Bringing impact to investment

Social Entrepreneurship Forum, Riga

11 November 2014
Rodney Schwartz
CEO, ClearlySo
rod.schwartz@clearlyso.com

Setting the Scene on Impact Investing:

What drives investors?

Objectives for today

Introduce myself
Provide a background to these developments
Offer some thoughts on this thing we call social or impact investment
Provide some examples of these wide-ranging enterprises
Explore different investor types and what they are looking for
Briefly explain what ClearlySo does

HAVE I MISSED ANYTHING???

Caveats and my own hidden agendas

Combine practical experience with theory and ClearlySo activities
with what we see elsewhere
Predominantly a UK oriented view, for the most partalthough
informed by experience elsewhere
My own interestsall things spring from the personal
Would be delighted to entice one of you into becoming an active in
this areaI am NOT objective!

My own career
trajectory

Social economy approach

within the context of other models

A sustainability crisis..our traditional view

There is a broader Western

sustainability crisis

Unsustainable systems
Environmental

Financial
Institutional
Familial/personal
Unjust societies
Unsuccessful economies

Widespread
signs of social
unrest

The old models/systems for fixing things do not work

(and how we do things is not divinely decreed!):
The government model

1. Government (tax and spend)

Not awful, but:

Short term oriented

Costly to citizens
Frequently lacking democratic support
Officials often seen as incompetent, corrupt or both
They are like parents in a dysfunctional family

The old models/systems for fixing

things do not work:
The charity model

2. Charity
More connected, but:
Ineffective at times
Inefficientas so much resource is spent on money raising
Becoming less sustainable in the current fiscal climate

The old models/systems for

fixing things do not work:
The business model

3. Business
Effective & Efficient, but:
Unbalanced in terms of objectives
Generates substantial negative externalities
Proven to be less sustainable then we thought
Heavily subsidized by the state

A new enterprise and investment model:

What are the key components?

Two views of the same basic

ideaaccording to most

By type of
organisation

By type of
investment

grant
making

programme
related
investments

mission
resonant
investments

positively
screened
assets

negatively
screened
assets
(SRI funds)

fully
commercial
assets

Things we say

High-impact

Transformative
Disruptive
Impact-centred

Impact-focused
Extraordinary

3D investing

entrepreneurs
businesses
investors
funds

Risk, return and impact

Third dimension

Externalities

Things we dont say

Social
business
enterprise
investing
entrepreneur
The sector

Corporate business and social

business
Impact as an asset class

And what is social anyway?

These entrepreneurs DO possess some constraints,

but also certain competitive advantages
Legitimacy/moral authority
Access to free labour
Ability to sell products at higher prices
Readier access to publicity

Access to below market-rate capital due to major changes in the

investment environment!
The interplay of below market rate capital
and intentional social impacts is what
creates the conditions for new
possibilities in finance

The world of investment in the 1980s

Risk

Return

Today: 3D Investing
Risk

Return

Some examples

Its not always a sacrifice - there is no

impact see-saw

Sometimes they are early stage

growth ventures

but what drives investors?

Types of investors

Governmental (single country)

MFI
Institutional
Award givers
Individual investors

Governmental (single country)

investors
Direct investment funds

Australia - SEDIF

UK Futurebuilders, NESTA, UnLtd

Domestic market-building funds

Germany KFW

UK Big Society Capital

International development funds

SDC, Sida, CDC, USAID, etc.

Multinational Financial Institutions

UN SEED initiative
European Investment Fund (plus the EIB)
IFC (studying impact investment)

Institutional Investors
Impact investment funds (e.g. Acumen, Social Venture Fund, Bridges
Ventures, LGT Venture Philanthropy)

Renewal Partners. (50 year strategy/500 year intention Carole Newell)

Fund managers (e.g. AXA Investment Managers)

Banks and financial firms (e.g. Deutsche Bank)
Pension funds and life insurers (e.g. Waltham Forest)
Foundations (e.g. Kellogg, Esmee Fairbairn, Bertelsmann)
Housing associations

Award givers

Skoll
Schwab

Global Social Venture Competition

SEIF (Switzerland)

Individual Investors
HNWIs
Family offices

Private banks
IFAs
Retail funds (e.g. Threadneedle/Big Issue)
Crowdfunding and community share issues

Justgiving, Kiva, Kickstarter, CrowdCube

And where does their money

actually come from?

From you and me!

What drives investors?

Governmental (single country)
MFI

Institutional
Award givers
Individuals

And what does ClearlySo actually do?

Entrepreneurs

Entrepreneurs

Investors

Entrepreneurs

Investors

Thank you
Rodney Schwartz
CEO, ClearlySo

Email: rod@clearlyso.com
Twitter: @rodneyschwartz
Skype: rodneyschwartz
Website and blog: www.clearlyso.com
Telephone: +44(0)20 7490 9524

ClearlySo Ltd is an appointed representative of Catalyst Fund Management & Research Ltd which is authorised and regulated by the Financial Conduct Authority (No.185678).