Позитивные изменения. Том 1, №1 (2021). Positive changes. Volume 1, Issue 1 (2021)

Impact investing as a subject of research: 10 publications of 2021

Elizaveta Zakharova

According to estimates of the Global Impact Investing Network (GIIN) the global impact investment market in 2019 amounted to $715 billion, thereby registering a 14-fold increase over the past 10 years. Today we can talk globally about more than 1,700 organizations involved in this field, most of which being located in the USA, Canada and Western Europe.

Elizaveta Zakharova,

PhD student at the HSE Faculty of Social Sciences

The global pandemic crisis has turned into a powerful driver of the rapid development of impact investments and the interest towards them, when the question of how to effectively solve social problems of different scale and level became very acute. At the same time, the tendency to allocate funds in order to improve people’s well-being, to reconsider the role and prospects of businesses in resolving social and environmental issues, seems to be growing steadily, and the virus challenge to humanity has become a catalyst for the global changes.

Companies are participating in social programs and develop new models and tools, setting up new approaches, and through this a new charity infrastructure is being formed right now, quite important for the implementation and promotion of impact investments.

At the same time, the need is expressed to build the terms of reference for impact investments, to find their place in the overall structure of investment strategies, to develop common tools for measuring social impact, while popularizing positive examples of impact investment throughout the world. All these topics are touched upon one way or another in papers published in 2021. Summarizing the conclusions made over the past year, we can say that much attention has been paid to the research of the impact investment market. Thus, the authors see its main drivers in the desire of effective investment in the territories of presence, assistance to the government in solving socially significant issues, innovative technologies development, a positive reputational effect, the global competitiveness growth, participation in global trends.

As businesses tap and comprehend the new market, they also face issues that form barriers for further growth and participation, and this is also expressed in a number of works: the lack of a unified vision of the classification of types of socially-oriented investment, erroneous expectations of investors to get a quick result as investments in solving social problems are characterized by their long-term character. Other constraining factors are difficulties to determine the level of profitability, high financial risks, uncertainty in assessing the project success, and investments impact, assessment of their social impact, as well as imperfection of regulatory policies and legislation. All these are challenges on the way to the successful development of the impact investment market, and the future of this sector development depends on overcoming these issues. In addition to stating the existing restrictions, the research papers also suggest ways to overcome them. Thus, we can talk not only about the theoretical search of impact investment researchers, but also about the desire to saturate the general knowledge base with practical conclusions, recommendations, tools, etc.

Thus, in 2021, quite a lot of attempts were made to create a kind of guide for investors, offering them new tools for measuring and assessment of impact investment projects, establishing a dialogue between organizations. We see a large number of organizations, both domestic and international, that are engaged in research in this area and contribute to creating a favorable ground for development. In the past year, great strides have been made towards the development of classifications, measurement tools, and towards the study of experience in the field of impact investment.

At the same time, it is worth mentioning that Russia is also a part of the global trends in new approaches to solving social problems and already has some experience in mastering impact investment, but so far the share of Russian business in the global market of this segment is about 1 %. Nevertheless, within the country there is already a large number of examples of both specific cases of impact investment and scientific research and understanding of this new area.

We have selected 10 important and useful publications in our opinion for 2021, which reveal different aspects of impact investing and record the changes and achievements that are taking place. In our opinion such a selection will help to get acquainted with the current agenda of the impact investments topic in the outgoing year and to have a look into the future – learning what prospects in this area await us.

Analytical Report, 2021. SKOLKOVO Business School, Noôdome and PwC.

Dmitry Ageev, Ivan Klimov, Maria Davydova, Arina Fursova

There is no doubt in 2020 that we are living in an extremely difficult time. And it’s not so much about the pandemic as such, but also about how society, business, authorities and the world as a whole react to it – all together it radically changes our world. The crisis highlighted need to develop global impact investing that is long overdue, and to look for the tools of assistance for those who need it. The world needs a powerful and flexible financial system to solve the most pressing global social problems.

The development of impact investment ideas calls into question the traditional belief that social and environmental problems should be solved only through philanthropic donations and that market investments should be focused only on generating income. Both the behavioral models and the investors way of thinking are changing: investors they are more and more trying to take into account what will be the social effect of their decisions on how to earn, save, spend and invest their funds. There is growing social pressure on companies and investors, forcing them to think in terms of “people, planet and profit", as well as to look for comprehensive solutions to problems both within their business and beyond.

