Managed by pioneer and veteran of impact investing and development projects Obviam, the Swiss bank’s new fund gathered $50 million from extremely wealthy clients and promises net returns of about 10 percent, reports the Vancouver Sun’s Chinese newspaper Taiyangbao. Investors had to commit at minimum $250,000 into the fund, and will receive annual reports of the impact their investments made.
With over half of the world’s workforce employed by SMEs, and over 95 percent in rising economies such as Indonesia, these businesses play an important role in most economies. But their financial needs are often unmet.
The fund, by investing through other private-equity funds, will take equity stakes in 50 to 80 SMEs focusing on healthcare, education, access to finance, infrastructure, and agriculture and sustainable forestry sectors. Already UBS had invested $3 million in both developing renewable power generation in Southeast Asia and an education fund in India.
Responding on the firm’s new focus, the chief of wealth management at UBS Juerg Zeltner says this is only one step in the right direction, with many more to come as the firm expands philanthropic services in wealth management. Zeltner adds that there is a need for UBS and the banking industry as a whole to redefine their roles in society, and that engaging in impact investing is a credible opportunity for banks to rebuild their reputation following the global financial crisis.
Going back to the fund, returns are still a key piece of the conversation. Head of impact investing Andreas Ernst says that the fund’s targeted return of 10 percent is “conservative”. A similarly structured Swiss government fund by Obviam achieved annual returns of more than 23 percent.
Work to establish the fund began approximately two years ago and required much effort to educate clients as well as UBS’s own advisors, reflecting the sector’s embryonic state. Outside of investment in the fund, investors are able to co-invest together with UBS to make additional impact investments.
]]>A new report released today by the World Economic Forum in collaboration with Deloitte Touche Tohmatsu adds a dose of reality. It found that the sector would have to “grow aggressively” to surpass $500 billion. Yet challenges remain. Less than $40 billion of capital is currently committed to impact investments, and they mainly come from development finance institutions, family offices, and high-net-worth individuals. These groups represent only a small share of the global capital pool. According to the report, while 80 percent of U.S.-based pension fund managers are familiar with impact investing, only 9 percent felt that it is a viable investment approach.
Moreover, the report revealed that 79 percent of impact investors are targeting market rates of return, despite impact investing experts calling for an adjustment of expectations and practical deductions about those returns.
“There is limited consensus among mainstream investors and specialized niche players on what impact investing is, what asset classes are most relevant, how the ecosystem is or should be structured, and what are the underlying constraints the sector faces,” said Abigail Noble, Head of Impact Investing Initiatives at the World Economic Forum.
“As a result, there is widespread confusion regarding what impact investing promises and ultimately delivers, and therefore how it can reach scale.”
In attempt to provide clarity on impact investing, the report defines it as an investment approach and not an asset class; it must carry an intention to create social or environmental good and not solely financial gain, even if it unintentionally creates social or environmental value; and the outcomes must be actively measured.
The report proposes several recommendations on how the sector can reach scale, or from the “margin to the mainstream”. These include concerted efforts such as:
“Impact investing has become increasingly important as asset management is in a state of flux and public funds face increasing constraints to address key societal needs. Trillions of dollars are expected to be inherited over the next 50 years by the next generation, a generation that believes business should play a crucial role in creating a better society,” said Chris Harvey, Managing Director of Global Financial Services at Deloitte.
The report is the product of a one-year research initiative by the World Economic Forum’s Investors Industries community, which engaged 150 mainstream investors, business executives, and policymakers.
Photo from World Economic Forum.
]]>Ilse Treurnicht, the CEO of social innovation centre MaRS Discovery District, will be joined by Tom Kloet, CEO of TMX Group, the company that owns the TSX, to open trading.
Others in attendance include Dr. Eric Hoskins, Minister of Economic Development, Trade and Employment, and Adam Spence, who has led the development of the SVX and is the Associate Director of the MaRS Centre for Impact Investing.
After the official announcement, a venture day demo will follow. Ten of the ventures on the SVX will give short presentations.
SVX was conceived to mobilize capital for public good. It will be a place where investors and funds can connect with local impact ventures that demonstrate a double or triple bottom line – social and/or environmental impact and the potential for financial return. These ventures include not-for-profits, co-operatives, and for-profit businesses.
The new platform aims to create a win-win situation for both investors and entrepreneurs by reducing the time needed for and cost of due diligence with screened investment opportunities, and providing an avenue for ventures to access capital and financial expertise.
