1) Impact investing aims to generate both financial returns and measurable social/environmental benefits. It involves for-profit investments that target social outcomes. 2) A value analysis assesses opportunities through due diligence and scoring on legal, operational, market, financial, and social/environmental factors. Projects are then monitored on key performance indicators. 3) Lessons indicate collaboration is key to finding deals and sharing knowledge. Metrics and emotion also play a role in decision-making, though financial performance remains primary. The approach requires awareness, dialogue, patient capital, and risk-taking.

1. Creating Value towards Impact Investing
Definition and application
- Context and Definition
- Value analysis
- Concrete cases
- Lessons learned
Xavier Heude
Co-founder of meso IMPACT Finance
Concept-designer of PEERS Direct Investment
2nd Innovation for Financial Services Summit – Luxembourg, 19-21 Sept. 2012

2. The socio-economic context
Funding
(debt, equity)
Impact
Global economic Activities
situation (at local level)
A relation of cause and effect
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3. The socio-economic context
The scope of challenges facing society today can no longer be solved with a purely
philanthropic approach :
- threat of possible climate change
- poverty leading to major political instability
- human rights issues
- supply change management (e.g. food security)
- scarcity of primary resources
- demographic challenges
- etc …
Bamboo workshop (Vietnam) 3

4. Conceptual definition of Impact Investing
No standard definition …
Source : Monitor Institute
“Any profit-seeking investment activity that
intentionally generates measurable benefits
for the society” *
4 key-characteristics of Impact Investing
- Profit as an objective
- Intentional, pre-determined social impact
- Positive correlation between the intended social
impact and the financial return of the investment
- Measurable social impact
* « An unconventional perspective on Impact Investing », IESE Busines School - 2011
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5. Conceptual definition of Impact Investing
Expected results Investment themes
Agriculture
and rural
Environment : development
Services to the
- Biodiversity conservation elderly or Community-
- Carbon sequestration disabled based
people renewable
energy
Social :
- Community development Clean
(cooperatives, inclusive finance, transportation Education and
solutions health
housing, health …)
- Increase in jobs
Technological
- Better living conditions products
& services
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6. Conceptual definition of Impact Investing
Rational behavior
Emotional
behavior
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(derived from Monitor Institute)

7. Conceptual definition of Impact Investing
Investment targets
Medium to large companies
Mesofinance
Profile :
(the missing middle)
- startups
- going concerns
SMEs
Investment needs :
200.000 to 2.000.000 €
Microfinance
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8. Value analysis in Impact Investing
Methodological approach … applicable whatever :
• the location (worldwide)
• the activity (industry – agriculture – services)
• the business development’s step (start-up – going concern)
2 processes of VALUE CREATION
Appraisal process :
1. a conventional Due Diligence-process (101 questions)
2. a scoring system
3. a set of criteria to comply with for Labelling (…under development …)
Monitoring process :
• social-environmental Key Performance Indicators (…under development …)
• a technical assistance plan (applicable on a case by case basis)
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9. Value analysis in Impact Investing
Conventional Due-Diligence process
An in-depth analysis … … tracking risk Check
(101 questions) (4 categories)
Legal
Operational
Corporate overview Clear strategic
Operating Model  vision
Market - Competition Reputation
Financial
Reputation
Financial
Legal
Financial statements Financial Operational
 Financial return
Legal Reputation
Legal
Operational
Social-
Social – Environmental
Initiatives
Financial
Reputation  environmental
return
Operational
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10. Value analysis in Impact Investing
Scoring system
-5 1 2 3 4
Neutral
Below Satisfactory Very good
Significant warning ! Poor standard
  (average note)
Weighting’s system :
Weighted Risk’s Feature of the case / situation Scales of notes
notes intensity appraised
N (negative) Average Case / asset / situation making neither -5 1 2 = should be
to High compromise nor significant advantage, the case to reach
whatever it occurs. Negative to neutral impact
(at best)
D (double High to Case / asset / situation having negative or -5 1 2 3 4
sided) Low positive advantage, depending on the action
taken
P (positive) Average Case / asset / situation having neutral to 3 4 = minimum
positive advantage (can never be negative) requirement to
to Low reach

11. Value analysis in Impact Investing
Example of an agri-business case in Africa
major NEGATIVE weighting major POSITIVE weighting
LEGAL Incorporation Business in an early stage
Corp. management Some weak management / business skills ?
Mission statement Clear written mission statement
Stakeholders Strong support of the local actors
OPERATING Operational capacity Strong potential of growth (securised land)
MODEL
Organisational structure Efficient channels of reporting set up
Innovation & Dvlpt Good command of technology
HR management Jobs creation
Training, annual assessment, compensations ….
MARKET Customers Customers diversification
Focus on the local demand
& COMPETITION
Quality / Reputation Good products quality and diversification
Market Large market with strong growth
Competition Strong pressure from cartels ?
FINANCE Financial statements Sound financial projections
Insurance Some uninsured risks
External factors Political instability
SOCIAL & ENVIRONMENTAL INITIATIVES
Internal / external initiatives Good to high social / environmental impact 11
Local dialogue

