An Introduction to Impact Investing
Georgetown Webinar August 23, 2011
Georgette Wong
CEO, Correlation Consulting
CEO, Take Action! Conference Series
georgette@correlationconsulting.com | www.impactinvestingconference.com
The information provided does not constitute investment advice and it should not be relied on as such. All material has been obtained
What Is Impact Investing?
Impact investing is similar to, but somewhat different from:
• SRI, ESG, Triple Bottom Line investing, Long-Term Investing
Main differentiators:
• Expectation of measurable tangible social and/or environmental outcome
• Across all asset classes
ENVIRONMENTAL:
Clean Tech Climate
Conservation Environment
ESG/Sustainability Water
Impact investing is actively placing capital in businesses and projects that seek to generate market-rate financial returns while also creating
measurable social and/or environmental impact to address some of the world’s most pressing challenges.
SOCIAL:
Agriculture
Community/Economic Dev.
Culture
Demographics Education Fair Trade
Food Systems Gender Equality Health/Healthcare Housing
Inclusive Finance Job Creation
Microfinance Racial Equality Sustainable Cities
Two Views of the World
Making Money ≠ Doing Good
Short-term financial results
Talking about money rarely
includes values; training in finance is values-neutral.
Investments dictate the Natural World
Groups work in silos to solve issues
Predominant Up & Coming
Making Money = Doing Good
Judge impacts for our
grandchildren’s children – and more
Money reflects values & worldviews
Natural World dictates the Monetary World
Groups work together to solve issues
Government Business (&
Investments)
Philanthropy (& Not-For-
Profits)
1 Source: http://www.mckinsey.com/mgi/publications/gcm_sixth_annual_report/executive_summary.asp(2009)
2 Source: http://www.us.capgemini.com/services-and-solutions/by-industry/financial-services/solutions/wealth/worldwealthreport/(2010) 3 Source: http://www.citigroup.com/transactionservices/home/sa/2011q1/imr/docs/imr15_mag_int.pdf(2010)
4 Source: http://www.nytimes.com/interactive/2010/02/01/us/budget.html(2010)
5-6Source: http://foundationcenter.org/gainknowledge/research/pdf/fgge10.pdf(published 2010; 2009 estimated stats) 7 Source: Estimate, GPS Capital Partners, LLC (2010)
Leverage is Key
US Foundation Assets
$583.4 Billion5
US Foundation Giving
$42.9 Billion6
Global Capital Markets
$178 Trillion1
US Foundation Mission Investing
$3 Billion7
High Net Worth
$39 Trillion2
Global Pension Plans
$23 Trillion3
US Budget
$3.69Trillion4
US Foundation Assets
$583.4 Billion5
A Hierarchy of Impact
Meyer Memorial Trust
“Maximizing Impact”
Mission-Related
Market Rate Investment Strategy
Presented at 2009 Take Action!
Correlation Consulting
Focus on above-market rate financial returns
Non-Profit Education (2007) For-Profit Consulting Services (2011)
Assist Asset Owners and their Trusted Advisors on the following:
Clarification of the field of Impact Investing
Identification of clients’ desired areas of impact
Introduction to like-minded
investors and potential partners in impact.
Take Action! Conference Series
By Invitation only
Non-solicitation annual event
Market Research
Identify key trends
Assess supply and demand
Take Action! Conference Series
Our Signature Annual Event
By-invitation only, non-solicitation
Peer Group of Asset Owners (60-70% of the audience) Families, foundations, major pension plans, corporations
Focus on investments, specifically premium (above-market rate) financial returns
Neutral, Third Party
Practical, Action-oriented
Since 2007, over $300M in new commitments made (low estimate)
98%+ fulfilled on their goals for attending (3 years in a row)
98%+ say they would attend again (3 years in a row)
Next event is Spring 2012 (East Coast)
Year Total Participants Assets Represented Location
2011 125 $4.5 trillion San Francisco
2010 125 $4.1 trillion Boston
2009 145 $2.4 trillion San Francisco
2008 100 $2.7 trillion San Francisco
2007 100 $80 billion San Francisco
Selected Participants
Motivations
Financial
Looking for outperformance
Reduce investment risk Social/Environmental
Alignment with values
Use all existing assets – financial and non- financial
Find like-minded pioneers Orient the financial markets towards the long-term
Pension Plans
Many Individuals & Families Foundations
Asset Managers
Investment Consultants
Government Agencies
Correlation’s Asset Owner Study
Return of Capital to Premium Financial Returns
Advisors
• Sherwood Dodge, CEO, GE Equity
• Lala Faiz, Senior Partnerships Advisor, Office of the Secretary of State
• Janice Hester-Amey, Portfolio Manager, CalSTRS
• Rob Lake, Director of Strategic Development, Principles for Responsible Investment (UK)
• Bonny Landers, River Star Foundation (Hong Kong)
• Jean Oelwang, CEO, Virgin Unite (UK)
• David Wood, Institute for
Responsible Investment, Harvard University
Institutional Investors
• Individuals & Families
• Pension Plans
• Corporations
• Development Finance Institutions
Core Questions
• What are current global best practices?
