IRIS Data Brief: Focus on Employment

IRIS is a catalog of generally-accepted performance metrics used to measure an organization’s social, environmental, and financial results. IRIS data briefs provide snapshots of the performance of the diverse organizations contributing data to the IRIS initiative. This issue is the first in a regular series, which will include statistics that present a broad summary of the full data set, as well as a focused set of analyses related to a specific thematic area. This issue’s focus is employment.

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Dasra philanthropy foundation grants $800,000 award to six organizations

MUMBAI: Strategic philanthropy foundation, Dasra, has announced the $800,000 Impact Economy Innovations Fund (IEIF) grant award to six organizations building the ecosystem for impact investing in India.

Launched in January 2013, the IEIF grant, an initiative by Omidyar Network and The Rockefeller Foundation is administered in India by Dasra. The grant aims to build stronger infrastructure for the fast growing impact investing industry in India that can provide scalable and sustainable solutions to help the 600 million people living in poverty in India.

Chosen from a competitive pool of 120 applicants, the winners provide a spectrum of services to social entrepreneurs, investors and other players finding business solutions to India’s massive development problems, according to Dasra.

“If the impact investing industry wants to grow both in depth and scope so as to provide individuals with alternative and innovative financial access, then we need to focus on building the ecosystem to impact the lives of the poor or vulnerable,” said Rehana Nathoo, programme associate, The Rockefeller Foundation.

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In Mexico, investment with a social conscience

Author: Lauren Villagran

MEXICO CITY — It’s all about profit with a purpose.

The latest trend in financing boasts a double or triple bottom line: returns, plus a solution to social or environmental problems.

“Impact investing” is the new buzzword in social development, an unlikely marriage between old-fashioned philanthropy and venture capitalism. The investment model, which considers the social and environmental benefits of a business venture on equal terms with its capacity to deliver return on investment, is being hailed as a way to direct more capital to solving problems in impoverished and marginalized communities.

The emergence of impact investing as a consolidated asset class is a new spin on what socially mindful investors have been doing for years, according to Rodrigo Villar, co-founder and partner in Mexico City-based Adobe Capital, a six-month-old fund dedicated to impact investing. So is the partnership between business and philanthropy.

“Philanthropy realized that to achieve scale, it was necessary to do business,” Villar said. “Many times the problems are so big that philanthropic resources aren’t enough. Some problems can be resolved with business. And the business sector came to the same realization.”

What does a project look like?

FINAE, for example, is a Mexican financial institution set up to provide student loans to low- and middle-income students who want to attend a private university (often because they haven’t gained entry to Mexico’s overcrowded public university system). FINAE, which receives financing from Adobe Capital and the Inter-American Development Bank, works from the admissions offices of 10 major private colleges and offers payment plans at rates around 15 percent — cheap in Mexico for a long-term loan.

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PSU’s Impact program ‘Elevates’ awards finalists

By Andy Giegerich

Portland State University has announced finalists for three awards it’ll bestow during next month’s Elevating Impact Summit.

Hundreds of attendees are expected to hit The Elevating Impact Summit to explore the worlds of impact investing, startups, education and media. Among other offerings, the event features a rapid-fire pitch session at which up-and-coming social entrepreneurs will toss out ideas.

Six business leaders are under consideration for the Impact Entrepreneur Award,

They are Shane Endicott of Our United Villages, Michael “Luni” Libes of Fledge Incubator, Tim O’Brien of Tropical Salvage, Adam Reid of KOREducators Leadership and Entrepreneurship Public High School, Ben West of EcoZoom and Evan Thomas of SWEETSense, Manna Energy and PSU.

Finalists for the Corporate/Nonprofit Impact Intrapreneur Award are Catherine Ellingson of New Avenues for Youth, Mark Holloway of Social Venture Partners Portland, John Haines of Mercy Corps NW, Kazi Huque of Grameen Intel and Meyer Memorial Trust’s Doug Stamm.

The younger set vying for the event’s Student Impact Award are Ahmed Abidine of PSU, Glenda Alfaro of Mt. Hood Community College, Orion Falvey of the University of Oregon and PSU’s Brian Forrester and Simon Ngawhika.

