Archive for the ‘Editorials’ Category

Where The Glass Ceiling Is Already Smashed

September 16th, 2016

A SOCAP Guest Post By Monique Villa

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There is a growing sector where women are rising to the top, smashing through the glass ceiling as never before, and transforming the world with big ideas.

It’s called social entrepreneurship and it’s disrupting the traditional status quo, fostering innovation and developing sustainable business ideas to solve the world’s most pressing social problems.

From training rats to detect landmines, to offering micro-lending to Indian farmers, these entrepreneurs see success not just through financial returns, but also in terms of social impact. The ultimate business goal? To set up successful companies that improve the lives of underserved and marginalized communities. It’s not just about the balance sheet, but it’s not charity either.

A Thomson Reuters Foundation poll, conducted in partnership with Deutsche Bank, UnLtd, and the Global Social Entrepreneurship Network (GSEN) shows that women are embracing social entrepreneurship, especially across Asia.

According to our survey, 68 per cent of those polled across the world’s 44 biggest economies said women were well-represented in management roles within the industry. The Philippines ranked first as the country where women were most active in the sector, while Malaysia, China, Hong Kong, Indonesia and Thailand took five of the other top ten slots.

Women like Ajaita Shah, who set up an organization that sells and distributes products like solar lamps and smokeless stoves to households in rural India. Here, endemic poverty has kept investors at bay.

With her company, Frontier Markets, Ajaita has reached 40,000 households in Rajasthan, and is on track to provide over 10 million products to 30 million households in India by 2016.

Ajaita is not a charity worker, she is a business woman. As her business grows, the living standards of hundreds of marginalized low-income communities are lifted.

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The rise of female social entrepreneurs is also witnessed across the UK. Here, 40 per cent of social enterprises are led by women, compared with just over nine per cent of FTSE 100 companies. In addition, 84 percent of social ventures have at least one woman on the leadership team.

Why are women excelling in this field? Those we surveyed pointed out that social entrepreneurship is a level playing field for women: gender bias has almost disappeared when it comes to using enterprise for social good. Others mentioned compassion, a strong desire to impact people’s lives rather than focusing solely on profit.

Statistics seem to support this argument. One in particular motivated me to ensure women’s rights were core to the Foundation’s work. It was when I heard that women reinvest 90 percent of what they earn back into their families, according to the World Bank. Women build solid networks with their communities and as a result their families are wealthier and healthier. They are the ultimate economic accelerators, so it’s not surprising that the social enterprise model is so appealing to them.

The sector is clearly gaining momentum: 85 per cent of the experts we polled describe growth as fast, and a recent report by JP Morgan and Global Impact Investing Network (GIIN) expects social entrepreneurship worldwide to receive a cash injection of almost $18 billion in 2016.

But there’s a big challenge ahead: funders, governments and the general public still see this fast growing sector as charitable work. In the words of one of the experts we polled: ‘just mentioning the word ‘social’ makes investors deaf, dumb and blind’.

It’s clear that this is an incredible loss of potential. At a time when the world faces unprecedented challenges we can only benefit from the courage and the ideas of these change-makers. Just imagine what could be achieved if they were encouraged to tackle global issues such as climate change or the refugee crisis. Now more than ever society at large needs a different point of view; social entrepreneurs might just be our best answer.

Monique Villa is CEO of the Thomson Reuters Foundation

For the full results of the survey, visit www.poll2016.trust.org

Investing to End Food Waste

September 16th, 2016

A SOCAP Guest Post By Maura Dilley

Over 200 million dollars are lost to food waste every year. Spoiled, unwanted, imperfect food that businesses pay to grow, package, transport, refrigerate and throw-away uneaten.

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American agriculturalists are shifting paradigms from paying to manage waste to saving money eliminating waste such as developing “co-products” and circular products from material that was once fodder landfill.

If over 200 million dollars are lost to food waste, how much money might there be to gain from plugging the leak? Investors are beginning to look into new products lines, technology, supply chain transparency and data analysis to help unlock a brave new food market.  

“Investors need to think about where and how capital can unlock more capital” says Sarah Vared of MissionPoint Partners. This means making strategic, and sometime out-of-industry, moves to clear the path and gain access to big wins for returns and circular food systems.

