Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p.

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IMPACT INVESTING : Perspectives & Dimensions
If you change the place, you change the future*

This Thought Piece applies an academic model to analyse Impact Investing Perspectives & Dimensions.
Motivations, preferences & actions to achieve impact investing goals. Its is a classification over three
cultures and their interactions demonstrated in trends & events in the evolution of impact investing.
The thought piece builds on 7 years of research of & (retail) impact investing and 20 years in (fundraising) philanthropy
as a Political Historian (Strategies & Trends) & Master in Politics of Alternative Development Strategies.
*inspired by Cantilena by Pietru Caxaro, Maltese Philosopher (1472).

KEY IDEAS of Impact Investing; Doing Well & Doing Good

Investing for return and societal & environmental impact.

Investing 'to do good' implies also doing less harm,

the majority of investment market opportunities.
Impact Investing 2.0 seeks impact through core activities,
impact (transition) ambition & operational ESG opportunities.

Impact investing is getting Bigger (market expansion & influencing capital

markets) & Better (ESG Materiality, Sentiment & Relevance).
ESG integration has achieved 25% capital markets share.

Growth is steered by (late) adapters & price competition, less on impact

quality: the transparency of net positive impact & of SDG contribution,
Broad Impact favoured over Deep Impact, Planet Impact favoured over
People Impact, Policy impact over Practical/Profit impact.....

IMPACT INVESTING APPROACH

Balancing Impact & Return, Progress
Finance First (over Impact), Profit
Impact First (over Financial return), protect People/Planet
Icons refer to motivation & choices i.e. Mission, vision, strategy, tactics.
Meaning of the icons: do Good make Profit do no Harm

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 2
Historical) ROOTS;
Religious/Ethical investing (exclusion, divestment) thematic on global, continental, national, local markets

Reconstruction & Development Investing in Infrastructure, Industry, Women

Accelerating economic growth & progress, post war & developing markets;

Community Development Investing (local economic growth/markets, SME's as employment catalyst);

Micro Finance/Inclusive Finance rolling out geographically & in sectors, scaled & scaling

Thematic Investing: Health & Biotech, Renewable Energy, Green & Clean investing (energy & tech)

(Core) Base of the Pyramid Investing (corporate strategy for developed market multinationals)

People Planet Profit (Prosperity) investing (Growth with caring for People & Planet)

Sustainable Investing, long term perspectives based, such as on finite resources & growing social movements.

Socially Responsible Investing (exclusion, doing less harm) in Corporate Social Responsible companies.

Best-in-Class investing

ESG Environment Social Governance investing (Risk -> Opportunity investing) coined in 2005, now dominant

Moving from 'doing less harm'' to ''doing good'' (natural evolution)

Climate Investing in Climate, Green thematic Bonds for (exclusive/institutional investors)

Vaccine Bonds (saving lives, lowering birth rates, improving children's opportunities care & education)

Contributing to UN Sustainable Development Goals. Attracting private capital is critical: scaling & synergy
Paris Climate Agreement & national implementation programs & policies

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 3
ROOTS of Philanthropic Impact Investing:
Ethical/Religious Values & Mission based Exclusion;
Engagement and/or Best in Class investing

Interest free or soft loans, low returns (e.g. Oikocredit, a World Council of Churches initiative and the largest micro
finance fund in the world giving 1,5% interest); Inclusive Finance (micro finance 2.0)
Program Related Investments (PRI's, an US fiscal facility) e.g. in Social Housing, Community Development....
Mission Related Investments (MRI s non tax deductible losses), Topical benchmarks & indices, Venture Philanthropy
Typical financial instruments: bank guarantees, first loss investment, loans growth capital investment (sometimes
after an grant of soft loan phase start / seed capital). Catalytic funds to attract private capital / catalytic funding,

Social Impact Bonds : philanthropic & private investors finance interventions, government or philanthropies pay out
of savings/grant budgets. Returns are incentivized by impact bonus. Spin offs : Development Bonds, Humanitarian
Bonds, Health Bonds, Environmental Bonds, Youth & Children Bonds, Refugee Bonds..... (> 130 bonds & > 424Million
US$ raised, > 1 Million people lives touched) https://sibdatabase.socialfinance.org.uk/

PREFERRED TOPICS

POTENTIAL WIN WIN & PROFIT

Over the years the How To books & Reports have stresses the doing good & doing well character in Responsible,
Sustainable investment, Long Term (ESG!) thinking and Win-Win : making a(n extra) profit
Titles of must reads & bestsellers: Impact Investing: Transforming How We Make Money While Making a
Difference. Impact Investing: ... Making a Difference. (Bugg-Levine & Emerson). The HIP (Human Impact +
Profit) Investor, Make Bigger Profits by Building a Better World (R. Paul Herman). The Power of Impact
Investing : Putting Markets to Work for Profit and Global Good (Judith Rodin, Rockefeller Foundation), Green to Gold:
How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive
Advantage (Etsy & Winston, ed. Krosinsky).