“We established these awards to recognize promising and noted changemakers in our region who are seeking bold ways to make a large and lasting difference,” said Cindy Cooper, co-founder and director of Impact Entrepreneurs.

PSU also announced that Peace First co-founder Eric Dawson will give the event’s keynote address.

Impact Entrepreneurs provides educational programs that provide insight into social impact investing and other strategies.

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‘Day in the sun’ nears for social impact bonds

By Daniel Hunter

2013 will be the year that social impact investing gains critical mass, according to KPMG’s public sector practice, which has produced a guide to Social Impact Bonds. This outlines the tools for assessing their feasibility, from both the investor and commissioner perspective.

The professional services firm is challenging those leading the country’s public bodies to consider Social Impact Bonds for funding innovation in public services that aims to deliver better outcomes than ‘traditional’ government support. Through a payment by results formula a return is provided to the investor, while the ‘interventions’ may be adopted as status quo policy measures.

Such investments are being explored by a number of the country’s more progressive public service providers. Indeed, their profile is rising rapidly now: A new £14m Social Impact Bond Fund launched at the end of April backed by the government’s social investment bank, Big Society Capital, and is its largest signed investment commitment to date. Also, the Prime Minister has indicated that he plans to use the UK’s G8 Presidency to draw attention to impact investing.

“It can be difficult to secure public funds to try out innovative ways of delivering public services,” Caroline Haynes, director in KPMG’s public sector practice, said.

“Governments typically spend money on programmes that have been rigorously tested, evaluated and measured, resulting in public services and social programmes that can remain unchanged for decades.

“Social Impact Bonds have a role to play in local government, the Prison Service and beyond. Preventative action is at their heart, for instance stopping young ex-prisoners from going down a lifetime path causing harm to themselves, their families and communities, thereby saving the state significant sums and improving collective well-being.

“Most have so far focused on social services but the principle could be extended to health. For example a Health Impact Bond for helping people with diabetes to manage their condition, or to support people who drink too much or are overweight to change their lifestyles and so improve their health prognoses.”

KPMG’s guide to Social Impact Bonds discusses a series of factors that the firm advises the increasing numbers of organisations considering impact investment to assess.

They are grouped into four key feasibility criteria:

Policy: A defined target population, measurable outcomes as well as counterfactuals and innovative interventions all need to be available.

Providers: There must be a competitive marketplace of providers capable of both delivering in different ways and making the investment required for a payment by results approach.

Finances: A workable commercial case, encompassing satisfactory cost savings, returns and outcome payments from the perspective of the commissioner, investor and delivery partners respectively, needs to be developed.

Stakeholders: The backing of those who look after the project client base; the carers, teachers, probation officers etc, and the target population themselves will maximise the chance of success.

“I foresee Social Impact Bonds having their day in the sun during the coming months for projects that can meet these criteria and are innovative and demonstrably different,” Caroline Haynes concluded.

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Miami Beach conference focuses on the social return on investment

Sustainatopia’s fourth annual Impact Conference will begin Wednesday, bringing together leaders from 40 countries to focus on social entrepreneurship, philanthropy and impact investing.

The three-day conference, held at the Miami Beach Convention Center’s Hall A, is being put on by Sustainatopia, a Fort Lauderdale-based company that organizes events to promote social, financial and environmental sustainability.

The issues discussed will cover “everything from climate change to how do we eradicate poverty through commerce,” said John Rosser, Sustainatopia’s founder. “Philanthropy plays a role, but we are focused on how do we do good but create jobs, and how do we create a more socially just economy.”

About 500 people are expected to attend the conference, whose goals include promoting economic development within the region by utilizing impact investing and financial, social and environmental sustainability; and establishing Miami as a capital of sustainability for Florida, Latin America and the Caribbean. The agenda also aims to educate private bankers, venture capitalists and angel investors about investment opportunities within impact investing and financial, social & environmental sustainability, Rosser said.

“The real key is to get private enterprise involved in issues of sustainability and have them be a partner,” he said. “We focus a lot on partnerships between private enterprise, governments and philanthropy.”