]]>McGrath is the former Chairman of Prudential (2009-2012) and Man Group (2000-2007) and will succeed Cohen, who has been slated to serve as Chair until BSC was fully operational.
Following a failed takeover bid in 2010 that left Prudential with a £377 million bill in costs and fees, shareholders voted against McGrath’s re-appointment, although he had no intention of stepping down.
But he continued to focus on philanthropic work, serving on the advisory board of Bridges Ventures, where Cohen is Chair, and receiving a Beacon Award for Philanthropy.
“I have been closely involved for ten years with social impact investment,” said McGrath. “I am excited to have this opportunity to contribute to Big Society Capital’s leadership in driving entrepreneurship and innovation in tackling social issues.”
Cohen said, “[McGrath] has extensive philanthropic and investment experience and is a firm believer in impact investment. After handing over the Chairmanship on 1st January 2014, I much look forward to working with him and the rest of the Board. Big Society Capital has developed into a powerful force driving social improvement in the UK and I have been privileged to be its founding Chair”.
]]>In view of the global momentum surrounding impact investing, this generation is slated to witness similar strides in the social finance industry. Although there is no NYSE-equivalent in the social finance space yet, there are a few incumbent social stock exchanges showing promising potential.
Social stock exchanges are regulated markets with public information and transaction services related to equity and debt instruments that generate financial returns along with positive social and/or environmental impact.
This concept is distinct from traditional charity platforms as a financial return is mandated. Crowdfunding platforms can also be distinguished from the social stock exchanges as they do not always warrant social or financial returns.
One of the pioneers for social stock exchanges is Ethex, an online marketplace where investors can compare ethical investments opportunities and manage their investment portfolio.
This London-based exchange was propagated by Jamie Hartzell. In 2003, with Hartzell’s initiation, Triodos Bank started a small share matching service for four social enterprises who did not want to join the main exchanges, believing it would compromise their mission. Triodos Bank wasn’t interested in developing the service further so the responsibility was transferred to Brewin Dolphin Securities in 2006. A couple of years later, Brewin expressed disinterest in the program and as a result Hartzell stepped up to lead Ethex in 2012.
Prospective investors of Ethex can join the social stock exchange by contributing a minimum capital of £10 through the free basic account or a £30 per year member account. Apart from accessing debt and equity holdings in social enterprises, Ethex users can execute investment exits with the assistance of Ethex’ matching service.
A more recent initiative from London is the Social Stock Exchange (SSE). Launched in June 2013, the SSE exhibits information on socially responsible companies that are already listed in regulated stock exchanges like the LSE. Currently, this exchange lists 11 organizations and deals with their equity, bonds, and cash investments.
Across the Atlantic, SVX is a Canadian platform developed by Adam Spence. This social stock exchange was endorsed by the Ontario Government in 2008 and approved by the Ontario Securities Commission in June this year. It is expected to have a public launch around mid-September this year at the Toronto Stock Exchange.
According to the latest plan revealed, SVX will have a public portal that displays relevant financial, social, and environmental information on participating local impact ventures. It will also host a private portal, where accredited investors and debt or equity issuers can access for more deal details.
Africa and Asia have also made significant progress in social stock exchange work. Based on past social investment achievements in Africa, and two years of active research and planning, the Kenya Social Investment Exchange (KSIX) was launched in 2011 to profile social enterprise investment opportunities in Kenya. Interested impact investors would contact the KSIX to confirm their eligibility and to identify potential debt investment opportunities.
The Impact Exchange is another novel stock exchange for social enterprises in Africa and Asia. It aims to be the world’s first comprehensive social stock exchange by providing equity, debt, and fund holdings to both accredited and retail investors.
This initiative was officially launched in June 2013, and is being led by the Stock Exchange of Mauritius (SEM) and the Impact Investment Exchange Asia. Prior to May 2013, Nexii was co-managing this social finance project with SEM.
In the past, when mainstream exchanges like the LSE and NYSE were blooming, a win-win situation for businesses and investors was created. Businesses listed on the exchanges attained greater operational freedom through access to large amounts of capital across national borders. Investors also benefited from these active and regulated stock exchanges as they did not have to stress over investment exit options or the legitimacy of the businesses they were funding.