Wasted food is wasted money. Wasting food also has a devastating impact on communities and the environment. Growers and pickers are exposed to chemical fertilizers and pesticides that also pollutes water for food that isn’t eaten. Uneaten food is transported across the country and world, emitting greenhouse gases along the way. The social and environmental returns of ending food waste are just now being calculated but seem significant.

Herein lies a challenge for investing in an optimal food system. Someone puts the money in and society gets the value back, where can business put money in and get money back? Vared says, “Incentives and credits from government can help out a lot here. There’s also a huge need for a full spectrum approach meaning philanthropic and business capital to come in together and unlock the market.”

Transparency through Technology and Data

Food waste defies common sense: how can America waste so much and still suffer from food insecurity? What do you mean apples cores won’t compost in landfills? Food waste is such a humdinger that John Oliver famously covered it in an episode of Last Week Tonight.

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Gaining visibility into where and why food is wasted helps to plan interventions and investments. But the food supply chain is gnarly and we can’t fix what we can’t see.

Platforms that provide transparency and communication between suppliers and buyers will empower as-needed harvesting. Data analytics to better understand market needs and make smarter in decisions will also reduce waste.

Technology that allows for supply chain transparency from procurement to disposal, even in the same company, will also greatly reduce waste. Think: no more unnecessary processing and packaging; no more over-ordering for fear of under-ordering.

The Closed Loop Fund is a corporate 100 million dollar social impact fund powered by companies such as Wal-Mart and dedicated to increasing recycling in products and packaging. Closed Loop thinks about where capital invested in waste reduction can unlock more capital. They’ve discovered that 2/3 of the cost in processing food for recycling (composting) is transporting food to and from processing plants.

Food investors are considering all the different pieces of the system and pain-points to progress, including out-of-industry investments like transportation. Targeting an investment in transportation may unlock economy of scale for food recycling and make a new valuable market.

Seeing, then Increasing Value

Other new markets for waste are co-products and circular products.

Andrew Falcon suggest going with the highest value when redirecting food waste. “Consider food waste from a grocery store, best value is feeding humans, then animals, then composting – which is green but low value, an anaerobic digester – another form of disposal or make a product, like bioplastic”

Falcon’s company Full Cycle Bioplastics captures methane off-gassing from food waste, feeds it to microbes who inturn produce PHA (polyhydroxyalkanoates), a compostable bioplastic made from renewable resources.  Falcon admits, “Bioplastic from waste is somewhat of a pessimistic technology. It’d be better if we had efficient systems and policy that eliminated waste at the source then we can make products from excess waste.”  

To create value from waste you need a product that is more valuable than the waste. Counting the cost of disposal, processing and transportation of food that’s wasted is a great head start on a co-products price point.

A co-product is the highest and best use of a resource that would otherwise be trashed. POM Wonderful, pomegranate juice mongers, uses leftover ingredients from juice as components for co-products like nutritional supplements and cosmetics. Products that start as co-products could rise to meet, or eclipse, the price point value of their parents. Spent grain from breweries can be baked into flour and then into a snack bar. With the proper systems in place, excess produce could become dehydrated produce and jams.

“Waste is a hot potato,” says Falcon, because currently components of waste aren’t linked together. Technology and transparency could enable nodes along the supply chain to talk, negotiate, optimize and eliminate waste.

md_headshotMaura Dilley is a systems-change strategist, writer and designer working at the intersection of ocean health and social enterprise. She is program director at Impact Alpha’s Financing Fish.

SOCAP16 And Beyond: A Community of Parts and Whole

September 14th, 2016

By Jed Emerson

As the SOCAP community gathers for its 9th convening, one can’t help but step back to reflect upon the journey we’ve been on over these recent years.

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Personally, I’ve been active in the world of impact investing, sustainable finance and effective philanthropy for nearly 30 years and, of course, have been participating in the SOCAP gathering for most of its life. Looking back, I remember in the aftermath of the 2008 financial crisis, we saw an influx of folks new to the community, coming to us from failed Wall Street firms as well as from lives wherein folks found that at the age of 25 or 35 or 50 they sought to do more than either good or well. However we got here, we all gather around the notion of purpose driven capital, of bringing your whole self to one’s work and of leveraging all our available assets for impact. (Okay—some of us are still working on that last one, but we’re getting there!).