• How can we unleash more capital?
• What distinguishes a “good investment” from an impact investment?
Launch (Fall 2011)
• PRI in Person
• State Dept. Forum
Current Product Landscape
Products are continually emerging
“Impact First”
Low High
High Net Worth
& Institutional Products Retail Products
Generation Investment Management
(25 – 30% Target IRR) Lyme Northern Forest Fund (22% Target IRR)
African Agriculture Fund (17% Target IRR)
Microvest Short Duration Fund
(LIBOR+) Aperio Public
Impact Portfolio (Market Rate)
Triodos Products (3 – 6% Returns)
Root Capital (2.5% Returns)
Acumen Funds (0% Returns)
RSF Social Finance Notes
(1% Returns) Calvert Social Finance Notes
(1 – 2.5% Returns) KIVA Giving Loans (0% Returns)
RSF Social Finance Notes (1% Returns)
Calvert Social Finance Notes (1 – 2.5% Returns) TriLinc Global
Impact Investment Funds
Target launch Q4 2011
(6% Target Yield, 8-10% Target IRR)
Expected Return on Investment
“Financial First”
The Field is Rapidly Developing
Foundations
Pension Plans
Universities
Corporations Religious
Groups Private
Investors
UNCOORDINATED
Asset Owners Are Beginning To Coordinate
Financial Consultant
Financial Consultant
Financial Consultant
Too Few Quality Fund Managers Financial Consultants
Need Training & Tools
Fund Manager
Fund Manager
Fund
Manager Consultants
Entrepreneurs
End Beneficiaries Aren’t Typically Consulted
Industry studies and general market research demonstrate a current demand for Impact Investments of approximately
$120 billion
1growing in the next ten years to $1 trillion
2Asset Owners Are Key
Foundations
Pension Plans
Universities
Corporations Religious
Groups Private
Investors
UNCOORDINATED
Yet, Asset Owners are particularly key, as they…
Financial Consultant
Financial Consultant
Financial Consultant
…incent fund managers/
entrepreneurs to create custom products
…incent financial consultants
to seek education (…or they move on)
Fund Manager
Fund Manager
Fund
Manager Consultants
Entrepreneurs
…can ensure end beneficiaries
are included There is an opportunity for leadership from all parts of the ecosystem.
Increase in unique partnerships, collaborations and product
structures among various asset owners
Georgette Wong
President, Correlation Consulting
CEO, Creator & Curator of the Take Action! Impact Investing Conference Series georgette@correlationconsulting.com|650.759.4769
• Involved with Impact Investing since 2007, SRI since 2001, and civil rights since 1992.
• Currently assisting the US State Department to catalyze impact investing across the government, private and public sectors.
• Over the last eighteen years: advised families, foundations and Fortune 100 businesses on public and private investments; developed and funded early stage companies; and created organizations focused on strategic philanthropy and partnerships between the business and social sectors.
• Founded the Take Action! Impact Investing Conference Series in 2007. Just celebrated 5 years of catalyzing impact through Take Action! Planning for the 2012 conference.
• Currently engaged with the Office of The Secretary of State and the United Nations-backed
Principles for Responsible Investment on a study to understand activity of asset owners in impact investing and how to free up more capital for impact investing.
• Previously engaged with the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of San Francisco’s Center for Community Development Investments to catalyze impact investing across sectors.
• Most recent work published in Community Development Investment Review (Federal Reserve Bank of San Francisco), Solutions for Impact Investors: From Strategy to Implementation (Rockefeller Philanthropy Advisors), Private Asset Management, and Financial Planning Magazine.
• MBA, UCLA Anderson; BA, magna cum laude, Amherst College