On
October 23rd I gave a presentation on Social
entrepreneurs and or Europe for Society Impact Platform.
It is an initiative of the Dutch Ministry of the Interior to support
innovative financing for social entrepreneurs.
Here
you find the long version of my presentation with additional (mainly
Dutch) data and developments. The short version will be posted on the Society
Impact Platform website for further discussion together
with the discussion and comments and the presentations by Jane
Newark founder &
director of Social Finance
UK. Socialfinance
They run the Social Impact Bonds in the UK and are setting up an
European SIB network. You wil find many publications on the website.
A summary of aims and funding of present SIB's in
Dutch is posted on
IINieuws
page/impact-investing-in-social-impact-bonds
Second
speaker was Ulrich
Grabenwarter the
Head of Strategic
Development-Equity at the European Investment Fund of the European
Investment Bank.
Institute.eib
He is at present building up a new business line dedicated to Social
and Impact Investing. Grabenwarter is also author of In
search of Gamma: an unconventional perspective on impact investing
with
Heinrich
Liechtenstein for IESE Business School at the University of Navarra,
Spain and the Family Office Circle Foundation based on experiences of
60 impact investors. Report: Papers.ssrn.com
Summary in Dutch under Academia een afwijkende visie op II in
IINieuws
15sept2013
You
can contact me for speaking engagements, further publications and
information on impact investing at impactinvestmentnews @ yahoo.com
CONTENT
Social
entrepreneurs in Europe & the Netherlands
Overview
The
market
The
origin of impact investing
Metrics
Data
on Impact Investing in Europe & the Netherlands
SRI
and Impact Investing
HNWI
and Impact Investing
Venture
Philanthropy in Europe
Charities
in the Netherlands
Private
Equity in the Netherlands
Crowdfunding
in the Netherlands
Social
entrepreneurs in Europe and the Netherlands
Overview
The
UK, Switzerland and Luxemburg
Europe
is an interesting place for social entrepreneurs seeking funding
especially the UK, Switzerland and Luxemburg with their big financial
markets. They excel in specific area's: the UK with Big Society Bank
/ Capital and charity and Social Impact Bonds. The Boston Consulting
Groep expects +600% or 1billion UK £
investments in social finance in 2016 in this favorable investment
climate*. Switzerland houses pioneering impact investing funds (but
reports only 2,4 billion Euro in impact investments in 2012). The
Luxemburg stock exchange lists public equity impact investment
opportunities such as UK charity and vaccine bonds. *BCG/The
first Billion (pdf)
The
Netherlands
In
the Netherlands we have pretty unique sustainable banks: small, but
specialized and with decades of experience: Triodos and ASN Bank. But
there are also bigger financial players and asset managers such as
Robeco which offers a range of sustainable investment Funds through
its partnership with Swiss SAM: Sustainable Asset Management. And
there is SNS Bank Impact Investment Asset Management for
institutional investors and the very wealthy wanting to invest in
poor people in developing countries.
One
of our big banks, ABNAMRO Bank, was once named the most
sustainable bank in the world by the Financial Times. ABNAMRO
Mees Pierson has worked with Triodos Bank for years for it's private
Banking clients and sustainability research. ABNAMRO recently started
it's own social impact fund, which by the way is not open to their
clients. It is started just to get the feel of running such a fund
investing growth capital in Dutch social enterprises. This is especially interesting as in the Netherlands impact investing was mostly focused on investment in developing countries.
So
what actually is Impact investing?
It
is investing in profit making businesses which have a social and or
environmental benefit. Because the business makes a profit, the
company can invest in scaling up and investors get their money and a
profit which they can also re-invest to scale up the business. And
with that it's social and or environmental impact as well. Note that
the profit should be related to the risk and the specific market the
business operates in such as for instance agriculture, emerging
markets etc.
Impact
investing: to good to be true?
It
does sound like that doesn't it? So there is a lot of interest in
impact investing, it's marketing has been called brilliant.
Practically all Dutch banks i.e. asset managers claim they can assist
their clients with impact investing. But they really mean their
private banking and institutional clients.
