Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
Figure 6: Business sectors for impact investments
Business sectors
Business sectors
Basic needs
• Agriculture
• Water
• Housing
Basic services
• Education
• Health
• Energy
• Financial services
Source: IRIS, J.P. Morgan.
Investors often choose a business sector or an impact objective as primary focus
An impact investor might approach investment decisions by first choosing a business
sector or by first identifying an impact objective. Yara, a global fertilizer company
based in Norway, invests along the agricultural value chain to leverage its existing
core competency, generating impact through agricultural productivity, food security
and reduced emissions from the production of fertilizers. A foundation dedicated to
mitigating climate change might use this impact objective as its primary investment
criterion, making cross-business sector investments in renewable energy, green real
estate or sustainable agriculture. We list the full categorization of social and
environmental impact objectives in Table 2, as outlined by the IRIS 11 .
Table 2: Breaking out impact objectives in more detail
Increase incomes and assets for the poor
(from IRIS’s social impact objectives)
Improve basic welfare for people in need
(from IRIS’s social impact objectives)
Mitigate climate change
(from IRIS’s environmental impact objectives)
Employment generation Conflict resolution Biodiversity conservation
Access to energy Disease-specific prevention and mitigation Energy and fuel efficiency
Access to financial services Access to clean water Natural resources conservation
Access to education Affordable housing Pollution prevention and waste management
Income/productivity growth Food security Sustainable energy
Agricultural productivity Generate funds for charitable giving Sustainable land use
Capacity-building Health improvement Water resources management
Community development
Equality and empowerment
Source: IRIS. As defined at iris.thegiin.org.
Impact can be delivered through processes or products
Businesses can pursue the objectives above by many means, and investors can
reference these means of impact in designing an investment thesis. In Figure 7, we
outline some examples of ways in which companies deliver social impact, which we
categorize into processes or products. Within processes, for example, a company
might make part of its mission hiring employees from a traditionally
underrepresented group, or employing people that had previously been unemployed.
Alternatively, a coffee processor might source its cocoa beans specifically from BoP
suppliers, with the intent that engaging them in a production supply chain will
improve their incomes (or stability of income). Within products, a company
producing solar lamps, for example, might deliver its social impact by providing
affordable access to light for people who currently lack access to electricity grids.
Targeting BoP consumers can be considered an implicit part of the products method
of impact.
11 These impact objectives reference over 400 indicators of impact.
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