EXCLUSIVE IMPACT INVESTING

Focus on Big numbers (GIIN) Big Funds (Charities - Rise) Big Names (Bill Gates, Lauren Jobs, Bono...)
TheGIIN The Global Impact investing Network, only colects datafrom investors with over 10Million US$ AuM, thus
Institutional Investors, Development Banks, Large Philanthropies, Financials. Its members are the creme the la creme
of philanthropy, social investment & finance. Its works globally but its data shows 50% investments in North America.

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 4
Financial media (b-to-b), e.g. Ron Robbins the Soul Investor report on market developments & data, product
launches. ImpactAlpha, a US based impact Investing eNwsletter monitor market news: launches, fundraising rounds,
expansion, mergers, exits also analyses trends & themes & showcases the new generations impact investees.

News about Charities, Philanthropist & Celeb Impact Investors reach a wider audience, business focused pub media.

There is criticism on Exclusive Investing e.g. from  Don Shaffer, former president of RSF Social Finance, We are a
financial services organization that offers catalytic investing and giving options and connects social entrepreneurs with
capital. RSF is a respected player and pioneer in impact investing. Shaffer is quoted “The mainstream approach to
impact investing not only continues to task the most privileged with improving the system, but in the pursuit of doing
well by doing good, it maintains the established order of privilege, power, and wealth”. … “The impact-investing
   
industry is mimicking the structure and presentation of institutional finance—the culture of W all Street. “. 
RSF stands for Rudolf Steiner Foundation and has $120 million in consolidated assets (Wikipedia)

Shaffer is quoted by Rodney Foxworth, Executive Director of The BALLE Network (building healthy, equitable local
economies that work for all @BeALocalis). In Medium Foxworth asks “Is it not perverse that Ivy League-educated
white men from predominantly white male dominated institutions are able to accrue wealth by investing in African
American women entrepreneurs—now     that diversity is considered an asset, and the latest example of doing well by
   
doing good—while the majority of African American women are excluded from building wealth through impact
investment vehicles …
The best impact investors I know don’t even view themselves as investors; instead, they see themselves and act as
community organizers, activists, and social justice warriors, working on the front lines with and behind the communities
   
that they serve—capital is simply the vehicle of privilege they activate to advance a social, environmental, and
economic justice agenda. https://medium.com/balle/wealth-inequality-and-the-fallacies-of-impact-investing-eea902924309
The BALLE Network works with Communities of Practice. Its first cohort of the Local Economy Foundation Circle
committed to aligning more than $2.5 billion in collective investment assets to support local economic growth.

This type of critique is also directed at (Exclusive) philanthropy an important player in exclsuive impact investing.
“As more lives and communities are destroyed by the system that creates vast amounts of wealth for the few, the
   
more heroic it sounds to “give back.” It’s what I would call ‘conscience laundering’—feeling better about accumulating
more than any one person could possibly need to live on by sprinkling a little around as an act of charity. But this just
keeps the existing structure of inequality in place. The rich sleep better at night, while others get just enough to keep
the pot from boiling over.” — Peter Buffett, The Charitable-Industrial Complex

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 5
Peter Buffet is co-chairman of the NoVo Foundation, dedicated to catalyzing a transformation in global society, moving
from a culture of domination and exploitation to one of equality and partnership. His father Warren Buffet is a
renowned investor known for the Giving Pledge which encourages UHNWI to give away (part of) their fortune to
philanthropy. We are talking billions of US$. Warren Buffet's own pledge financed vaccination programmes in the least
developed countries halving child mortality and boosting Vaccine Bonds as an innovative tool to fund preventive
impact investing. HNWI – Ultra High Net Worth Individuals

A recent hype in Philanthropy critique is around Anand Giridharadas @AnandWrites who wrote 'Winners Take All:
The Elite Charade of Changing the World''. Giridharadas is an American of Indian descent who worked at McKinsey in
India after graduating, following his fathers footsteps. He is a former New York Times columnist and his book takes
readers “into the inner sanctums of a new gilded age, where the rich and powerful fight for equality and justice any
way they can – except ways that threaten the social order and their position atop it.''
Giridharadas proposed a moratorium on impact investing at a recent Economist event until finance unwinds its
own complicity in the injustices it purportedly wants to help solve. He ''redouble that call'' after a Rise Fund,
which is an Exclusive ImpInv Fund CEO was shamed in the Uni bribe scandal. ''This should be a signal moment for
#ImpInv to reflect and regroup''. ... Don't tell yourself this man is a one-off. He is a perfect metaphor for an
#ImpInv industry that wants the reputational benefits of "changing the world" while clinging to the systems of
oppression that continue to cause the problems you supposedly are devoted to solving.

These critiques on exclusive investment investment & philanthropy refer to systems of oppression, the social order
and fits in the Green dimension. I put Grass Root Initiatives opposite Exclusive & Inclusive Investing in
Perspectives & Dimensions. Its actors like going to places, learning perceptions, ideas, experiences, asking what the
people want, work with & for them. These projecs – with added training, skills, technical assistance, materials etc. –
have local support and success rates are high. The down side is projects are a one off and hard to roll out, copy &
paste. Even scaled sectors face geographical & cultural boundaries. E.g. Micro finance, inclusive finance surged in Asia
& Latin America, but has a hard(er) time to repeat the success stories in Africa in spite of advanced technologies.