Van
Lanschot Bank promoted it seriously in it Millionaires report last
year and a Dutch (VBDO*) report on charities and asset management
showed they have great interest to invest with impact as a way to
achieve their mission. It would upgrade their sustainable asset
management policies from merely excluding the dark side** and focus
on seeking the best investment opportunities supporting their
mission.
*
Vereniging voor Beleggers van Duurzame Ontwikkeling ** AGTAF
Companies active in Alcohol, Gambling, Tobacco, Adult Entertainment
(Pornography) and Firearms)
THE
MARKET
Impact
investing is still boutique investing
The
impact investing market is considered still in its infancy by the
players: it is a niche investment market. Boutiques, exclusive
specialized investing firms and BIG banks such as JP Morgan Social
Finance and in Europe Deutsche bank are promoting it. The main
concern, even complaint, is that there are to few deals especially
with a decent track record and of substantial size. That is a size of
a half a million or a million+ investment and preferably bigger. The
deal size is very important because it has to make up for their
considerable start-up fees for due diligence research and the extra
work, researching the -specific and often new markets- and the impact
claims of the investment deal. One
of our biggest (pension) investment management organizations PGGM
claims it goes for a slightly higher more profit to make up for the
extra costs).
These
impact claims are to be backed up by an impact measurement system,
-preferably- a widely accepted impact metrics system or standard.
That allows for benchmarking its impact results within an investors
portfolio.
Guestimate
for the Impact investment market
This
growth investment, big deal, impact metrics impact investment market
is guestimated to grow from 50 billion to 500 billion in 10 years. Or
1% of the global asset management market. This is what the -now
deceased- Monitor Institute reported back in the end of 2009. It
would double the worldwide .0 and become 6% of present Sustainable
Responsible Investing market. This accentuating that they are not
interchangeable and that impact investing is a specific kind of
Sustainable Responsible Investing. More recent
guestimates state the worldwide potential is 1 trillion US$.
JP
Morgan and the Global Impact Investors Network collected data on
Impact investing from their members and clients and they paint an
interesting picture. 2/3 is debt, lending and not ownership. The
investments aims at social causes such as the billion poorest people
on Earth, the Bottom or Base of the Pyramid defined by JK Pralahad,
it focusses on agriculture to fight hunger, expanding Microfinance
(which is included) by evolving into financial inclusion but also
basic needs such as clean water, hygiëne healthcare and
education. In the US the focus is on community development and social
housing. Note
that Green and clean energy, lowering or ending Carbondioxide
emissons and cleantech innovations are excluded though they clearly
have a measurable impact.
THE
ORIGINS OF IMPACT INVESTING
So
where does the big size thinking and US focus in impact investing
come from? Impact
investing as a marketing term was invented on a conference by large
charities, foundations, thinktanks and consultancies working for the
greater
-often global- good. There were wealthy prosperous charities with
large assets and experience with professional asset management. Also
High Net Worth Investors are big investors in impact investing, often
young innovative entrepreneurs
that found themselves incredibly rich overnight, and want to extend
their game changing talents into the world of global deficits and
opportunities.
A lot of the credit
however goes to a centenarian, founded in 1913, the Rockefeller
Foundation and its policy advisors championed sustainable investing,
Programme Related Investment (a US fiscal instrument) and has had an
Impact Investing Action Programme since 2009. It started the Global
Impact Investing Network*, an elite investors club and The Gates
Foundation came on board once it became aware it's asset portfolio
companies where creating a lot of the harm is was trying to solve
with it's health programmes...
With the Rockefellers
100 year history of philanthropy and 3 billion US$ in assets, it
realized that charities and governments are just not able to solve
the problems of the world. Especially not in the face of a population
explosion, growing consumption and ecological pressures and possible
domino effects.
The
fact that there is growing demand, but an inability to meet the
worlds demands points at another origin of the idea of impact
investing: failing markets.
If there is enough food (now) to feed the earth why cant we get to
the billion hungry people? and so prevent death, disease, growth
distortion, poor results in education and many more negative long
term effects. If we have a cheap cure for something as simple as
diarrhea why do 700.000 children die every year? If we have the
vaccines why can't we prevent unneccesary infant mortality? Actually
we are doing pretty well here: since it is possible to invest in
vaccine bonds financing vaccine programma's all over the world child
mortality is decreasing sharply. It may surprise you to learn that
Japanese retail (smaller private) investors are behind this succes.
