Building an Innovative Platform for Social Capital Markets
10 January 2011

Disclaimer: The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

$500 Billion Potential Market
Investment Philanthropy

Global Managed Assets: $53Tn Environmental, Social and Governance Focus: $20Tn Socially Responsible Investing : $7Tn

Impact Investing: $500Bn

Philanthropy: $310Bn


BCG asset management industry survey (July 2010) United Nations Principles for Responsible Investment Monitor Institute: Investing for Social and Environmental Impact (2009)

Impact Forum for Social Change

But is it achievable?


Deman d

Impact Investment Market

Impact Forum for Social Change

Supply of Impact Investment Capital: US Retail

U.S. Retail Market Study  $120 billion potential today  ~50% of Americans interested in Impact Investing  Minimal cannibalization of charitable donations (~10%)  Increased investing activity after first impact investment
Source: Hope Consulting (2010)

Impact Forum for Social Change

Case Study of a Microfinance Fund Manager

responsAbility’s growth in asset under management
900 800

USD in Millions



Global Microfinance Fund is Launched

Second Microfinance Fund is Launched

200 100




2006 Year




Impact Forum for Social Change

$0.5 Trillion

Impact Investors Triple Bottom Line Investors

Impact Investing Landscape
Foundations Insurance Cos UHNWIs Broad Range of Institutions Other Individual Investors
Social Venture Capital Funds Microfinance Investment Vehicles

Private Loans and Private Equity Investments

Publicly Traded Shares and Bonds
Invest through

Mutual Funds

Impact Forum for Social Change

Impact Investment Exchange Asia (IIX)

Creating platforms to facilitate capital raising by Social Enterprises

The Mission
To provide a liquid and transparent market where: Social Enterprises can raise capital for expansion to scale their social and environmental impact - and Impact Investors can achieve both financial and social / environmental returns
Impact Forum for Social Change

South Asia // Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, India Sri Lanka

East Asia // China, Hong Kong, Japan, Korea, Mongolia, Taiwan
Bangladesh Thailand


Southeast Asia // Brunei, Cambodia, East Timor, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam


Pacific // Australia, Fiji, Kiribati, Marshall Islands, Micronesia, Nauru, New Zealand, Palau, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu
Impact Forum for Social Change

Two Platforms to Connect SEs and IIs

Impact Partners

Impact Exchange

What: A private marketplace
where selected Impact Investors will be introduced to carefully screened Social Enterprise investment opportunities

What: A stock exchange where
Impact Investors can invest in and trade shares and bonds issued by Social Enterprises in a liquid and transparent environment

 

Target investors: Social Venture
Funds and UHNWIs

 

Target investors: Institutions and
Accredited Investors

Target companies: Established
Asian SEs seeking private venture funding

Target companies: Well
established Asian SEs seeking access to broader pools of funding

Transaction structure: privately
negotiated investments by 1 or a small number of investors

Transaction structure: Private
placements to a broad group of investors; secondary trading and quotation on an established exchange platform

Impact Forum for Social Change

IIX Launch Phases
Social Enterprise Capital Absorption Ability



Impact Partners

Impact Exchange

Social Enterprises

Venture Funding ready • Limited funding history • Market entry for Social Venture Funds (SVFs)
Accountants, lawyers, specialized financial advisors

Private market ready • Significant funding history • Exit strategy for SVFs • Market entry for Institutions, HNWIs
Investment bank involvement

Impact Investors

Ecosystem Players

Impact Capital Raised Launch Date: Impact Forum for Social Change

$ 250K +
Q 1 - 2011

$ 5 M onwards
Q 1 – 2012

What Securities Will IIX List?

Limited to Social Enterprises

Primary mission to create positive social or environmental impact

Shares (for-profit social enterprises)
 

Public offerings at valuations that reflect both economic and social/environmental values of the enterprise Investors receive financial return through dividends (and potentially capital appreciation) plus social/environmental returns

Bonds (for-profit and not-for-profit social enterprises)
 

Bonds issued by for-profit SEs pay interest and principal from earned income Bonds may also be issued by not-for-profit SEs with income streams that provide a repayment source Investors will receive an financial return through receipt of interest and eventual return of their principal plus social/environmental returns

Impact Forum for Social Change

Listing Criteria and Investor Eligibility

Listing Criteria for Social Enterprises
  

Both financial AND Social/Environmental Impact Financial performance, disclosure and corporate governance criteria appropriate for growth companies Supplemented by social / environmental criteria that will limit listing to social enterprises

Eligibility Criteria for Investors

Institutional investors and high-net worth individuals from around the world Self-selected group of Impact Investors interested in triplebottom-line returns

Impact Forum for Social Change

Why Not List on a Traditional Exchange?

How the SE will be received by the market
 

Unfamiliar business models Suspicion of social mission Lack of investor alignment Limited impact reporting Pressure to pursue financial returns at the expense of social impact Exchange rules that enshrine shareholder primacy

Whether the social mission will be preserved

  

Impact Forum for Social Change

Next Steps

Launching Impact Partners Building a pipeline of market-ready SEs Creating complete local and regional ‘eco systems’

Inviting Impact Investors to begin investing
Completing regulatory requirements and launching Impact Exchange
Impact Forum for Social Change

Thank you
www.asiaiix.com info@asiaiix.com

…Capital Markets for Social Good

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