My point is that we have always been a gathering of mainstream rejects and new market opportunists, visionary capitalists and 21st Century socialists. We have been a gathering of social entrepreneurs, asset owners, fund managers, thought leaders and focused practitioners. Early on, I made the observation that SOCAP was where Wall Street met Burning Man. We are, indeed, a fairly unique gathering of the Tribes. And we should celebrate that!

Those of you who know me, know my own journey has never been one of purely professional career development, but rather a set of unfolding personal passions. I’ve gone from peer tutor in Spanish Harlem, to youth development in Denver’s 5-Points and San Franciscio’s Tenderloin neighborhoods and, finally, to nearly two decades of work in various aspects of what we now call impact investing. I know each one of you in this room can tell the same story of engagement in a life of impact. I tell you where I’ve been in order to affirm the reality that each of our journeys is diverse, changing and dynamic. If we are lucky and born into the right set of circumstances, our lives unfold in many ways and from many perspectives over the years. Who I was at fifteen or twenty-five or forty-five is not who I am today—yet each of those identities is in me today; each contributes to and rolls into the person who stands before you this morning.

Just as individuals are the sum of the parts of their lives, communities are also made up of everything they have been, the parts they are right now and the possibilities they hold for the future. Our communities of impact are dynamic and evolving; they look different based upon where you stand as you engage with them. You see them differently based upon the lens through which you see their emergent realities.

SOCAP16, as one such community, is itself increasingly diverse, dynamic and emerging.

And this is an understanding of community I have had to personally re-engage with. At the close of SOCAP15, I was left with very mixed feelings. One the one hand, it was great to see that however you want to define “going mainstream” our ideas and practices (viewed in diverse ways and brought to market through various practices) had, in fact, gone mainstream! We had Goldman Sachs, Bain, BlackRock and a host of other institutional actors here, contributing and engaging with this community; and here as a new part of this community. We had Tideline, Confluence, Nexus and a host of other smaller firms and larger networks engaging with us, advancing their perspectives and promoting their visions. And of course, we had the passion and commitment of hundreds of social entrepreneurs giving witness to their strategies and the challenges of creating the impact organizations not only of today, but of tomorrow. It was both great and disillusioning all at the same time!

It was great, because one could not help but feel we—as an increasingly diverse set of actors promoting a very nontraditional understanding of capital—had arrived!

And it was disillusioning in that it was also clear we are, as a community, still coming to grips with many fundamental questions with regard to who we are, what we believe and how best to be positioned to move forward to capture the possibilities before us.

I was disappointed to see how much of the SOCAP15 conversation focused upon strategy and tactics—the “how” of impact investing (how to structure funds, how to measure impact, how to raise capital) when I firmly believe if many of our members spent more time connecting with the “why,” with cultivating a deeper understanding of the fundamental purpose of capital, we would find questions regarding the “how” of impact investing easier to navigate. This question of why, of the purpose of capital is a much deeper, historic conversation than we have time to explore today—and is the focus of much of my current work—but the answer to this question of purpose is itself embedded within how we understand the place and structure of our current—and evolving—community.

As I have reflected upon SOCAP15 over these past months and have then also observed some of the subsequent discussions taking place in the broader impact community with regard to justice, equity and impact, I’ve come to realize what I know many of you see as well, and that is this:

As we move to scale our impact and continue to embrace the ongoing mainstreaming of our vision and practices, we need to create a truly big tent that may simultaneously hold all our various parts while also ensuring we’re all a part of the same gathering and overall movement committed to impact, equity and the effective deployment of diverse types of capital in pursuit of multiple returns.

Let me be clear—what stands before us is not a challenge of accommodation, compromise and mediocrity. We, as individuals, each need one another if we are to achieve our specific goals. It is the diverse perspectives and slightly differing goals of our constituent parts that will make for the creation of a more fully diverse and rich impact ecosystem within which we may all thrive and grow as we pursue our own understanding of what that vision of impact and value creation should look like.

It is in this way we are simultaneously a community of parts and Whole.

I am not without my own perspectives with regard to how we should think about the nature of impact and purpose of capital. I have built my life, reputation and career upon being known for calling bullshit and speaking to what I understand to be the “truth”! And I have certainly come to my own beliefs and perspectives with a good deal of passion, experience and vision.

