Diana Hollmann

Recap: Impact Investing Forum 2010

Last week, London was the venue for the Impact Investing Forum 2010. The two-day agenda covered a range of topics including the role of different stakeholders in the space, case studies from a variety of sectors, and infrastructure initiatives for the impact investing space.

The conference counted 40 to 50 participants, one of whom commented: “It’s small, but this size is actually great to connect to people.” The participants’ drive to connect and network became quite apparent after each coffee and lunch break. The conference team almost had to drag participants away from each other and back into the conference room to make sure the Forum stayed close to schedule.

Roger Frank, creator of i3 Advisors, made the opening and gave a quick introduction to the major challenges of impact investing ranging from attracting adequate finance to establishing a legal and regulatory framework that would facilitate investments. With regards to the diversity of vocabulary used in the space, Roger commented that you sometimes feel like in the movie L.A. Story where everyone essentially just orders coffee saying: “I’ll have a decaf coffee.” “I’ll have a decaf espresso.” “I’ll have a double decaf cappuccino.” “Give me decaffeinated coffee ice cream.” “I’ll have a half double decaffeinated half-caf, with a twist of lemon.”

Several discussions revolved around initiatives that have the potential to create an environment more conducive to efficient impact investing and for the sector to pick up further momentum. Tim Radjy of Zurich-based AlphaMundi commented on the results from its recent Impact Finance industry survey. The survey report provides an overview of the impact finance landscape based on the responses of 63 mainly European organizations. The survey found the missing middle appears to apply to impact investing. There appears to be a wide gulf between industry pioneers with assets exceeding $100 million (USD) and recent market entrants with assets of $20 million or less. Less than a quarter of respondents reported assets in-between, according to the survey. Most invested “directly into impact enterprises, while a good third already invest through funds.” Although fewer than half of those surveyed chose to disclose their actual financial performance for 2009, the average was greater than a net annualized return of 5%, the survey notes.

Tim also mentioned that the government of Luxembourg works on creating a legal and policy framework aimed at facilitating impact finance. Already for next year, steps towards the implementation of tax incentives, the provision of seed investments and further accelerative activities are in the pipeline. Also, PWC recently published a short paper on “How impact investing could become the next big opportunity for the Luxembourg financial industry.”

A concept that was received with great interest was presented by Emily Bolton of Social Finance. The Social Finance Impact Bond is an innovative investment vehicle that channels money to early prevention schemes tackling societal challenges. The public sector commits to pay a proportion of savings that result from early intervention activities to reward investors that fund these prevention initiatives. The idea is to make more funds available for prevention, while creating an incentive for prevention activities to be more effective as better outcomes ultimately will result in higher repayments from the public sector to the investor. Social Finance recently started a pilot aimed at reducing reoffending rates of former inmates.

A number of European impact investing funds with different backgrounds presented their strategies and perspectives. Among the UK-focused investors were Bridges Ventures, a London-based impact investor that manages venture funds, a sustainable property fund and a social entrepreneur fund; and Big Issue Invest, a fund from social entrepreneurs (grew out of The Big Issue) for social entrepreneurs. Simon Merchant, CEO of London-based Jacana, presented its approach of partnering with and developing local venture capital fund managers in emerging markets. Instead of directly investing in African SMEs from Europe (“that would be silly”) Jacana invests in the management company and the fund helping to develop local capacity while providing access to finance. Kenyan InReturn is Jacana’s first local partner.

Mark Campanale, advisor to Halloran Philanthropies and founder of the Social Stock Exchange Ltd., presented the concept for a marketplace that will connect for-profit social purpose businesses with impact investors. The marketplace, namely the Social Stock Exchange, will enable businesses to access the mission-driven capital they need. Investors will have a platform to identify and trade investments and individuals will gain easy access to social investment schemes. Moreover, by being registered as a Recognized Investment Exchange (an exchange recognized by the UK Financial Services Authority) also institutional investors will be able to invest in these businesses. Working on securing the necessary funding to establish the Social Stock Exchange, Mark hopes to see it launched already next year. A number of companies have already signed up to be listed.

Speaker from outside of Europe included Vineet Rai from India-based Aavishkaar and Beth Richardson from GIIRS amongst many others. It was great to see participants from a variety of backgrounds and regions coming together here in Europe to discuss current issues, initiatives and ideas. The Impact Investing Forum helped to connect those already active in the impact investing arena and those interested in doing more, laying a basis for further conversation and joint initiatives. Should this conference evolve to become an annual event, more focused sessions with more in-depth discussions will contribute to advancing the field even more also in Europe.