The Impact Investor. Clark Cathy

easy-to-apply tools:

      • For mainstream investors, including commercial institutions, fiduciaries, and individuals, The Impact Investor provides actionable insights into the characteristics and performance of a range of proven impact investing strategies. It also paints a picture of the unique skills of impact investors, and the right questions to ask when weighing a fund's likelihood of delivering the financial and social value it promises. The Impact Investor also recommends concrete steps investors can take directly, in their own portfolios, to deliver positive social or environmental outcomes in addition to attractive rates of financial return.

      • For corporate executives, The Impact Investor provides evidence a new era of Collaborative Capitalism is emerging – the next essential paradigm in business, building on CSR and other evolutions in thinking regarding the place of business in advancing social or environmental performance. By showcasing the work of impact investing funds at the forefront of this trend, this book portends a set of practices that, in less than a decade, will become commonplace in all business settings. By studying the work of impact investors, business executives will gain material insight into a range of strategies for ensuring that their companies remain profitable and sustainable. Executives will also gain skills needed to be more successful operators in a world that is more sector agnostic than ever and populated by a new generation of Millennial customers.

      • Entrepreneurs will learn what makes impact investors tick and the type of business approaches they typically invest in. This book will provide entrepreneurs with insights into partnering and working with investors, and the other multilingual skills and new approaches they should master (alongside impact investors) in order to be as effective as possible. Each of the impact investing funds we feature is also entrepreneurial in its own right. The lessons from the experience of these funds will be invaluable for any innovative business leader.

      • Community and social change agents will gain insights into how capital can be used to drive social and environmental justice. The tools of finance are increasingly being appropriated to support community vehicles – nonprofits, businesses, cooperatives, social enterprises, and any number of other structures – delivering job creation and opportunities for expanding employment and development to those presently excluded from local and regional economies.

      • For teachers and students of business, the book offers a range of new analytical frameworks for assessing the structure and rapid development of impact investing, created with the benefit of extensive primary data. These frameworks have broad business applications, and our research methods and approach to documenting performance can be applied in most markets. The book also presents clear paths for continuing research and opportunities for further academic and thought leadership. All students will benefit from understanding the operational approaches being applied by funds using cutting-edge financial instruments in pioneering markets.

      • For philanthropists, the book presents a comprehensive overview of what it means to be “catalytic” by delivering a magnitude of social value never before seen as an intentional outcome of private investment. The book highlights the involvement of a number of philanthropic leaders in the funds we researched, two of which are private foundations. The book will help philanthropists understand what it means to engage in impact investing, how to get started, and the kinds of approaches that will increase the probability of success.

      • Public officials will recognize a range of private investment strategies in The Impact Investor that have already been utilized by policymakers to drive the delivery of social and environmental impacts at scale. The book describes an ideal form of public-private partnership and the steps needed, primarily on the part of impact investors, to actualize this heightened form of collaboration. Public officials will see a powerful, evolving role for government in the development of impact investing, and the opportunity to stretch limited resources in innovative new ways. As essential partners in impact investing, public officials will benefit from the book's broader insights into the future of finance and business and its relationship to diverse constituencies, a perspective already at the heart of government.

      No book can be all things to all people. Readers should know that much of our data and real-life examples of Collaborative Capitalism are drawn directly from impact investing funds. The rest is drawn from the broader literature and our personal experiences in the fields of impact, philanthropy, policy, and investment. Two of us have been private impact investing fund managers, and two of us have been foundation executives making grants and program-related investments, a key form of impact investment. One of us has been a business and finance reporter; two of us have written guidebooks for practitioners that include models and frameworks that, more than a decade after they were published, continue to be widely used across the social enterprise and impact investing sectors. We have experience in successfully changing the way people think about and understand complex topics. Two of us have been publishing and teaching on these topics for more than fifteen years each. One of us coauthored the first book ever published on the topic of impact investing; one of us was a public official focused on economic development before advising the largest pension fund in the United States on its impact assessment practice; and one of us helped create an emerging standard rating system for impact investing funds worldwide.

      A Focus on Intermediaries

      Through these experiences, we initiated our major collaborative research effort in 2011 with the strong belief that there is no better unit of analysis than impact investing funds for understanding the way capitalism is changing.

      Why? Because funds interact directly with hundreds of enterprises and have ultimate responsibility for delivering the blended performance of financial as well as social and environmental returns on which the case for impact investing rests. They are the proverbial canaries in the coal mine of the larger sphere of Collaborative Capitalism. They are test beds and financial R&D labs, where in order to succeed, relationships and communication must be rock solid even while the work remains innovative.

      Indeed, when impact investing funds succeed, many important results follow that may positively impact the development of Collaborative Capitalism: investors increase their investment, replicable financial structures emerge for new pools of fund capital, entrepreneurs have clear guideposts of what to expect of investment, and secondary markets more naturally emerge.

      Finally, funds are also a crucible of accountability. As Bob Webster has written about the Grassroots Business Fund, where he is chief operating officer, the formal fund structure provides a “clear and transparent picture of fund financial flows,” including management fees, legal costs, portfolio investments, investment interest, dividend, and principal reflows; “clear expectations for financial and social returns and any tradeoffs thereof”; and an “active seat at the governance table.” They also “can incentivize the fund manager through some type of carried interest in the fund's performance.”3

      What's Ahead?

      The Impact Investor is presented in three parts that examine how we got here, the current state of the market and its emerging best practices, and future implications.

      In part 1, “Key Practices and Drivers Underlying Impact Investing,” we describe the development and current state of Collaborative Capitalism and impact investing.

      Chapter 1, “Inside Collaborative Capitalism,” explores some of the big-picture trends driving the shift from incidental to intentional impact, including the use of business approaches in solving social challenges, a growing awareness of environmental and economic sustainability, and demand from a new generation of more responsible consumers and investors.

      Chapter 2, “Raising the Curtain on Impact Investing,” provides a comprehensive overview of this fast-growing market, introducing our twelve funds in detail, their performance, and the market of which they are a part. We also provide a new estimate of the total size of the global impact investing market, drawing on key subsectors, and propose a new method for categorizing impact investing funds.

      In part

3

Webster, B. (2013, December 24). “The Best of 2013: What's Next for Impact Investing? The Value of a Formal Fund Structure to Maximize Impact.” Next Billion. http://www.nextbillion.net/blogpost.aspx?blogid=3159.