Yet I am also committed to a vision of the Whole for the same reason I do not despise the Jed I was in the past for not being the Jed I am today—I as an individual and we as a community, need to allow ourselves the room to simply “be” as we are in turn moving through the process of our “becoming.”

I say all this in part because I’ve observed and felt a degree of tension within our community as it has evolved over recent years. At times I’ve heard some in our community call for a new level of intolerance with regard to impact—an intolerance more appropriate to a Trump campaign rally than a gathering of change makers! Indeed, I have myself been referred to as being “an Impact Taliban” in light of the passion I bring to the promotion of my own beliefs!

I’ve heard some say there is no place for moderates in our community and one is either enraged by injustice and willing to fight back as a part of the impact investing community or one is part of the problem. I’ve also heard some say there is only one way to define the nature of the financial and impact returns we should pursue, and that if you don’t embrace their definition you are somehow not part of the real impact community. I’ve heard still others say our challenge is simply proving the case one may generate “competitive” financial returns with impact—however deep or lite—and that anything short of that makes our work irrelevant.

And so, as we begin another gathering of the Tribes here at SOCAP16, I would ask you to keep some of the following thoughts in mind:

First, we, as a community, are so much more than the sum of our parts. We are rich in our views and should seek to be increasingly diverse in terms of our membership and perspective. It is only by cultivating, growing and engaging with that diversity that we will be a stronger community in the future.

Second, as we spend the coming days comparing our experiences and emerging best practices, let us not become so lost in the weeds of our own execution of strategy and capital deployment that we lose sight of the larger meadow and growing field of which we are a part. We must always remember our work in managing capital is simply a means to the end of bringing greater justice and impact to a world that sorely needs both. As we work to improve our various skills and practices, we should do so within the context of our using equity to advance greater equity(1)—not simply to build our individual firm, market or career.

Third, for some there seems to be a sense we should define our answers in advance of fully and deeply moving through our questions and actual experience of engaging in the work at hand. We seek the perfect strategy, the perfect integration of financial returns and impact, the perfect definition of measurement and performance, and the perfect framing to attract the perfect investor group—and we then array ourselves to defend that perceived perfection to our peers. I would submit the answers we seek will best evolve as we cultivate a deeper understanding of the questions before us and not simply rush to promote our given set of answers. In the course of our work, we need to leave space for a more complex and nuanced understanding of impact and the purpose of capital to emerge.

Finally, as you move through the presentations and conversations to come, both here at SOCAP16 and at home in the months ahead, I remind us there is a unique and critical urgency to our getting on with the order of the day. Black men, women and children continue to be murdered in their own communities, going about their daily lives, driving cars and playing in front yards. Women around the world continue to be objects of abuse, trafficking and economic injustice. Animals and diverse species on our planet whose interests are wrongly deemed subservient to Homo Sapiens are in some cases directly exploited through industrial farming and in other cases increasingly tipping toward permanent extinction as a result not of natural processes but of the economic, cultural and related systems we have put in place and with which we dominate our world.

Discussion, reflection and learning are critical parts of our process. Yet, I would remind us they are simply that—parts of a process…

A process of engaging in economic and social activism; mobilizing resources and capital for communities, firms and entrepreneurs who historically have not had access to the resources they need; and a process of bringing into reality a shared commitment to advancing work that, in our lifetimes, will create deep impact upon the diverse and many human and other communities existing on this planet.

As we celebrate our diversity of perspectives and practice, let us get on with the process of working together to change our world!

Jed Emerson at Union Station in Denver.

Jed Emerson at Union Station in Denver.

Jed Emerson is Senior Impact Strategist for ImpactAssets. He is a leading strategic advisor to asset owners, as well as an impact investing leader and author. A version of this talk will be given in an opening address at SOCAP16 as well as published as a blog on September 14, 2016.

 

 

 

 

 


Sources:

  1. I’m indebted to Lucy Bernholz and Lisa Richter, who I paraphrase and who first used that phrase in 2009 as part of their great research paper by the same name!

Leadership for Glocal Impact: Key Insights and Related SOCAP Sessions

September 14th, 2016

A SOCAP Guest Post By Arjanna van der Plas

What strategies can be employed to address the complex nature of social and environmental challenges on a local and global level? And how do we design systemic solutions inspired by the greatest future possibilities, rather than define them by the past?