And
of course we all know the big success of microfinance,
now
a 75 billion US$ market of which by the way the Netherlands as a
pioneer
holds 2 billion or 8% market share of the international microfinance
market of 25 billion US$. It took 30 years and lots of subsidizing,
but it now reaches over a hundred million poorer people in developing
countries. This sizeable market inspires micro mortgage, micro
insurance etc. Sell a lot of it at low prices and you find yourself
leapfrogging
forward to financial and social security.
* The GIIN has a Dutch
European liaison, Harry Hummels prof at UniMaastricht and director of
SNS Impact Investment, it has 6 Dutch members, all major impact
investors, and about 20 Dutch networkmembers which is a light form of
the GIIN membership.
Enter
impact investing
Impact
Investing shows that if we can get private profit seeking capital
involved in solving the worlds problems, we do not only get
the-sky-is-the-limit
moneywise, we also get business
practice involved.
Business practice as in running a financially sustainable
organization that grows and becomes independent. Maybe even goes
public and enters the stock market we have a couple of impact
investing funds gone public. Quite the opposite of Governments and
philanthropy giving their money away expecting results, maybe even
some income, but basically just spending their money and when it is
finished or the Programme finishes activities probably will wither
away. This happens more than you may realize, because their agenda's
are governed by their own finances, the quantity and quality of
tackled problems, effective lobbying and the desire AND need to be
innovative.... Business practice on the other hand claims efficiency,
effectiveness, fast response ability and vitality as
it is always competing in a rapidly changing market environment.
Investment
rules rule
But
the same sense of business practice rules the investment scene which
says you DO NOT invest in a
start up, but only in a proven successful business model of a company
with an excellent track record and great management team. This
explains why the preferred deal size is half a million or a million
plus. Impact investors (advisors) as most of the investment sector
want to invest GROWTH capital, not research & development phase,
marketing research, seed or start up capital or growing a nano
size business into a micro
business. Adopting a micro sustainable company as an impact
investment by large companies is quite popular and 'nice' according
to Dr Maximillian Martin but not very effective. I agree, although a
forming marketeer I must also admit it is effective impact
washing.
METRICS
So
what is a social entrepreneur to do?
Especially
when looking for capital and the business (plan) is still in one of
these early phases....? Claiming to be sustainable or a social
enterprise doesn't cut it anymore these days.
I'd
start with getting an impact measurement standard
included in the business idea or plan. It gives you an advantage idea
of what is considered impact as you are also competing with other
aspiring social entrepreneurs promising beneficial effects or impact.
IRIS
& GIIRS
A
system preferred by the impact investing elite and BIG finance is
available online and it is FREE, including some quite intimidating
example investments and a new guide on how to work with it. It is
called IRIS it is
quite elaborate, but you can focus on a set of most relevant key
performance indicators stating your impact claim. Such as job
opportunities, income effect, people reached etc.
My guess is that any
prospect investor will be quite impressed. And if they have
experience with IRIS I hope they limit the impact data demands.
Newcomers might get a bit to enthusiastic and ask for additional
data. That should be part of the investment deal negotiations. If
they cannot truly effectively use the data that you are required to
submit is it just extra work for them and you. Time and energy which
you cannot put into the social enterprise. Now that can't be a good
thing.....
IRIS
or Impact
Reporting Investment Standard is
a quite elaborate instrument, developed
by accountants
and supported by the Global Impact I-investing Network theGIIN.org.
IRIS is still under construction, theGIIN just announced IRIS 3.0
consultations. IRIS is also the basis for GIIRS
the Global Impact Investing Rating System
www.giirs.org which is a
benchmark based on IRIS for impact investors such as Morningstar
is for public equity. It makes it possible to compare impact results
in the way investors can compare financial results. (2012
Q4: 1,1 billion US$ in GIIRS data base, but no new data released in
2013. It recently merged with B Lab. B Lab is a US fiscal facility
for social enterprises)
If
you approach a known impact investor you might expect that they will
want to compare your impact results to other social enterprises in
their portfolio.