Many publications have already been devoted to impact investing. This means that we are not alone on this long road that we have to pass. This publication is focused primarily on investors, their requirements, expectations, opportunities and skills.

https://ftp.skolkovo.ru/web_team/research/2021/SKOLKOVO_Investing_in_Society_SWTC.pdf

2021, Global Impact Investing Network.

Rachel Bass, Dean Hand, Kelly McCarthy, Sophia Sunderji, Noshin Nova

COMPASS: The Methodology for Comparing and Assessing Impact builds on the GIIN’s ongoing efforts to help impact investors integrate impact into decisions across their investment processes. COMPASS presents for the first time, a tested, widely accepted methodology to assess and, most critically, compare impact results. Since impact is inherently multi-dimensional and complex, this methodology is designed to offer investors insight into three critical impact performance figures: scale, pace, and efficiency. This research effort seeks to standardize the components for and process of impact performance analysis, describing each step of the analytic process the GIIN has developed that can be used for aggregate investment-, fund-, or portfolio-level analyses.

In November 2020, the GIIN released a first of its kind analytic methodology for understanding and comparing impact performance. This paper underwent a public comment period, which garnered feedback from 367 individuals representing over 150 organizations on the methodology, which can be found here. Many of these participants are GIIN Members, the current list of whom can be viewed here. COMPASS incorporates this feedback into this revised version of the methodology.

https://thegiin.org/research/publication/compass-the-methodology-for-comparing-and-assessing-impact

2021, Global Impact Investing Network. Dean Hand, Sophia Sunderji, Noshin Nova, Indrani De

"Impact Investing Decision-making: Insights on Financial Performance" uncovers insights into financial performance and explores the increasing sophistication with which impact investors are approaching decision-making. Specifically, it finds that impact investors are applying a multi-dimensional approach to decision-making, considering impact objectives and impact risks alongside traditional factors such as financial return, financial risk, resource capacity, and liquidity constraints. Experienced impact investors exercise this dynamic approach to assess how they can most efficiently achieve their optimal impact and financial performance. This dynamic decision-making highlights growing maturation within the industry as impact investors are becoming more sophisticated in their approaches to performance management and capital allocation.

Drawing on data from six of the industry’s existing financial performance studies, this report also offers a synthesis of impact investment financial performance and additionally analyzes the GIIN’s 2020 Annual Impact Investor Survey responses of 161 impact investors seeking risk-adjusted, market-rate returns. This report also highlights practical examples of leading impact investors, including: Anthos Fund & Asset Management, IDP Foundation, Inc., Incofin Investment Management, UBS Global Wealth Management & UBS Optimus Foundation, and Vox Capital, offering an inside look at how various facets influence their decisions on capital allocation and performance management.

The report confirms earlier findings from the GIIN’s research around financial performance of private debt, private equity, and real assets and expands on this research to focus on various facets of impact investment performance, including risk, financial return, and impact.

https://thegiin.org/assets/Impact%20Investing%20Decision%20making_Insights%20on%20Financial%20Performance.pdf

2021, European Venture Philanthropy Association.

Picón Martínez A., Gaggiotti G., Gianoncelli A.

This report summarises the main elements to be taken into account to measure and manage impact throughout the investment strategy and the investment process, linking each phase to the relevant steps of the EVPA five-step framework.

To clarify how the EVPA five-step process and other IMM initiatives are linked and complement each other, this publication also refers to different principles or standards throughout the investment journey, such as the Dimensions of impact of the Impact Management Project, the Operating Principles of Impact Management, the Principles of Social Value and the SDG Impact Standards.

https://evpa.eu.com/download/start/EVPA_Navigating_IMM_report_2021.pdf

2021, Global Impact Investing Network.

Dean Hand, Sophia Sunderji, Uma Kommineni

Institutional asset owners are increasingly interested in incorporating social and environmental factors into their portfolios and investments strategies. The pandemic, the climate crisis, and other social and environmental challenges have all signaled a fundamental need for change – to allocate more capital into investment products that incorporate some consideration for the real-world outcomes that the investments generate.

Institutional asset owners have an immense opportunity to generate change, as they possess both the capital and scale to address the world’s most pressing social and environmental challenges while meeting their fiduciary duty. In order to achieve this potential, institutional asset owners must set impact priorities and targets; however, many face challenges doing so. This research brief is the first in a series, focused on helping such asset owners do this work more efficiently and effectively.