Questions like these fascinate every ambitious social entrepreneur. But we hardly take the time to ponder on the answers. SOCAP and the events that are organized around this conference give us the opportunity to dive into these big themes, and learn from science and practice.

On Monday September 12, Nordic Impact Week (former Nordics Go SOCAP) kicked off with an international dialogue on Leadership for Glocal Impact at Saybrook University, hosted by the Institute for Evolutionary Leadership in partnership with researchers from the Melbourne Business School Asia Pacific Social Impact Centre, who presented their groundbreaking research on business models for social impact in a hands-on workshop. Other notable partners of the event included Global Chamber San Francisco, Bay Bucks Cooperative, the NorCal Community Resilience Network, and China Social Innovation Forum.

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Key Insights from Leadership for Glocal Impact organizer Fyodor Ovchinnikov, co-founder of the Institute for Evolutionary Leadership

“When we deal with complexity, we tend to take our own perspective on the situation as the norm. No wonder that we cherish our own solutions, and try to find excuses for why these solutions have limited or even negative impact,” Ovchinnikov explains. “In our daily life we rarely take the time to map our stakeholders, let alone to closely study the relationships between them and the value that is generated and exchanged in our network. When people are challenged to do a mapping exercise like we did at the event, they suddenly realize that there are many critical things they do not know. This is uncomfortable, especially when they think that they have the solution already.”

arjanna_2“It is a very common pitfall to resist the mapping phase, to dismiss it as being a waste of time. This attitude undermines our capacity for innovation, collaboration, and collective action that can be effective in addressing the complex issues we face on local and global level. Therefore we should always remember to suspend our judgement, let go of attachments to pre-existing solutions and emotions these attachments generate, be comfortable with not knowing the right answer, and listen to others to get a better sense of what is going on. And, on top of that, we need to always remember that solving complex problems takes time. A lot of it. As well as hard work that by its nature involves ambiguity, frustration, and clashes of limiting beliefs, egos, and structures. It is an art and science to navigate the change gracefully and skillfully, resisting the temptation to avoid this hard work and retreat to what we already know and do best.”

“This blind spot that I just described shows up quite strongly in social entrepreneurship. It is common for social entrepreneurs to focus on product or service that in their opinion would help address the social or environmental issue as they understand it, and to think that if only they figure out the product-market fit, this will inevitably create significant positive social impact. This conventional laser-focus mentality makes many change makers to either think that mapping the stakeholders and analyzing relationships among them is not important, or assume that they already have sufficient understanding of the social system they are trying to fix. Usually neither of these assumptions is true.”

“As confirmed by recent research conducted by our partners from Melbourne Business School, social impact critically depends on the arrangement of value exchange among multiple actors (including businesses, government institutions & NGOs) and not so much on specific value generated by one particular actor. Think about this: if you are serious about making a real positive difference for people and the planet, in most cases it is not enough to develop a product or service that addresses the symptoms and is well received by the market. As my esteemed colleague and co-organizer Dr. Chris Dembek puts it, exclusive focus on product-market fit makes social entrepreneurs “half blind”, and they end up simply making some money from unconsciously reinforcing more of what is exactly the root cause of the complex problem they claim to address.

I hope that for many participants of our pilot #glocalimpact16 event these insights will serve as a springboard for a deep and honest inquiry that can take their social innovation endeavors to the next level.”

Feel free to send your questions for Fyodor Ovchinnikov at f.ovchinnikov@evleadinstitute.com.

Five SOCAP Sessions on Leadership for Glocal Impact Not to be Missed

Would you like to learn more about Leadership for Glocal Impact in action? Check out these five SOCAP sessions!

What Will It Take to Solve Climate Change? Broad Challenges and Innovative Solutions

Wednesday  September 14, 10:45 AM – 11:45 AM, in Gallery 308

Ready to solve climate change? Where do we begin? Let’s look at the problem at the macro level and evaluate all the tools we have to address it, with an emphasis on the role of innovation and impact investing and the opportunities out there to get involved. This panel will bring together entrepreneurs, investors, and thought leaders to discuss the myriad opportunities that exist for joining the struggle against climate change.

Building Healthy Communities through Investments in Local Economic Strategies

Wednesday September 14, 12:00 PM – 1:00 PM, at the Southside Theater

Over the past several decades, studies have shown that up to 80% of human health is determined by social factors such as income, housing quality, and education, rather than just by the availability or quality of medical care. In response, investments are now being directed toward prevention at the community level and new strategic alliances are emerging. From the national to neighborhood level, we’ll explore new drivers and tactics for investing in population health.

