The Rapid Globalization of Impact Investing

1. The Rapid Globalization of Impact Investing Ted Jackson School of Public Policy and Administration Carleton Centre for Community Innovation Presented to the Research Works Luncheon Session, Senate Room, Carleton University, November 1, 2012

2. Core Issue Impact Investing is growing across the globe, but so far this growth has been driven mostly by investors from the Global North. How to effectively engage investors from the fast-growing new economic powers, and the low-income countries, is a challenge that this new field must meet directly, with energy and creativity.

3. Current Context Slow economic growth globally High unemployment and growing inequality Pressure to reduce western aid budgets Continued ascendance of new economic powers: China, India, Brazil, South Korea, Indonesia Increased importance of G-20 in global governance Increased development assistance and trade on the part of the new powers Need and opportunity to lever private sector capital to address pressing social issues

4. Investments intended to create positive impact beyond financial return • Provide capital • Transactions currently tend to be private debt or equity investments • We expect more publicly traded investment opportunities will emerge as the market matures • Expect financial returns • The investment should be expected to return at least nominal principal • Donations are excluded • Market-rate or market-beating returns are within scope • Businesses designed with intent • The business (fund manager of company) into which the investment is made should be designed with intent to make a positive impact • This differentiates impact investments from investments that have unintentional positive social or environmental consequences • … to generate positive social and/or environmental benefit • Positive social and/or environmental impact should be part of the stated business strategy and should be measured as part of the success of the investment Source: JP Morgan, Rockefeller Foundation and GIIN, 2010

5. i Financial First Impact Investing: Mapping ReturnsSource: Adapted from Monitor Institute 2009, via Rockefeller Foundation , 2011 Impact Investments High Traditional Investments Market Related Impact First • SRI • (“Do No Harm”) Financial Returns Low Impact and Low Financial Returns Philanthropy • Subsidized Investments Below Market • Grants Low High Social Returns

6. Actors in the Impact Investing Industry

7. Examples of Impact Investments Investee: Investors: Investee: Investors: and USA INDIA TANZANIA Investee: M’tanga Farms Investors: Calvert Foundation, Lion’s Head Global Partners Investee: LGBT Enterprises in Latin America Investors: and supported by NESsT.org CHILE

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

9. Capital Growth

10. Value of Reported Investments, by Region, 2011 Source: Saltuk, Bouri and Leung, “Insight into the Impact Investment Market,” 2011

11. What Impact Investing is Not Not a silver bullet / panacea Not implying that every social issue can be solved through market-based approaches Not replacing the important role of philanthropy Not an excuse for governments to ignore their obligations to marginalized populations or their obligations to redistribute wealth

12. The Potential of Impact Investing The ability to unlock new types of capital to address a range of social issues, and to combine capital in creative ways An opportunity to address the limitations of traditional investment approaches that narrowly focus on financial returns A desire by some wealthy investors to generate both financial and social returns

15. What Should/Could Carleton Do? (I) Ottawa/Eastern Ontario Engage Canadian impact investors to finance LTW and other Carleton-affiliated enterprises that can generate social or environmental benefits Accelerate efforts to commercialize and scale social-purpose technology in priority sectors: health, the environment, sustainable energy, etc. Integrate impact investing strategies and actors into promotion of regional economic development Become an impact investor in affordable housing and social infrastructure, through partners and intermediaries (e.g., CMHC)

16. What Should/Could Carleton Do? (II) Global Use evaluation to hold impact investors to account for their declared intentions Conduct independent, critical research on effectiveness of models and tools in impact investing in various sites Design/facilitate “triangle” interventions involving a western country, a new economic power and a low-income country Consider hosting professional training in impact investing at Carleton (e.g., “IPDET for impact investing”)

17. Resources Bugg-Levine, A. and J. Emerson. Impact Investing: Transforming How We Make Money While Making a Difference, 2011. Gates, B. “Innovation with Impact: Financing 21st Century Development,” Report to the G-20 Leaders, Cannes, 2011. Global Impact Investing Network: thegiin.org Harji, K. and E.T. Jackson. “Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry,” Rockefeller Foundation, 2012. J.P. Morgan, GIIN, Rockefeller Foundation. “Impact Investments: An Emerging Asset Class,” 2010. Monitor and the Acumen Fund. “From Blueprint to Scale: The Case for Philanthropy in Impact Investing,” 2012. Monitor Institute, “Investing for Social and Environmental Impact: A Design For Catalyzing An Emerging Industry,” 2009. SVT Group. “Catalog of Approaches to Impact Measurement,” 2008. United National Development Program “Innovative Financing for Development: A New Model for Development Finance,” 2011.