee vs Professional vs Advisory Fiduciary Responsibilities, in various related roles with differing incentives and motivations • The Future of Millennial Fiduciaries and Disgruntled Boomers

  6. Beyond the Zero-Sum Dissonance: The Investment Plane and Capital Continuum Quad A Quad B Economic Value +1 Financial Investments & Numeric Returns Blended Value Investments w/Multiple Returns FROI & SROI +1 -1 +1 SocialValue Philanthropic Investments & Social Returns Quad C -1

  7. A Value Maximizing Equation The Power of Social and Environmental Factors to Impact Financial Performance Total Portfolio and Corporate Performance: Multiple Returns and Blended Value Creation The Power of Financial Assets to Generate Social and Environmental Impact

  8. Capital Considerations

  9. A Winning Philanthropic Business Model? “For every dollar you donate, 95 cents is invested in the pursuit of financial return and a nickel is invested in our business… (Insert your business here: Small Business Development, Education, Social Change, Environment, Economic Development…) 95% of your assets are, at best, neutral to your institution’s mission…. ….while 5% of your assets drive 100% of your mission. What Percent of Your Capital is Advancing Your Mission?

  10. The New Golden Rule Portfolio or company size does not define the breadth of one’s vision nor determine the tools you may use to create the future you desire Wealth Management and Fiduciary Translation: Your family’s financial AUM and/or Family Firm Corporate Philanthropy Payout are not your current value nor your future potential!

  11. 360-Degrees for MissionMistra Foundation

  12. A Unified Investment Portfolio Traditional Diversified Investment Portfolio VC Fund Or Angel Investing FROI Risk Boundary (Impact Investing Vehicles) Treasury Notes, Community CDs, Impact Investment Bonds Private and Public Equity Investing Risk Free Rate PRIs and Recoverable Grants Socially Responsible Angel and Social Venture Capital Fund Investing Available Capital Grant (Program) Grant (Infrastructure) Grant (Research and Development, Seed Funding) SROI Risk Boundary

  13. Solutions for Impact Investors Rockefeller Philanthropy Advisors

  14. Sustainable Finance as Risk Mitigation • Sustainable Finance integrates financial, social, and environmental considerations into decision making, facilitating improved risk management and higher return on investment. • Financial institutions can potentially be affected by social and environmental issues through the operations of their clients. Social and environmental issues within a financial institution's portfolio may translate into business risks for the financial institution. • There are three types of risk a financial institution could be exposed to arising from the social and environmental issues of their clients: credit risk, liability risk and reputational risk. • IFC Web Site for reference

  15. Corporate Considerations of Value Creation Foundation for Applied Research, Association for Accountants and Financial Professionals, 2009 “Nike, P&G, The Home Depot, and Nissan North America are better at balancing social/environmental and financial objectives than other companies because they don’t see them as competing objectives. They are able to hold on to both perspectives simultaneously because they are using the sustainability tensions as a source of new ideas, creativity, and innovation. They expect more innovation and entrepreneurship from their employees and more sensitivity to sustainability issues by innovation and R&D, business unit, and functional leaders.”

  16. From Capital Market Catalysts to Collaborative Innovators

  17. Tracking Integrated Performance

  18. Why Are We Here? Where you sit determines… ….where you stand: Social Entrepreneur… Asset Owner… Public Funder… Public Policy Activist… Foundation Executive… Business Owner… Social Enterprise Manager… Fund Manager… Social Worker… Researcher/Academic… Concerned Other! …but there is only one question: Are we maximizing total performance while generating real impact for our multiple investments?

  19. Visible vs. Invisible Value Enhanced Analytics and Research Frameworks to Assess /Track Financial and Extra-Financial Aspects of Firm Performance and Capital Returns

  20. Evolution of Metrics • Compliance • Management • Value Maximization?

  21. Acumen Fund Pulse

  22. Manage to ImpactSMToolkit Discover Measure Manage Communicate

  23. Impact Reporting and Investment System (IRIS)

  24. Evolving SROI Methodology • REDF • 1996 • 2000 • 2009 • NEF SROI Framework • European SROI Network • Regional SROI Networks • On-Line/Off the Shelf Tools • LBS SROI Primer, Social E-Valuator, REDF Templates, Social Solutions SROI • Center for Social Investing, University of Heidelberg, SROI Version 2.0

  25. Yahoo Google

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