Food Climate Collaborative in Action

Thursday September 15, 11:00 AM – 12:00 PM, in C235

Food manufacturers, retailers, distributors, and suppliers are leveraging the collective power of the natural foods industry and teaming up to take bold action to reverse climate change. OSC2, in partnership with natural foods industry leaders, is developing a networked approach to inspire action and recognize businesses doing the right thing. Learn how sustainable food leaders are deepening their commitments, expanding partnerships, and sharing best practices.

A Story of Unreasonable Collaboration

Friday September 16, 8:30 AM – 9:30 AM, at the Festival Mainstage

The most radical innovation and impactful change often happens at the convergence of sectors, perspectives, and industries. With 325 years of history and expertise in banking, Barclays has recently engaged with Acumen and Unreasonable Group to pioneer new models of partnership. Join this panel of unlikely collaborators to learn how they are working together to unleash the power of entrepreneurship to create jobs, build a greener economy and develop new opportunities for inclusive business.

Best of Cities: How to Teach All Businesses in Your City about Impact

Friday September 16,  11:00 AM – 12:00 PM, in the  BATS! Theater

Is it possible to have every business in a city learn how to solve locally entrenched issues? Yes! NYC started a citywide program to teach all businesses – not just those that drank their Kool Aid – how to create high quality jobs, strengthen communities, and preserve the environment. In the first 6 months, more than 1,300 companies participated, reaching 63,000 workers. Come hear lessons learned from NYC, and also Pittsburgh and New Orleans about how they are doing the same.

 

arjanna-at-lowlandsArjanna van der Plas is a social impact focused author, yoga teacher and workshop facilitator. She currently spends most of her time in San Francisco’s Tenderloin neighborhood, teaching yoga and meditation at the Healing Well, and writing a book and blog series called Stories Behind The Fog together with the Free Range Puppies. With Stories Behind The Fog she wants to challenge the single-minded view of homelessness by rendering its entire spectrum, one story at a time.

Before Arjanna moved to San Francisco, she was communications manager for the Amsterdam based sustainability startup Circle Economy. Prior to that, she was a lecturer at the TU Delft, innovator at TNO (the largest independent research organization in the Netherlands) and freelance science journalist. Arjanna holds two MSc. degrees from the TU Delft, one in Industrial Design Engineering and one in Science Communications. Follow her on Medium, Linkedin, and Twitter.

Impact Unicorns: Can We Have Our Cake and Eat It Too?

September 9th, 2016

A SOCAP Guest Post by Fran Seegull

The term “unicorn” was coined by Aileen Lee of Cowboy Ventures to describe private companies that have achieved a post-money valuation of $1 billion or more. Originally, these companies were scarce, magical and elusive. As of August 31, 2016, according the CrunchBase Unicorn Leaderboards, there are now 191 unicorns.

In my impact investing practice at ImpactAssets and in the graduate class I teach at USC’s Marshall School of Business, I have adapted the phrase. I describe an “impact unicorn” as a company that is positioned to achieve a market rate of financial return AND high levels of impact. Population growth, income inequality, climate change and other social and environmental factors are shaping our world. The private sector has a major role to play (and returns to make) in ameliorating these intractable challenges by investing in ventures that are consistent with our values. Indeed, impact unicorns achieve strong financial returns because of, not in spite of, their impact theses.

The impact investing field has often used the Monitor Institute framework of “impact first” and “financial first” to categorize the investment orientation of companies and funds. While a bit reductive, this framework has persisted since its introduction in 2009. According to it, investments that seek to maximize impact with a financial floor are called “impact first.” Those that seek to maximize financial impact with an impact floor are deemed “financial first.” Implied by this framework is a tradeoff between financial and impact returns. Recent studies from Cambridge Associates, GIIN and the Wharton School of Business indicate that impact-focused venture capital investments can achieve market rate returns. But, what about the measurement of their impact returns? Can investors have their cake (financial returns) and eat it, too (impact returns)?  