BUT
I
know of only one Dutch social enterprise in the GIIRS system and they
are not eager to share their knowledge, so limit the time and energy
you put into this for now. This is of course disappointing.
Another
metrics system on the GIIRS website is the Small
Growing Business Impact Assessment
and Impact
Measurement Curriculum
to upgrade it. It was developed by the Aspen Network for Development
(ANDE) whose aim it is to support social enterprises in developing
countries.
UK
Style
If
you find the American metrics IRIS & GIIRS or ANDE's impact
assessment unappealing check out the UK's charity matrix or the
recently launched SocialStockExchange.
Here
publicly traded small cap companies assessed
by the stock exchange present
themselves with impact reports.
I
agree with Jed Emerson, the blended value guru who states that impact
investing as a investment style is not exclusively for private
equity, but can be applied to public equity as well. More:
Impact
Assets issue brief 1:
An
Introduction to a Unified Investment Strategy for Impact Impact
Assets. Jed
Emerson et al. (Pdf) ImpactAssets
IssueBrief1
Dutch Summary in IINieuws-15okt12
Charity metrics
When
looking for grants, loans or guarantees from charities and non
profits: work they often work with their own impact measurement
system. Karen Maas found over 30 (American) metrics systems in her
thesis 'Corporate
Social Performance From Output Measurement to Impact Measurement'.
(EUR
2009). Note that some of these metrcis systems were developed for /
by company foundations as part of their Corporate Social
Responsability activities.
In
the Netherelands the Centraal Bureau Fondsenwerving recently
published an overview of impact measurement systems for charities. I
hope it will stimulate a practice which allows for benchmarking
impact results in the Dutch charity sector.
More
in Dutch in IINieuws-15juli13
Also
the Transparantprijs,
a transparency prize for Dutch charities, pays special attention to
impact reporting. For social entrepreneurs: if you are looking for
start-up grants or additional capital from charities, explore their
impact measurement ideas and try to incorporate those in your
business pland and funding proposal.
DATA
on Impact Investing in Europe and the Netherlands
What
do we know about Impact Investing in Europe?
Unfortunately
theGIIN has not published a separate data set on Impact Investing in
Europe, only worldwide, and their data is quite US market oriented
67% is in the US, 51% notional or monetary. Western Europe gets 1% of
the number and notional impact investments in the 2012 survey. Dutch
GIIN members participated in the survey.
Earlier
this month the GIIN organized a conference on impact investing in
London, so they do look East,
not just South or within. It also has two European liaisons one in
the UK and one in the Netherlands, prof Harry Hummels of SNS Impact
Investing Asset management.
Exclusively European data
The
European data we have is mainly collected by Eurosif, the European
sustainable investment organization. They survey Socially Responsible
Investing and investments by High Net Worth Investors.
Sustainable
investing in Europe amounts to 6,763 Trillion Euro. As in the
Netherlands it is dominated by institutional investors: they have 94%
market share, with a preference for bonds (51%) stocks (33%) and
hedge funds and venture capital. In their 2012 survey Eurosif also
asked about impact investments next to: Best-in-Class, ethical
investing, exclusion, ESG screening and Engagement.
Eurosif
asked about: Microfinance, Social Business en Community
investments. It amounts to 8,75 billion Euro. Personally I think
is is a low guestimate considering Dutch Institutional investors
(pensionfunds and insurance companies) alone claim al least this
amount in impact investments. I'll research their reported impact
investments one of these days.
Eurosif
reported on Microfinance 55%,
Social Business 18%,
Community investments 19% and
other 8%.
Unfortunately the data is not specified by country or included in the
country profiles. Motivations are supporting
sustainable development or
Local Community Development, long term returns,
Risk management, return opportunities, an alternative for
philanthropy, sharing wealth and lastly: an obligation to clients or
fiduciary reasons.
Impact
investors in Europe
It
may be a minor reason, but those fiduciary clients include High
Net Worth Individuals (HNWI),
billionaires, and they seem
to embrace impact investing. Half of them have impact investments
next to their cleantech and renewable energy investments. More than
half of High Net Worth Individuals invest
in microfinance and they expect to increase their allocation. HNWI
now prefer to invest in microfinance with 43%, community investing
20% en social enterprises 33%. These were also the focus areas in the
survey. Remember the billionaires in this survey were advised by
professional asset managers and thus
choose good investment deals.
