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Tides Impact Investing Field Scan - 2011

Tides Impact Investing Field Scan - 2011

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Published by Tides
This memo provides an overview of the field of Impact Investing, highlighting several key sub-sectors and roles that different organizations and companies fulfill within this evolving landscape.
This memo provides an overview of the field of Impact Investing, highlighting several key sub-sectors and roles that different organizations and companies fulfill within this evolving landscape.

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Published by: Tides on Aug 24, 2011
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12/05/2012

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Impact Investing Field Scan
Landscape Overview and Group Profiles
July 2011
 
 
Introduction to Impact Investing
Impact investing
uses profit-seeking investments to generate societal and environmental goodin addition to financial returns. The impact investing market sits at the nexus of philanthropy andcapital markets. It provides grant-makers and philanthropic institutions the opportunity to gobeyond contributions, memberships and grants, leveraging investment assets to further social-change and social-justice missions.As impact investors, these individuals and institutions make investments in social enterpriseentrepreneurs and social enterprises: mission-driven organizations that apply market-basedstrategies to achieve a social purpose. The social enterprise movement includes both non-profits that use business models to pursue their mission and for-profits whose primary purposesare to deliver positive change (jobs, micro-loans, positive environmental impacts, etc.).Impact investing is a distinct type of socially responsible investing that starts with a differentpremise than past “SRI” investment models. The SRI market has traditionally used either (1) a“negative screen” to filter out investments in companies that create societal harm (e.g. refusal toinclude tobacco companies in an investment portfolio) or (2) a shareholder activism model toattempt to positively influence corporate behavior.Impact investing starts in a different place: instead of a “do-no-harm” model, it uses a “do good”model that seeks investment opportunities that create societal benefits in addition to financialreturn.
 
For the purposes of this overview, “negative screening” strategies are considered
finance-first
vehicles because their first goal is financial return, while impact investments arereferred to as
impact-first
opportunities and strategies.
Purpose and Methodology
This memo provides an overview of the field, highlighting several key sub-sectors and roles thatdifferent organizations and companies fulfill within this evolving landscape. Example groups arebriefly profiled within this memo to demonstrate different models and types of engagement inimpact investing. This piece also provides working definitions of key terms (highlightedthroughout the text in boldface type), the goal of which is to develop a common language foruse within Tides.The memo is based on a field scan of more than 30 leading groups in the field of impactinvesting -- from investment-product providers to philanthropic institutions and membershipassociations. This is a small percentage of the total number of groups in this industry, but ourpurpose is to provide a framework for assessing potential partnership opportunities for Tides,not to create a comprehensive snapshot of the field.The field scan is appended. Data for these profiles was compiled through publicly availablesources including websites, research reports, brochures, forms and membership affiliationprofiles, where available. The scan was conducted from July 11 - July 18, 2011.
 
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Convening Roles in Impact Investing
Impact investing is a growing marketplace of tens of billions of dollars. A 2008 Monitor Institutereport, “Investing for Social and Environmental Impact,” estimates that the impact market couldtop $500B by 2018. Comparatively, this would be nearly double the amount of current annualphilanthropic giving in the U.S.To help create this marketplace, a handful of foundations -- led by the Rockefeller Foundation --have incubated and funded a variety of
convening groups
to create, support and evaluate thefield. Convening groups tend to serve one or more of three purposes:
Define the landscape
of impact investing by studying its developments, creating andstandardizing investment and/or reporting metrics;
Support social-enterprise entrepreneurs
by providing
technical assistance (“T.A.”)
tohelp manage and launch their business and connect them to investors; and
Support investors and institutions
by researching developments in the field, vetting andproviding their members/constituents with information about investment opportunities.Several organizations provide leadership in these areas, and further information is provided forseveral of them in the appendix. A subset is profiled here as examples of key actors with whomTides may be able to partner.
> PROFILE: THE GLOBAL IMPACT INVESTING NETWORK (GIIN) -- LANDSCAPE DEFINITION
The GIIN is a 501c(3) public charity operating under the fiscal sponsorship of RockefellerPhilanthropy Advisors. The GIIN developed the Impact Reporting and Investment Standards(IRIS) Guidelines to serve as “a common social and environmental vocabulary” that can beused by social enterprise and investors to evaluate impact returns. Organizations that adoptthe IRIS definitions for their impact reporting can contribute data to the GIIN, which willproduce industry-wide benchmarks and support related analysis. While IRIS and other workfrom the GIIN is meant to be used by the general public, the organization’s primaryconstituency is its Investors Council, designed for investors with significant capital alreadyinvested with a clear social or environmental impact. Members range from major privatefoundations (Gates, W.K. Kellogg, Annie E. Casey) to multi-national financial servicescorporations (e.g. Citi, Deutsche Bank, TIAA-CREF).
> PROFILE: INVESTORS CIRCLE (IC) -- CONVENER + T.A. FOR INVESTORS
IC is a marketplace of investments. The non-profit organization supports a membershipnetwork of “150 angel investors, professional venture capitalists, foundations and familyoffices.” The organization, now merging with the SJF Institute (which convenes and providesT.A. to social enterprises), solicits prospectuses from early-stage enterprises. IC invitesselected organizations to present to the IC network at in-person and virtual Venture Fairs.
Philanthropic Roles in Impact Investing
More specific to the arena of foundation investment strategy is
mission-related investing(MRI)
, the practice of aligning a foundation’s asset investments with its mission. Manyfoundations rely on finance-first SRI vehicles to achieve
market-rate returns
(that is, financialreturns that are at least equivalent to the returns of the market as a whole) while avoidinginvesting money at cross-purposes to their philanthropic missions.

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