Let’s take a look at this framework and determine where Impact Unicorns may fit in a 2×2 matrix. Impact first and financial first as described above are in the upper left and lower right quadrants, respectively, implying a tradeoff. In the lower left quadrant, we have deals with suboptimal financial and impact returns—an investor wouldn’t make these types of investments. In the upper right quadrant, we have those investments that achieve risk-adjusted rates of financial returns and strong social and environmental impact. These are the so-called “Impact Unicorns.”

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Over the last five years, as Chief Investment Officer of ImpactAssets, I have had the opportunity to see the impact investing field grow substantially. Many investment funds and impact ventures over time have delivered a very strong combination of financial and impact returns. In building a private debt and equity platform for ImpactAssets, we have largely, but not exclusively, added funds that invest in impact unicorns. These include funds from firms such as Better Ventures, Core Innovation Capital, Elevar Equity, MicroVest, Sarona and SJF Ventures. To bring the impact unicorn to life, let’s explore some examples.

Elevar Equity, from their third venture capital fund, invested in Varthana, an affordable private school finance company in India. Only 260 million of the 400 million school-aged children in India are enrolled in school. Neighborhood private schools are cropping up, but they need growth capital to scale–this is the gap filled by Varthana. Today, Varthana has improved over 2,000 schools, impacting over 800,000 students, exemplifying Elevar’s approach to “human centric venture capital.” While there hasn’t been a realized exit to date, the company has received further financing rounds at increased valuations.

An impact unicorn that has already seen an exit is NexTracker. This company, a DBL Partners venture investee, makes solar tracker systems, serving clients in Asia, Europe, and North and South America. NexTracker sold to Flextronix for $330 million just 21 months after the company’s founding and DBL’s investment.  To date, the company has created 4.8GW of solar energy through its projects, offset 1,226,121 tons of CO2 emissions, powered 920,629 homes and planted 2,465,756 trees.(1)

A portfolio company of Core Innovation Capital is Oportun, which uses alternative credit scoring methodologies to reveal the debt worthiness of those unserved or underserved by the traditional banking sector. As of June 30, 2016, Oportun has deployed $2.6 billion in loans to over 770,000 people, mostly to low-to moderate-income clients. The company has received over $265M of equity funding through lead venture capital investors such as Charles River Ventures and Madrone Capital Partners.(2) Last year, the Wall Street Journal suggested that the firm could be worth close to $1B should it pursue an IPO.(3)

While these are strong impact unicorn examples, the truth is many times as investors we can’t have our cake and eat it too. There may be some investments focused on high impact geographies (emerging and frontier markets), certain investment stages (seed- and early-stage entrepreneurs in the “Pioneer Gap”) and specific constituencies (folks at the bottom of the pyramid) that require a tradeoff in financial returns. Maybe these impact enterprises need grant capital at inception or perhaps they require concessionary funding to de-risk them to a point where more commercial rate capital can be attracted. And it must be said that impact unicorn enterprises aren’t unequivocally better than, say, impact-first ventures. But they do indeed fly in the face of the financial tradeoff debate.

Please join us at SOCAP on Wednesday, September 14, at 10:45am where we will discuss: “Impact Unicorns:  Can We Have Our Cake and Eat It Too?”

Find all of the SOCAP16 sessions Fran Seegull is participating in on Pathable. She tweets on impact investing @franseegull.

fran-seegullFran Seegull is Chief Investment Officer and Managing Director at ImpactAssets—a non-profit investment firm seeking to increase the flow of capital to impact investing. She oversees firm product development and heads investment management for The Giving Fund—an impact investing donor advised fund. Seegull is Adjunct Professor at the Lloyd Greif Center for Entrepreneurial Studies and Senior Fellow at the Brittingham Social Enterprise Lab, both at USC’s Marshall School of Business. She serves on the board of the Barbara Lee Family Foundation and the Investment Committee of the Goldhirsh Foundation and served on the G7 Social Impact Investment Task Force Working Group on Asset Allocation. She tweets on impact investing at @franseegull.

 


Article Sources:

  1. “NEXTracker Company Profile.” NEXTracker. https://www.nextracker.com/company/.
  2. “Oportun: About Us.” Oportun. http://www.oportun.com/about-progreso/.
  3. Demos, Telis. “Hispanic Community Lender Oportun Planning 2015 IPO.” Markets. The Wall Street Journal, 24 Apr. 2015. Web. http://www.wsj.com/articles/hispanic-community-lender-oportun-planning-2015-ipo-1429910554.