12. Value analysis in Impact Investing
Monitoring process …
Goal :
- enhance organisation of the business owners
- mitigate risks identified through Due Diligence-process
7 main intervention areas 1 Client database
(applicable on a case-by-case basis)
2 Internal training
3 Internal organisation (procedures)
4 Human resources policy
5 Internal control / MIS
6 Business development (clients) & networking
7 External communication

13. Key-success factors in this project :
1) Animal sourcing and crossbreeding : the capacity to set up a scalable livestock
2) Training, monitoring and coaching of the farmers (= microfinance techniques)
3) Export sales
Empowerment of the rural communities, with developing a competitive national
milk industry
Buffalo husbandry’s
business …
(Philippines)
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14. Innovative concept – Social Gaming :
- Introducing the general public to microcredit through a fun and entertaining medium
- Raising awareness of the potential impact of this type of developmental tool.
- Impacting some of the most vulnerable people in the world
Social game …
(France)
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15. Lessons learned
What surveys say …
… what we are experiencing
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16. Lessons learned
What surveys say …
(Source : Investing for Social & Environmental Impact, Monitor Institute, 2009) 16

17. Lessons learned
What surveys say …
Recommandations to accelerate the growth of Impact Investing :
- Increase the talent pool of investment professionals
- Collaboration is essential for finding quality deal flow, sharing knowledge, increasing
learning an developing new investment vehicules
- Not waiting for perfect metrics on social / environmental impact to invest
(Source : INSIGHTS AND INNOVATIONS: A Global Study of Impact Investing + Institutional Investors, 2012) 17

18. Lessons learned
The 4 golden rules
What we are experiencing …
1st rule : Scarcity lies in the good investment opportunities, not in the investment flow
- Secure the projects sourcing, with building strong networks
- Maintain strict due-diligence standards
2nd rule : Dialogue with the business owner / stakeholders never stops
- Share common values (not just check professional skills & financial projections)
- Cross-check information steadily
3rd rule : Emotion is – in a certain extent – part of the decision-making process to invest
- Tell the story and report thoroughly
- Get investors involved …
4th rule : But … at the end of the day, financial performance comes first
- No philanthropy
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19. Lessons learned
What we are experiencing …
Impact Investing is not « investment as usual ». It requires :
• social / environmental awareness
• opened dialogue between the parties
• patient capital (mini. 5 years)
• risk-taking mind
Main asset classes fitting for Impact Investing :
- Fixed income (including private debt and mezzanine financing)
- Venture capital / Private equity
- Real assets (including real estate, commodities, timber, etc …)
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20. Lessons learned
Investors appear to be more cautious how their money is used …
Family offices … address a range of challenges (climate change, poverty …)
Clients of leading private banks … provide them with more choices than just traditional investment
and philanthropy
Private foundations … making investments in areas related to their social mission
Private equity funds … provide growth capital
Mutual funds … dedicate a portion of their assets to social / environmental income
generating businesses
Pension funds /
sovereign wealth funds … deploy capital in ways that benefit the communities they serve
Corporations … improve the lives of the poor while creating profitable products
& services
Governments … support economic development in poor areas
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(Source : Investing for Social & Environmental Impact, Monitor Institute, 2009)

21. Some resources
• In search of gamma. An unconventional perspective on Impact Investing - IESE Business School, University of
Navarra, 2012
• Industry Survey of Financial Advisors on Sustainable and Impact Investing, 2012 - www.gatewaystoimpact.org
• INSIGHTS AND INNOVATIONS - A Global Study of Impact Investing + Institutional Investors, 2012
www.correlationconsulting.com
• The Power of Advice in the UK Sustainable and Impact Investment Market – Bridges Ventures Research, 2012
• WORLD INVESTMENT REPORT 2011 - NON-EQUITY MODES OF INTERNATIONAL PRODUCTION AND
DEVELOPMENT, UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)
• European SRI Study 2010 – www.eurosif.org
• Investing for Social & Environmental Impact - Monitor Institute, 2009
• Impact Investments, an emerging asset class – J.P.Morgan Global Research, Nov. 2010
• « PEERS Direct Investment » website : www.peersdirectinvestment.com
Contact
Xavier Heude
xh@peersdirectinvestment.com
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