Policy
Luckily
the EU is promoting
impact investment opportunities through its policies for the internal
market and liberalizing the market for starting up investment
funds. The focus is on Venture Capital for innovative SME's (Small
Medium Sized Enterprises) start ups en social businesses. The SME
fund is called EuVECA
and the Social Business fonds EuSEF.
If you have a fund in 1 EU country you can start a fund in all the EU
countries.
European
Venture Philanthropy
An
other interesting trend is with European Venture Philanthropy, it's
Association (EVPA) recently published data of 60 or 60% of their
members. Many Venture Philanthropy Foundations have just been
launched and
joined EVPA. The respondents have invested 1,4 billion Euro, on
average 5,2 million Euro in 2011. Which is up 27%
from
the 4,1 million the year before. Impact is their primary goal, but
now half of them also expect financial return
(its up from 38% to 48%).
And a
quarter of them feel impact and financial return are equally
important. (was 10%). Social
enterprises are by far the largest group investees with 39%, up from
25%'. This growth is achieved in favor of NGO's and young
enterprises. It shows Venture Philanthropy is serious about risk
assessment.
So
who are these venture philanthropists?
Financial
institutions 20%, followed by with on average little over 15%: trust
funds and foundations, Venture Enterprises, Venture Capital and hedge
funds, private individuals, companies and governments.
Dutch
charities
The
Netherlands is a bigger player in
European Venture Philanthropy, but Dutch
members are however few and they are the well known Dutch charity
impact investors. By the way (Dutch) charities often refer to impact
investing as mission
related investing.
We
have about a dozen Dutch charities that are also impact investors, be
it said that 'trust' or endowment funds are not to keen to share
financial information. This might change January 1st
when they are obliged to offer such information publicly in exchange
for tax facilities. Trust funds are guided by the statutes of the
founder, which can be hundreds of years old, long before impact or
social investing was invented. Note that a business origin or at
present funding by a company, can be a lead for an interest in impact
investing such a community development around their plants and / or
head offices.
For fundraising charities there is a clear reason why they shy away from impact investing: many have statutes that simply do not allow for grants to go to profit making activities. They themselves are barely allowed to undertake profit making activities in-house by our fiscal authority with a maximum of 15.000 Euro.
So impact investing inhibitions are steered towards their asset management. Asset management by charities is often sustainable, but also often exclusion oriented though best-in-class is increasing in importance. Note that we are talking publicly traded equity. A big step forward this year was the launch of a Dutch Exchange Traded Fund (etf) aligned with Dutch charity exclusion policies. The Think Sustainable World etf invests in the 250 most sustainable companies in the world. This perfectly fits fiduciary asset management because etf's offer risk spreading and are usually much cheaper than funds (of funds).
An
impact investing etf is
not around, yet.
But
a proper impact etf would invest in (probably large cap companies)
active in impact
sectors. That
is a long way from -private equity- impact investment in often small
and medium sized social enterprises.
With the big shake
up of the spreading-your-risk-in-investment market, as investment
funds loose their pay back fees funding, there wil be turmoil in the
fund and etf market after January 1st.
It will be interesting to see what will happen the next 6 to 8
months.
AIDA:
Attention Interest Desire, but where's the Action?
Dutch
Charities are very interested in impact investing, but are also
hesitant: waiting for specialized advisors, intermediaries etc. This
according to a survey by the Vereniging Beleggers Duurzame
Ontwikkeling (VBDO), at the end of 2012. But
they also have 23 billion Euro in assets and
according to a European Foundation Centre publication, European
charities in 15 countries had 237 billion Euros in 2008. They could
do much more with their money to achieve their mission than they are
doing right now.
Just imagine if they were to invest 1% of their assets as impact investment.... If Dutch charities would only allocate 1% of their assets to impact investing and preferably their spending budget as well. That would mean millions of funding: a lot for impact investing in the Netherlands. Social entrepreneurs could appeal for start up funding or additional funding from charities, closing the gap in their funding needs.
