The concept of innovative financing is a relatively recent addition to the development lexicon. Edward Jackson, a faculty member at the School of Public Policy and Administration at Carleton University, and Karim Harji, a co-founder and partner at Purpose Capital, will introduce the audience to innovative financing and impact investing through their report, Accelerating Impact: Achievements, Challenges and What’s Next in Building the Impact Investing Industry. The AKFC Seminars on Innovative Financing for Development, hosted by Aga Khan Foundation Canada in partnership with Carleton University’s School of Public Policy and Administration.

1. ACCELERATING IMPACT:
IMPACT INVESTING & INNOVATIVE
FINANCING FOR DEVELOPMENT
Edward Jackson
Karim Harji
26th March 2013

2. Main Messages
• Impact investing: a small, dynamic, growing industry with
impressive talent, products and networks
• Learning about impact investing opens the door to the
broader world of innovative financing
• Impact investing needs accountability, transparency and
critical engagement as it proceeds forward
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3. Current Context
• Slow economic growth globally
• High unemployment and growing inequality
• Pressure to reduce western aid budgets
• Continued ascendance of new economic powers: China,
India, Brazil, Korea, Indonesia
• Increased importance of G-20 in global governance
• Increased development assistance and trade on the part of
the new powers
• Need and opportunity to lever private sector capital to
address pressing social issues
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4. New Options for Development Finance
• Ten years of R&D by UNDP, OECD, World Bank, think tanks
• GAVI vaccine bonds: $7B+ in long-term government pledges
• New options proposed that can be driven by G-20 countries:
• SWF Infrastructure Fund
• Financial Transaction Tax (Tobin Tax)
• Remittance Transfer Savings
• Diaspora Bonds
• Fuel Tax (Global Component)
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5. Source: Gates, 2011

6. Impact Investing: Part of the
Future of Development Funding
Along with:
• Government tax revenues
• Domestic private investment
• Foreign direct investment
• Overseas development assistance
• Charitable grants
• Other innovative finance instruments
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7. Impact Investing:
“actively placing capital in businesses and funds
that generate social and/or environmental good and
at least return nominal principal to the investor”
Source: Monitor Institute, 2009 7

8. Investments intended to create positive impact beyond financial return
Provide capital Expect financial returns
• Transactions currently • The investment should
tend to be private debt be expected to return at
or equity investments least nominal principal
Businesses designed … to generate positive
with intent social and/or environmental
• The business (fund benefit
manager or company) • Positive social and/or
into which the investment environmental impact
is made should be should be part of the stated
designed with intent to business strategy and
make a positive impact should be measured
Source: JP Morgan, Rockefeller Foundation and GIIN, 2010 8

9. Impact Investing:
Core Definitional Elements
Tangible Impacts
Intention
“Investments intended to create positive impact beyond financial returns”
Source: O’Donohoe, Leijonhufvud and Saltuk, 2010 9

10. Impact Investing: Mapping Returns
Source: adapted from Monitor Institute 2009, via Rockefeller Foundation , 2011
High
Financial
Market First
Related
i
Traditional Impact
Investments Investments
• SRI
Impact
First
Financial (“Do No Harm”)
Returns
• Subsidized Investments
Low Impact
and Philanthropy
Below
Market Low Financial Returns
• Grants
Low High
Social Returns
Source: Adapted from Monitor Institute (2009) via Rockefeller Foundation (2011)

11. Examples of Impact Investments
Investee:
Investee:
Investors:
Investors:
and
USA
INDIA
TANZANIA
Investee: LGBT Enterprises in Investee: M’tanga Farms
Latin America
Investors: Calvert Foundation,
Investors:
and Lion’s Head Global Partners
CHILE
supported by NESsT.org
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12. Types of Impact Investment Products
• Private debt (loans, guarantees)
• Government debt (loans, guarantees)
• Equity-like debt (e.g., convertible bonds, warrants)
• Private equity (direct purchase of shares in enterprise)
• Program related investments of foundations/endowments
• Deposits in social banks, credit unions, CDFIs
• Community investment notes
• Disability savings plan (Canada)
• Social impact bonds (premium on financial return to private
investors for non-profit achievement of outcome targets)
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13. Actors in the Impact Investing Industry
Source: ET Jackson & Associates, 2012 13

14. Building the Impact Investment Market
Intermediation
Demand for
Supply of Capital
Capital
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15. Local Impact Investors
• Impact investment funds of banks
• Micro-enterprise, SME, non-profit
financing by credit unions
• Micro-enterprise, SME and non-profit
financing by Business Development Bank
of Canada
• Community economic development (CED)
Investment Funds
• Program-Related Investments (PRIs)
• Debt and equity investments by high net-
worth individuals
• Social impact bonds
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16. The Potential of Impact Investing
• The ability to unlock new types of capital to address a range
of social issues, and to combine capital in creative ways
• An opportunity to address the limitations of traditional
investment approaches that narrowly focus on financial
returns
• A desire by more investors to generate both financial and
measureable social returns
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17. What Impact Investing is Not
• Not a silver bullet / panacea
• Not implying that every social issue can be solved through
market-based approaches
• Not replacing the important role of philanthropy
• Not an excuse for governments to ignore their obligations to
marginalized populations or their obligations to redistribute
wealth
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18. Accelerating Impact:
Intentionally Deploy
More Impact Investment
Source: JP Morgan and GIIN, 2011 18