Considering the history of stock exchanges and this year’s GIIN and J.P. Morgan survey, which identified a “lack of appropriate capital across the risk/return spectrum” and “difficulty exiting investments” as some of the key challenges in the impact investing space, the advancement of the aforementioned social stock exchanges will be a considerable step towards the progress and standardization of the social finance industry.
At the moment, though, the social stock exchange activity is jumbled and it demands more efforts for the creation of widely-accepted standards related to matters such as shareholder governance, transactional platforms, market liquidity, and trading costs.
Photo courtesy of Photokanok / FreeDigitalPhotos.net.
]]>Despite dodging a threat from banks to shut down M-Pesa, who claim that the service, now with 17.1 million customers in Kenya and close to 5 million in Tanzania, will cause people to lose money without regulatory infrastructure to support it, that claim has come true for one particular user.
AllAfrica reports that a Safaricom user, Makena Onjerika, had mistakenly sent money to a number registered to a Benson Kariuki. The money was withdrawn within 10 minutes of sending it.
Onjerika tried to reverse the transaction but the money had already been withdrawn. Safaricom customer care service cautioned that little could be done about it.
Onjerika tried to contact Kariuki, who ignored her pleas to refund the money.
On September 4, Onjerika wrote a blog post detailing the steps she took to get her money back, and asked readers to share the post through social media. Through the post, she also appeals for a protection system against mobile fraud. Her case went viral.
The next day, she posted an interaction with Safaricom who got a hold of a woman whose phone Kariuki used to transfer a portion of the money back.
As of September 7, Onjerika writes that she had received all her money back.
]]>Hundreds of students across the US responded to this question asked at last year’s Lend for America Summit by starting microfinance initiatives at their college.
“That’s 32 universities in 19 states disbursing $376,000 in microloans to underserved communities nationwide,” said Charity Yoro of Lend for America.
Lend for America is an alliance founded in 2009 in response to a growing number of students starting microfinance institutions to spur economic development in their communities. It provides technical assistance and creates networking opportunities for these organizations.
Every year, the Lend for America Summit invites students to come together for a weekend of training and peer learning. This year, the fifth annual event will take place on October 11 to 13 at the University of Pennsylvania in Philadelphia.
“In Philadelphia, our goal is to bring together the next generation of leaders to offer training on how young people can make a meaningful impact in their local communities,” said Vanessa Carter, Executive Director of Lend for America.
The agenda will focus on best practices for microlending and enabling students to help the working poor in their communities, including some of America’s most troubled cities such as Durham, North Carolina and New Brunswick, New Jersey.
One of the goals of the summit is to encourage students to start campus microfinance institutions or “Campus MFIs”. As a member organization of Lend for America, Campus MFIs receive support such as access to a resource library, small grants, and on-site consulting. Membership fees last year were $200.
Intersect Fund, the parent organization of Lend for America, was also a student-led initiative out of Rutgers University. Today, it is one of New Jersey’s largest microlenders.
CITI Community Development is this year’s lead sponsor. Other sponsors include Campus Philly and the Annie E. Casey Foundation.
]]>Within approximately the next 12 months, the Taskforce aims to report on three things: a complementary policy framework that would allow impact investment to reach a tipping point; a standardized approach to measuring social outcomes; and methods for foundations, institutions, and private investors to invest.
At Social Capital Markets 2013, attendees were formally introduced to the members of the Taskforce for the first time. Matt Bannick of Omidyar Network, who himself is a member, and Jonathan Greenblatt, who is the Director of the Office of Social Innovation at the White House, were there to make the announcement.
The members are:
Dr. Lieve Fransen, European Commission (EU)
Hugues Sibille, Crédit Coopératif (France)
Claude Leroy-Themeze, Ministry of Economy and Finance (France)
Nadia Voisin, Ministry of Foreign Affairs (France)
Brigitte Mohn, Bertelsmann Foundation (Germany)
Susanne Dorasil, Ministry for Economic Cooperation and Development (Germany)
Giovanna Melandri, Uman Foundation (Italy)
Mario Calderini, University of Turin Politecnico (Italy)
Mario La Torre, La Sapienza University – Rome (Italy)
Sir Ronald Cohen, Big Society Capital and The Portland Trust (UK)
Kieron Boyle, Cabinet Office (UK)
Matt Bannick, Omidyar Network (USA)
Don Graves, The White House and US Department of Treasury (USA)
At this point, it was only announced that the Taskforce will have representatives from Canada and observer representatives from the Australian Government and Development Finance Institutions.