Traditional asset management implies 'Pissing it away' as Michael Porter, the strategy consultant guru, said about US charities with such asset management 5 years ago. Fortunately with these explicit words he also started a new era in charity asset management.
What
about Private Investors?
It is the same as
drinking fair trade coffee: everybody knows it and likes the idea of
sustainable responsible investing, but few actually do it. In the
Netherlands it is driven 90% by institutional investors -such as our
pension funds and insurance companies. For instance Aegon studied its
Sustainable Responsible Investing portfolio last year and concluded
almost 70% is actually already impact investing. Note that the SRI
portfolio is 3,5 % of its all over assets. It would like to do more
in both SRI and impact investing, such as microfinance in Southern
Europe, but warns that the Basel II demands, limit
their options for impact investing.
Retail investors
Our
retail sustainable investing market maybe marginal moneywise, but it
is 'hot'!
Since the financial crisis, the credit crunch and the Euro crises it
flourishes. It grew again with double digit numbers last year, now
reaching 14 billion Euro's. These investors are small private
investors who invest in a green savings account or a fair trade
investment fund or maybe have a second savings or investment account
at Triodos or ASN bank.
Saving is with 14,2 billion Euro (+15%) much more popular than direct investing (5,7 billion Euro (-3%). It has been shrinking due to the phasing out of fiscal policies that offered deducting sustainable investments from all over assets. The phasing out has been halted by the latest government, but the damage has clearly been done. Research by Paul Smeets from Maastricht University discovered retail clients at asset manager Robeco and Triodos Bank don't really care about fiscal deductibility (anymore).
But on average Dutch High Net Worth Individuals, the over 130.000 millionaires, are less generous: they expect reasonable returns and would like to see more fiscally favorable policies according to a recent ING Bank lobby. Oikocredit, one of the world largest impact investing funds open to the public, with its head offices located in the Netherlands, states it has many small investors and few large retail investors. But it offers only 1,5% fixed return, almost half our annual inflation making it a solid, but not very attractive investment.More interesting for their coupons are European Investment Bank Climate Bonds that go up to 6%. EIB has excellent rating but offers non euro currencies, sometimes their notional issue price is high, trade is dead, and their rate is often over 100% percent the which makes the effective yield lower especially when an investor has to consider the fixed repayment date.
Private Equity impact investing
A
private equity investment
in a social enterprise could just offer a more attractive investment
with impact. It requires knowledge of equity investing
and a higher risk appetite
on behalf of the investor and thus should also promise a reasonable
return That can however be
below the market because of the impact effect if it appeals to the
investors ethics and philanthropy ambitions.
Private Equity, the Major league the Netherlands
According
to the Dutch Association of private equity investors (NVP) they saw a
rising interest from private investors and family offices in private
equity investments in 2012. At that time the private equity market
had invested about 20 billion Euro declining since the crises. In
2012 it's new investments amounted to 1,3 billion Euro (in 289
companies) compared to 2,3 billion in 2011. The drop is due to lack
of major deals, selling acquired private equity or divesting went
down 50% to 841 million. 88% of privaty equity investments went
to Small Medium Sized Enterprises (SME's) with investments below 5
milion
Euro. Over 150
million Euro went to start-ups, Venture Capital grew to 171 million
Euro in 2012 (136 million in 2011). More
in Dutch on: NVP/OndernemendVermogen
(pdf)
Private Equity, the Minor league in the Netherlands
Due
to the credit crunch, informal investing is on the rise and quite
interesting for impact investing as well. Of course there have always
been local and sector investors circles, angel investors and green
investors circles such as 'de Groene Zaak'.
And BIG banks have small enterprise windows such as Qredits for
funding up to 50.000 Euro. It has funded entrepreneurs with over 4000
credit deals. Recently it got an extra 60 million and raised its
funding ceiling to 150.000 Euro.