19. Accelerating Impact:
Unlock New Capital at Scale
• Impact investors
provide the upfront
capital to stimulate
vaccine research
and development
• Investments backed
by international aid
commitments
• 2008: International
Finance Facility
(IFFI) for
Immunization issued
bonds which raised
the equivalent of
over $1 billion
Source: GAVI, 2012 19

20. Accelerating Impact:
Strengthen Intermediaries / Products / Platforms
Intermediaries
• Service
providers
• Advisors
Products
• Institutional
• Retail
Platforms
• Due diligence
• Crowdfunding
• Social impact
Source: Shanmugalingam et al., 2011 20

21. Accelerating Impact:
Options Beyond The Financial/Impact Trade-Off
Source: Monitor and Acumen Fund, 2012 21

22. Accelerating Impact:
Capacity Development: Entrepreneurs & Teams
Source: Simpa Networks @ Dasra Social Impact, 2012 22

23. Accelerating Impact:
Coordinate and Balance Social Impact
Measurement Initiatives
• Language: Impact Reporting
and Investment Standards (IRIS)
• Enterprise Governance: B
Corporations
• Investor Ratings: Global Impact
Investing Ratings System (GIIRS)
• Approaches/Uses: Rating,
Assessment, Management
• Tools: Social Return on
Investment
Source: GIIN and GIIRS, 2011 23

24. Accelerating Impact:
Raise the Bar on Impact
Source: Root Capital, 2011 24

25. Accelerating Impact:
Government & Policy as an Enabler
Source: Pacific Community Ventures, 2011 25

26. Accelerating Impact:
Anticipate the challenges & opportunities
of market building; and manage expectations!
Source: ET Jackson & Associates, 2012 26

27. When Things Go Wrong
• Bad things can happen to good ideas and good people
• Managing the social and business dimensions at the
same time is challenging
• Business environments are volatile
• The private sector fails all the time, but it is private!
• Capital and measurement are not enough
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28. What To Do? Short-Term Responses
• Evaluate on a case-by-case basis and programs as a whole
• Protect vulnerable parties
• Undertake SROI and other value-analysis studies
• Rebuild the business plan, reposition the enterprise
• Ensure strong business leadership, financial reporting
• Draw lessons for future investments and programs
• Strengthen regulation and monitoring
• Get back on the horse and keep riding!
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29. What to Do? Long-Term Responses
• Build a cohort of new leaders in business, finance and the
social sector with the skills and commitment to design and
execute impact investments and social enterprises
successfully
• Develop targeted training programs jointly designed by
community, government, business and educational
stakeholders, using case studies of both failure and
success
• Increase resources for monitoring, evaluation, regulation
and mentoring
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30. Accelerating Impact Investing
Increase the velocity of:
• Evaluating, monitoring, learning and improving
• Scaling up capital pools
• Diversifying investment products and services
• Strengthening the capacity of social enterprises to receive
and use capital
• Refining cost-effective impact-measurement tools
• Building the leaders of the future
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31. What Now? What Next?
Learn. Act. Reflect. Repeat.

32. Accelerating Impact: Achievements, Challenges and
What’s Next in Building the Impact Investing Industry
http://www.rockefellerfoundation.org/news/publications/accelerating-impact-achievements
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33. Resources
• Bugg-Levine, A. and J. Emerson. Impact Investing: Transforming How We Make Money
While Making a Difference, 2011.
• Gates, B. “Innovation with Impact: Financing 21st Century Development,” Report to the G-20
Leaders, Cannes, 2011.
• JP Morgan, GIIN, Rockefeller Foundation. “Impact Investments: An Emerging Asset Class,”
2010.
• Monitor and the Acumen Fund. “From Blueprint to Scale: The Case for Philanthropy in
Impact Investing,” 2012.
• Monitor Institute. “Investing for Social and Environmental Impact: A Design For Catalyzing
An Emerging Industry,” 2009.
• Monitor Group. “Promise and Progress: Market-Sased Solutions to Poverty in Africa,” 2011.
• Pacific Community Ventures. “Impact Investing: A Framework For Policy Design and
Analysis,” 2011.
• United National Development Program. “Innovative Financing for Development: A New
Model for Development Finance,” 2012.
• UN Department of Economic and Social Affairs. “World Economic and Social Survey 2012:
In Search of New Development Finance,” 2012.
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34. Organizations and Networks
• AKF USA Impact Investing Initiative: akdn.org/usa_impact_investment.asp
• Carleton Centre for Community Innovation (3ci): Carleton.ca/3ci
• Purpose Capital: PurposeCap.com
• Aspen Network for Development Entrepreneurs (ANDE):
aspeninstitute.org/policy-work/aspen-network-development-entrepreneurs
• B Lab / B Corporation: bcorporation.net
• Global Impact Investing Network (GIIN): thegiin.org
• Global Impact Investing Ratings System (GIIRS): giirs.org
• ImpactBase: impactbase.org
• Impact Investing Policy Collaborative (IIPC): iipcollaborative.org
• MaRS Centre for Impact Investing (CII): impactinvesting.marsdd.com
• SocialFinance.ca: socialfinance.ca
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35. Contact Information
Edward Jackson
Senior Research Fellow
Carleton Centre for Community Innovation
Carleton University
edward_jackson@carleton.ca
Karim Harji
Co-Founder and Partner, Purpose Capital
Senior Research Associate, Carleton Centre for Community Innovation
karim@purposecap.com
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