Sir Ronald Cohen will be leading the Taskforce. He is known for founding Social Finance, the organization responsible for developing social impact bonds, and his work in the private equity and venture capital areas, having established one of Britain’s first venture capital firms. Cohen is also currently the Chair of Big Society Capital.
With the Taskforce and G8 countries on board, there are strong validations for the idea of impact investing. “Having a body like the G8 be interested in impact investing has put that on the agenda. It’s terrific in and of its own right. It gives the emerging sector a level of visibility that we haven’t to date,” said Matt Bannick. “But let me be also clear, it is ultimately about getting stuff done.”
Although impact investing is a typically praised concept of investing capital in entrepreneurs, ventures, and organizations that could produce a financial return and create some sort of positive impact to society, there has been criticism about the need to actually demonstrate impact on the ground.
Still, Bannick explains, “I do think the G8 is a terrific venue. I do think things can get done in that venue in collaboration with social and private sector.”
Photo from G8 Summit 2013.
]]>The SGII Center was created to facilitate participation in the impact investing field by training and allowing students to work directly with social enterprises, corporations, family offices, impact funds, and private family foundations.
What has the Center been working on lately? Together with funding from the Sorenson Impact Foundation, they will invest approximately US $2 million in five Africa- and India-based early-stage social enterprises. Students were involved in conducting due diligence for these impact investments.
“The opportunity to play an active role in combating these crucial societal issues is very rewarding,” said Brandon Koch, a student studying finance and computer science at the David Eccles School of Business who spent three months in India working for Kinara Capital. “The hands-on experience I gained at the SGII Center has been invaluable, and I look forward to continuing to apply these skills in the real world to create sustainable change.”
“These investments will serve to close funding gaps, helping social enterprises to prove out their businesses, with the additional benefit of cultivating impact investing expertise in students,” said Sorenson. “I hope that our efforts will accelerate the growth of the sector at-large and help lead to improved societal change on a global scale.”
The companies who have received investments from the Sorenson Impact Foundation are:
Copia – Kenya-based consumer catalog and rural distribution company
Kinara Capital – India-based financing company for micro and small enterprises
Liberty & Justice – Fair-trade apparel manufacturing company with offices in Liberia and Ghana
Simpa Networks – India-based pay-as-you-go solar financing company
World Haus – India-based affordable housing construction company
Today, 15 social enterprises chosen from 116 applicants have been announced as finalists. They are:
Aakar Innovations Pvt. Ltd
Arogya Finance
Avani Bio Energy
Banka BioLoo
Boond Engineering & Development Pvt. Ltd
Edubridge Learning Pvt. Ltd
Jackonblock Facility Services Pvt. Ltd
KNIDS GREEN Pvt. Ltd
NextDrop
MicroGraam Marketplace Pvt. Ltd
Sanchayan Suraksha Solutions Pvt. Ltd
Sevamob
Sakhi Unique Rural Enterprise
Tamul Plates Marketing Pvt. Ltd
Villgro Innovation Marketing Pvt. Ltd
“It was an interesting learning experience,” said Pradeep Kashyap, who is the founder of MART and was on the jury panel. “Some of the plans from the ventures were of the highest order.”
As a finalist, the businesses will receive capacity building support from innovation accelerators Ennovent and Villgro to take their ventures to the next level. If the ventures are able to secure an investment in the form of grant, equity, or debt within the next eight months, they will also get the opportunity to access Rs 25 lakh (approximately US $37,000) of matched equity funding as part of the Challenge award.
Seeing as many ventures fail because of the inability to access funding and resources required to grow, the AVC was created to invite entrepreneurs who have completed a proof of concept and are looking for growth investment. The Challenge aims to address the missing middle in impact investing by providing high-risk patient capital and customized business support.
“The Artha Venture Challenge is a pioneering initiative for early-stage social ventures in India. We are excited to be announcing this final cohort and providing them the capacity building support they require to secure their lead investors, which will in turn trigger our matched round of Rs 25 lakh,” said Audrey Selian, Director of the Artha Platform.
“Our goal is to shift the center of gravity in this space, to empower the entrepreneurs through our process, and then to encourage our peer impact investors to take action. This is indeed an opportunity for us all to replace talk with action.”
The AVC was inspired by the UnLtd Big Venture Challenge where 10 early-stage co-investment deals were closed within 10 months.
]]>