Social Impact Investing

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Impact Investments: An emerging asset class Global Research 29 November 2010 investments, it also means that the currency risk is more likely being borne by the recipients of these investments. Microfinance trends indicate that currency risk is increasingly borne by investors While currency risk remains a concern – we address this in more detail in Appendix I: Managing impact investments– the trend toward investments in local currency that has appeared in microfinance highlights that investors are increasingly taking over the currency risk from the microfinance institutions. According to CGAP, the amount of investment into local currency debt by microfinance investment vehicles increased by 54% in 2009, and now accounts for 31% of all outstanding direct debt investments 40 . We anticipate that as the other impact investment sectors mature, a similar trend will emerge. 40 Microfinance Investors Adjust Strategy in Tougher Market Conditions, Xavier Reille, CGAP 2010. 38
Impact Investments: An emerging asset class Global Research 29 November 2010 4. The potential BoP market opportunity Impact investments can benefit different populations: the BoP in emerging countries, as defined by the World Resources Institute; the broader BoP+, including the lowincome populations in developed markets; or the broadest group, which can include those impacted by income-independent factors such as climate change. In this section, we present a new framework for measuring the potential scale of impact investments, in terms of both invested capital required and profitability. Our measures are by no means comprehensive. An attempt to size the entire impact investments market would have made the scope of this research note unmanageable. We have chosen instead to focus only on the BoP segment of the customer base for impact investments and further to analyze only selected businesses within five subsectors: urban housing, water for rural communities, maternal healthcare, primary education, and microfinance. While our measures may be incomplete, they yield impressive results: in housing alone, a total invested capital requirement ranging from $214–$786bn and a potential profit opportunity of $177–$648bn (see Table 6). Table 6: Potential invested capital to fund selected BoP businesses over the next 10 years Sector Potential invested capital required, USD bn Potential profit opportunity, USD bn Housing: Affordable urban housing $214–$786 $177–$648 Water: Clean water for rural communities $5.4–$13 $2.9–$7 Health: Maternal health $0.4–$2 $0.1–$1 Education: Primary education $4.8–$10 $2.6–$11 Financial Services: Microfinance $176 Not measured Source: J.P. Morgan. Our methodology uses a sector-specific case study approach. We start by analyzing a successful business model that we assume can be extended to satisfy the demand of a larger target customer base, determined based on pricing and affordability of the product and an assumed penetration rate that we deem realistic. To arrive at conclusions on potential profitability and invested capital requires us to make a host of other assumptions, including: the timeframe by which a target market can be reached (we assume 10 years), the operating margin for the business and the relationship between invested capital and revenues. A change in any of these assumptions could significantly affect the model outputs. We believe the publication of our prototype framework itself, more than the resulting measures, contributes to a better understanding of the opportunity this emerging asset class presents. Before delving into the details of our methodology and measurements, we discuss below the challenges and opportunities in providing business solutions to the BoP population. 39
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Turning the Improbable Into the Exc
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6. 1 We disseminate Quarterly publi
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23 “His master replied, ‘Well d
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Domini, shareholder advocacy and co
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Two good things came out this resea
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Fund Azzad Ethical Mid Cap Fund Bri
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Fund Fund A Praxis Growth Index Fun
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development in the US, or are made
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concern, and submitting and voting
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sustain land trusts, to a meeting o
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that are often excluded from market
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Some organisations that have used S
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it helps identify the critical sour
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and shareholder trust through posit
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Approaches Some commentators have i
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Wieland and Handfield (2013) sugges
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EthicalQuote (CEQ) tracks reputatio
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Displaying commitment to CSR is one
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Brand Differentiation CSR can help
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takes health and safety, diversity
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advance with the practice of CSR wh
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Stakeholder Influence One motivatio
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Regulation Fifteen European Union c
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jurisdictions. E.g., some jurisdict
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"Impact investments can be made in
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venture capital community. Investor
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countries via local intermediaries.
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determining views of affected commu
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Another measure of economic impact
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The Board for the CCEG was to inclu
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17 Love Relationship Online dating
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Social Value Act 2012 legislation.
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Development released a report outli
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Benefits and Costs of Social Impact
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UK On 18 March 2010, Secretary of S
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US Massachusetts: The second of two
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US Federal: The U.S. Department of
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would establish a five-year pilot p
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We are dedicated to finding ways to
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In the past, public monies have oft
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indicate that more Americans want t
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Youth" to "Opportunity Youth" in or
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income must file a Form 990. The fo
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In its first three years, SIF has a
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The Office of Social Innovation pri
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of Management at UCLA; and launched
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Notes _____________________________
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Investing for Impact Case Studies A
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Contents What is Impact Investment?
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What is Impact Investment? Impact I
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A case study approach in an asset a
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Segments of Impact Investors High T
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Foundations Like high net worth ind
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in the developed and the developing
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By creating mechanisms through whic
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Asset Allocation Framework Asset cl
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Cash Shorebank Deposit Program fina
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Mezzanine/Quasi Equity Instruments
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Venture Capital Bridges Ventures CD
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Real Estate JP Morgan Urban Renaiss
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absolute return (hedge funds) BelAi
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senior debt Root Capital Impact Fir
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Venture Capital Aavishkaar Impact F
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eal estate Ignia Impact First Inves
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senior debt Root Capital Layered St
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The New York City Acquisition Fund
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Appendix Methodology The Investing
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Websites •• Bridges Ventures: h
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Cash Quasi Equity Public Equity Buy
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SOCIAL IMPACT INVESTMENT: BUILDING
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Page 287 and 288: SOCIAL IMPACT INVESTMENT: BUILDING
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Impact Investments: An emerging ass
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Advocacy Foundation Publishers The
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XVI for Drug-Free Communities Landm
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Vol. VIII 2022 ComeUnity ReEngineer
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Vol. XV 2029 Inner-Cities Revitaliz
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The e-Advocate Journal of Theologic
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Issue Title Quarterly Vol. I 2015 I
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The e-Advocate Juvenile Justice Rep
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2018 - The Theological Law Firm Aca
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About The Author John C (Jack) John
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