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

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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.

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

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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

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

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

Source: JP Morgan, Rockefeller Foundation and GIIN, 20104

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Impact Investing: Mapping ReturnsSource: Adapted from Monitor Institute 2009, via Rockefeller Foundation , 2011

ImpactFirst

Low Impactand

Low Financial ReturnsPhilanthropy

Social Returns

FinancialReturns

iFinancial

First

Low High

High

• Subsidized Investments

• Grants

BelowMarket

MarketRelated

Traditional Investments

• SRI (“Do No Harm”)

Impact Investments

Actors in the Impact Investing Industry

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Examples of Impact Investments

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USA

INDIA

TANZANIA 

 

 

   

Investee: M’tanga Farms

Investors: Calvert Foundation,

Lion’s Head Global Partners

Investee:

Investors: and

Investee:

Investors:

CHILE 

 

Investee: LGBT Enterprises in Latin America

Investors:

and

supported by NESsT.org

Mapping the Impact Investing Industry

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USA 

CHINA (HONG KONG)NETHERLANDS    UK

INDIA

BRAZIL  SOUTH AFRICA 

KENYA 

 MEXICO 

    

 

 

 GERMANY

 

 

 SINGAPORE

AUSTRALIA 

The Sterling Group

  

 

 

Capital Growth

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Value of Reported Investments, by Region, 2011

10Source: Saltuk, Bouri and Leung, “Insight into the Impact Investment Market,” 2011

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

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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

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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)15

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”)

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ResourcesBugg-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.

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