We also see a growing interest in starting Kredietunies, cooperative credit facilities in regions or sectors. Supported by former bankers it is lobbying for regulation supporting their activities to stimulate credit for small and medium-sized enterprises (SME's). It aims at credits up to 250.000 Euro which are unprofitable for banks, but essential for SME's (growth) ambitions. SME's are our big employers with 60% of the jobs and a catalyst for employment growth: impact. Fortunately CDA Parliamentarians took an interest supporting such initiatives and are preparing a legislation proposal. More in Dutch on Kredietunienederland
The big initiatives with big names in their boards get business media or national attention, but most private equity investment vehicles are not to keen to share financial data online, let alone have sector survey data available.
Crowdfunding
But
for the crowdfunding business. They love to collect data
and share
it.
The European
crowdfunding sector grew 50% in 2012 and the Dutch crowdfunding
sector grew 560% in 2012. Not lagging, but leading the way.
The Dutch 4 million euro market share of real investing and not just giving money or supporting in exchange for a product or service also grew 560%. On average people invested a couple of hundred euro's, so you do need a crowd and thus a campaign to mobilize a crowd.
The Dutch 4 million euro market share of real investing and not just giving money or supporting in exchange for a product or service also grew 560%. On average people invested a couple of hundred euro's, so you do need a crowd and thus a campaign to mobilize a crowd.
The
crowdfunding sector is developing rapidly from an online giving
platform (75%) to a risk profiled investment place. The former bank
guys offering loans after due diligence acceptance grew fastest.
(www.geldvoorelkaar.nl)
And recently partnerships with credit assessing companies were
announced for crowdfunding for small and medium sized companies, so
risk is becoming a serious aspect in the crowdfunding business as
well. Here in stead of starting with 20euro and on average a couple of hundred euro investments with a maximum of 40.000 euro we are talking a minimum of 10.000 euro investments.
But none of the
crowdfunding platforms have impact investing as a separate category
yet, so social entrepreneurs are still just competing with other
enterprises for funding. Only OnePlanetCrowd claims all their
investing opportunities to be sustainable, but doesn't show impact.
Governments
Last but not least
don't forget that the government is a big investor in social and
environmental causes. Think local, regional or national level.
The city of Amsterdam
just started a energy fund for businesses and the public. State bonds
and the mentioned European Investment Fund climate bonds are
impact investments. In the UK charity bonds are funded for services
and products paid for by the government. Social impact bonds are
completely focused on government tasks and or ambitions.
If social enterprises position themselves as delivering impact results, they might get a subsidy or just a fee for services rendered. That can consequently make them more attractive for investors, if they want to scale up the enterprise or develop new services and products.
All
in all
Is Impact
'Pitching' the smart thing to do?
Are social enterprises
impact investing missionaries when they go out there looking for
funds based on impact investing standards and practices when funding?
Maybe
sometimes: yes
But
positioning themselves as an impact investment offers a respectable
business card from a promising, professionally backed, business
sector in high demand. Direct retail investors have few places to go
and financing institutions servicing retail customers are now
referring to existing sustainable investment products, without
standardized impact reports.
I
think social enterprises should market themselves as impact
investments, but only if impact is incorporated in their business
model. Only if they can show impact results based on standardised
metrics. Maybe than they can even negotiate lower interest or returns
based on higher impact results....
Main
Sources:
The
Monitor Institute 2009 report on Investing
for Social or Environmental impact:
Monitorinstitute/impact-investing/Impact_Investing
(pdf)
European
venture Philanthropy
in
2012-EVPA-survey-of-european-venture-philanthropy-and-social-investment
Download after registering EVPA.eu.com/OnlineEVPA-Survey2012
Press articles on the survey op: EVPA/press-corner
In Dutch Impact-Investing-Nieuws-15-april-2013
EU
promotes social enterpreneurs and SME funds (EuVECA
en EuSEF) In Dutch
Impact-Investing-Nieuws-1april13
Half
European HNWI has Impact Investments
Rapport
Eurosif
HNWI
2012
in
Dutch Impact-Investing-Nieuws-15-nov12
In
Dutch The I-book Een kapitaalinjectie voor het Goede Doel Harald
Machielse (Chuva Consultants) en Alcanne Houtzaager with the
guestimates of the private capital market and charities looking for
private investors in stead of donors. On Impact Investing Nieuws blog
I-book-een-kapitaalinjectie-voor-het
goede
doel or Itunes.apple.com/een-kapitaalinjectie-voor
het goede doel
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