The conference will include a keynote speech from Melissa Bradley, president of Tides Foundation. Sessions are dedicated to crowdfunding, investing for social impact, empowering women through investment and alternatives to equity investments.

Sustainatopia organizes 40 individual events in film, art, music, eco-fashion, food, design and parties. Most of the events are held in South Florida.

“Our goal is to create the Art Basel for this space,” Rosser said. “Just like Art Basel does it for art, we want to do it for sustainability.”

Read more here: http://www.miamiherald.com/2013/04/16/3348057/miami-beach-conference-focuses.html#storylink=cpy

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Caspian Advisors to set up $40-mn debt fund in India

Hyderabad-based Caspian Advisors has said it would set up a $40-million fund to provide debt capital to a wide range of institutions serving low-income or financially excluded communities.

The investment advisory firm has launched the fund with $10 million of committed investments from the Dutch development financial institution FMO, Triodos Doen and Hivos-Triodos Fund, Gray Ghost Microfinance Fund, Caspian promoters, and local Indian investors. This will be the third fund launched by Caspian, with prior funds totalling $120 million in assets at the funds’ respective closings.

Paul DiLeo, fund manager of Gray Ghost Microfinance Fund, said, “As investors in both Caspian’s previous funds, we are very familiar with the lead role that the team has played in developing the microfinance and impact investing space in India.”

The new fund, Caspian Impact Investments, will initially focus on investing in businesses in the microfinance, small business financing, affordable housing, food, and agriculture sectors. It will collaborate with Dutch NGO Hivos through the ProCif programme, aimed at improving the ability of producer organisations in the food and agriculture sector to access debt capital. In addition, FMO will provide technical assistance to the fund for research and development of the food and agriculture portfolio.

“While there are several funds that are either already investing or looking to invest in impact enterprises in India, most funds today are offshore and focused on equity due to the significant challenges facing non-resident investors providing debt. Caspian Impact Investments offers impact investors and opportunity to reach these social enterprises and extend their impact,” said S Viswanatha Prasad, founder and managing director of Caspian Advisors.

According to Caspian, the current supply of debt to social impact enterprises is scarce in India. The fund will invest in specialised intermediaries that support these impact enterprises and aid social entrepreneurs to scale their businesses without depending entirely on equity capital or debt funding from banks.

“For smaller institutions that are providing microfinance, small business finance, housing finance and agriculture access to debt financing is still limited. By providing these entities with debt, Caspian Impact Investments adds value and creates impact,” said Anneloes Mullink, investment officer at FMO.

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Angel Investors Sacrifice Ownership Stake For Profits

A revenue-based structure for direct investments in small and growing businesses is beginning to gain currency among so-called angel and impact investors.

Revenue-based financing (RBF) is a modern iteration of traditional royalties. Rather than taking a share in the business, investors receive a share of a company’s revenues that can amount to up to two to five times the original investment. Since companies only make payments when they actually have cash flow, the rate of return depends on how long it takes to get that money back. In general, though, investors are shooting for an internal rate of return ranging from 18 percent to 30 percent.

“I’m a raving fan because I think [RBF] aligns interests [between investors and entrepreneurs] better than a lot of traditional investment vehicles,” says Jerry Carleton, an attorney with the Immix Law Group in Portland, Ore., which has organized 24 RBF financings over the last five years.

To read more from Ellie Winninghoff click here. Ellie is a former investment banker and currently a writer and consultant specializing in impact investing. Her blog is at www.dogoodcapitalist.com and she can be reached at ellie.winninghoff@gmail.com.

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‘Social Impact’ Investing in Demand in Maine, but Hurdles Linger

These cows in Dexter were part of bold iniative back in 2009 to provide a second chance for Maine dairy farmers, and more specifically, organic dairy farmers.

“We’re just waiting for MOO Milk to hit the shelves and let the consumer know that we are striving to have the best quality, the best tasting, organic milk out there,” said Dexter dairy farmer Mark McKusick. McKusick and nine others got together after HP Hood stopped buying their organic milk products in 2009. They created their own brand, called Maine’s Own Organic – or MOO – Milk.