The Sustainable Trade Iniatiative, a Dutch public private Partnership for a fair export supply chain with developing
countries, just published Collaborative Transformation. Sharing lessons learned. ''The stakeholders learned that
scaling the existing trainings to reach a million farmers would require a budget that was a hundred times what the
stakeholders were willing to commit. The shock forced the stakeholders to realize that it was time to abandon the
existing model and to switch to a larger, business-driven procurement approach to increase the production of
sustainable cotton at scale.'' https://www.idhsustainabletrade.com/news/idh-publishes-its-first-book-on-collaborative-transformation/

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 6
My unease with Exclusive Investing is also that it is elitist, excluding the majority but mostly inert and will be largely
replaced by fintech & investtech(ologies) offering impact seekers opportunities to go around this 'system' or directly
to the impact investments they seek. The announced revival of the Scottish Stock Exchange this summer is an exact
fit. It intends to ''provide access to the “world’s first regulated exchange” dedicated to businesses and investors seeking
to achieve a positive social and environmental impact through their activities. The initiative is carried by the former CEO
of the former Social Stock Exchange, with the same ambition but lacking direct trading facilities.

I wrote about the evolution of impact investing in 2017, describing the transformation from dedicated institutions to
dedicated products, the rise of transparency, passive & direct investing and now we are entering the era of inclusive
impact investing through crowdfunding for impact, impact fintechs, impact investtech, impact platforms etc.
https://www.slideshare.net/alcanne/english-the-evolution-of-impact-investing-10-20-30-40

Exclusive Investing seems irrational, going against the core intention of impact investing which is inclusive. It is
incredibly good at seeing the big picture, getting the best experts advice, doing consultations and uniting interests from
key decision takers & major players it is well connected. But a bit detached from reality because it has a kind of
monopoly that makes it hard to think and act out of the box. Such systems can thrive for centuries and suddenly
implode since how it operates is obsolete. Maybe I am too pessimistic, the global support, from all countries, for the
UN Sustainable Development Goals is a tremendous success. So a two step back on the Global Compact for Safe,
Orderly and Regular Migration (aka Global compact for Migration, Marrakesh Declaration is probably to be expected.

When focusing on the financial players in this dimension, there is serious competition, there are different strategies,
marketing, Big Funds, pitches & spin offs. They organize incubators & accelerators for innovative & social enterprises.
Some social entrepreneurs spend more time travelling from pitch to pitch than they work in their dream job. They all
spend a lot of time looking at the competition, who does what, what seems to work & what seems to fail, why....
Change will come:
Gradually and then Suddenly.
Ernest Hemingway in the Sun also rises. Quoted by the Mercy Corps Social Impact Venture Fund.

The opposite Perspective & Dimension is that of Inclusive Impact Investing. Being Dutch I didn't realize how unique
it is that impact equity has been easily available to retail investors. We are home to the worlds largest inclusive finance
fund for (originally) agriculture and sustainable banks with track records of over 40 and 50 years offering e.g. micro
finance, fair trade, sustainable opportunities. Partly exiting private equity investments in e.g. micro finance institutions
and partly public equity that somehow excelled in sustainability efforts.

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 7
Add the rise of low cost online (equity) traders et voila inclusive impact investing is a reality. Not that one can invest in
hard core impact investments, but definitely in companies creating economic growth & jobs in developing, mostly
emerging markets. Of course also thematic investments in both sectors & impact themes such as Health, Clean tech,
Water & Environment. At present finance has embraced impact investing with surging launches of ESF funds. Blackrock
just launched another six with 100% transparency of (MSCI) ESG data.

From an impact perspective right now offerings are more focused on price competition than quality. A lot of Impact
& ESG funds hold typical largecaps. I published a Checklist for Impact & ESG funds & ETFs: Review & consider Finance
First or Impact First, Broad or Basic (Needs), Paper (policy) or Practice, Progress (KPI's) or Promise, (R)Evolutionary
(ambitions) or Inert, Planet or People, Inclusive & Competitive? Most of all: is it different from existing funds.
https://www.slideshare.net/alcanne/impact-investment-funds-checklist

Net Impact of Funds

Since then I discovered an easy way to find the net impact of ESG
funds. Take MSCI's exposure rating % of funds to SRI, Socially
Responsible Investment (exclusion) sectors in %and the exposure
% to Global Impact (based on their 2016 Global Goals Index
Methodology) et voila.

SRI & Global Impact exposure % data is published on Blackrock's

iShares website in products factsheets. It has just promised 100%
transparency of ESG data. Also available on etf.com and etfdb.com

Next post will describe further Dimensions of the Perspectives.

On the next page they are visualised in a tabel, connecting them
(with a few added relevant characeristics).

Comments & Questions are Welcome.

Please connect with me on Linked In:
https://nl.linkedin.com/in/alcannehoutzaager
And/or Follow me on Slideshare and Twitter @alcanne
https://www.slideshare.net/alcanne

Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 8
Drs Alcanne J. Houtzaager MA, Inclusive² Impact Investing, Tools & Thoughtpieces, p. 9