“And it will be fresh and local,” McKusick said. “It’s not ultrapasteurized, so it will spoil in 10 days, so they need to buy it and drink it ’cause it’s gonna be great.”

Though MOO Milk has struggled, it’s now standing more solidly on its own four hooves, and is found on supermarket shelves throughout New England. It’s an example of a new business model, which operates as a for-profit entity, but offers more than just quality organic milk.

“With impact investing, it’s not just about that capital – it’s about building companies, it’s about human capital, about management, about so many more things other than capital,” says Ron Phillips, CEO and co-founder of Coastal Enterprises Inc., a non-profit community development corporation based in Wiscasset which distributes capital to rural businesses like MOO Milk on behalf of investors who see some greater value in the company’s very existance.

“We were able to step in with other private investors not driven so much by tax incentives, but trying to help build a company, frankly,” Phillips says. “And the merit of this company, and the possiblities are to restore and begin to rebuild a component of the dairy industry in the state of Maine, namely organic dairy farmers, and a large segment of them in Washington County and northern Maine.”

In the world of accounting, MOO Milk operates as an L3C, shorthand for “low-profit limited liability company.” L3Cs are a kind of bridge between the for-profit and non-profit realms. They provide the same protections as limited liability corporations, or LLCs, and can make a profit. But they also are allowed access to grants, and to so- called program related investments, or PRI’s.

“A company, such as MOO Milk, could be set up in such a way to accept these program related investments from a foundation,” says USM Accounting Professor Jeff Gramlich.

The problem, however, says Gramlich, is that there are major hoops to jump through in order in order to be granted status as an L3C.

“In order to avoid severe penalties, the IRS almost requires that you go and ask permission to do that, and it’s very costly,” Gramlich says. “You have to get lawyers, and it takes a long time, and by the time you actually get through it all, maybe the business opportunity, or the opportunity to meet a social need, is gone.”

This new breed of company isn’t legal in every state. In fact, Maine hadn’t yet adoped the legal status when MOO Milk first formed, so the company had to register in Vermont at the time.

And MOO Milk has had a difficult time attracting capital, which has caused a constant problem with cash flow. Gramlich says these kinds of businesses are not attractive to, say, venture capitalists. “What kind of venture capital wants to invest in a company that is low profit?” he says.

But MOO Milk is now found in more than 250 stores around New England, with a major presence in Massachussetts. The company is hoping that a major investor will follow through soon, and provide a boost of capital to help fund equipment upgrades and ratchet up its marketing effort, which is largely word of mouth.

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Tanzania: New Africa Impact Investment Fund Launched

THE Rockefeller Foundation and the Tony Elumelu Foundation have announced the launch of a new Impact Investment fund for Africa —the Impact Economy Innovations Fund (IEIF) at the Impact Investing in Africa Forum.

The event, hosted by The Rockefeller Foundation, the Tony Elumelu Foundation, and the Bertha Centre for Social Innovation and Entrepreneurship aimed at introducing the investment and entrepreneurial community from all over Africa to the concept and practice of impact investing. Impact investing includes investments aimed at solving social or environmental challenges, while generating a financial return.

The impact investing industry has the potential to steer significant capital to market-based solutions in sustainable agriculture, affordable housing, affordable and accessible healthcare, clean technology, financial services for the poor and other sectors addressing the world’s most pressing problems. Impact investments can be made in both emerging and developed markets and target a range of returns from below market to market rate, depending upon the circumstances.

“Throughout its 100 year history, The Rockefeller Foundation has worked to enhance the impact of innovative thinkers and actors,” said Eme Essien Lore, Acting Managing Director at The Rockefeller Foundation. “Now, during our Centennial year, our work is helping accelerate the growth of the impact of the investing industry in Africa as we partner with organizations that are at the forefront of helping to achieve equitable growth for all, such as The Tony Elumelu Foundation and the Bertha Centre for Social Innovation and Entrepreneurship.”

Dr François Bonnici, Director of the Bertha Centre at the UCT Graduate School of Business said: “We are conducting research on the impact investing in South Africa to provide an annual barometer to track the trends and practices in the sector.

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