The report dives into these investors’ approaches to setting impact priorities and targets – unpacking challenges they face when assessing impact priorities, identifying ways of turning these challenges into opportunities to achieve greater impact, and outlining next steps investors can take to set targets and integrate social and environmental priorities into their investment processes. Specifically, the report offers insights and practical examples into how institutional asset owners are integrating real-world outcomes, or impact, into their portfolios and investment strategies alongside risk and return and within a fiduciary context.

https://thegiin.org/assets/Institutional%20Asset%20Owners_Approaches%20to%20setting%20social%20and%20environmental%20goals.pdf

2021, Journal of Small Business and Entrepreneurship.

Agrawal Anirudh, Hockerts Kai

Impact investing is an emerging alternative asset class. In the last few years, the investment in impact investing has grown many folds, however the research has not kept pace with the growing practitioner interest. The lack of knowledge about the field coupled with the lack of knowledge production of field might be dangerous in the long run. This is a systematic review of impact investing. This systematic review involves study of 85 published articles and reports. This literature was collected using the harzing’s publish or perish academic search engine and cross-checked against databases such as JSTOR and Web of Science. This review has four major contributions. First, the study reveals a unique longitudinal perspective on how the field is evolving and moving from pre-paradigm stage to the stage of proper scientific inquiry. It reveals that the field is evolving, as the reviewed literatures find that a higher number of empirical works were published recently. Second, the field impact investing is unique on six characteristics namely (1) capital invested, (2) degree of engagement with the investee, (3) process of selection, (4) social and commercial outcomes, (5) reporting outcomes, and (6) government role. Third, it reveals that the scholarship in the field has been mostly exploratory. Only recently the field is engaging in confirmatory studies. The research methods have used existing databases or existing single or multiple case studies. Finally, the field has to delve deeper into concepts like selection process, stakeholder management, opportunity recognition, and performance reporting to move the field forward and generate applied knowledge.

https://research.cbs.dk/files/61429775/anirudh_agrawal_et_al_impact_investing_acceptedversion.pdf

2021, Journal of Sustainable Finance & Investment.

Badri Zolfaghari

This article investigates the factors that prevent and facilitate impact investing strategies for philanthropic foundations to align their capital with their mission. Using qualitative data from foundations in both the US and South Africa, we identify five factors (i.e. mandate and country legislation, internal skills capacities, supporting infrastructure, market capacity and strong leadership) that pertain to the international foundations located in the North, and three factors pertaining to foundations in the South (i.e. understanding of fiduciary duty, the role of financial advisors and tax legislation) which influence the deployment and uptake of impact investing strategies. Findings also suggest that the adoption of a total portfolio management approach is the most adequate strategy to align fiduciary duty and mission, and therefore resolve this ethical tension that can be present in foundations. It concludes with suggestions for future theory and practice.

https://www.tandfonline.com/doi/abs/10.1080/20430795.2021.1907090

2021, The Institute for Emerging Markets Research of the SKOLKOVO Business School (IEMS).

Natalia Zaitseva, Kamila Novak

The final report includes a set of practical tools that were developed by the SKOLKOVO IEMS team based on the experience and identified “reference" practices used by the surveyed leading companies when building an effective sustainable development management system and social impact assessment.

https://www.researchgate.net/profile/Kamila-Novak/publication/355712271_ZOLOTOJ_STANDART_IMPAKTA_LUCSIE_KEJSY_I_PRAKTIKI_PO_IZMERENIU_SOCIALNOGO_VOZDEJSTVIA_BIZNESA/links/617ab86f53e51e1f94d35/ZOLOTOJ-STANDART-IMPAKTA-LUCSIE-KEJSY-I-PRAKTIKI-PO-IZMERENIU-SOCIALNOGO-VOZDEJSTVIA-BIZNESA.pdf

2021, Theories of Change: Change Leadership Tools, Models and Applications for Investing in Sustainable Development.

Swee-Sum Lam, Xiang Ru Amy Tan

This chapter highlights key challenges of impact assessment and argues for a unifying framework of impact assessment in impact investing. Given the current absence of common language for what impact is, and the diversity in methodological approaches and methods of how impact may be assessed, a unifying framework would facilitate comparisons of performance of impact investment funds.

Philanthropic organizations, foundations, investors and fund managers could benefit from such a unifying framework to assess, compare and aggregate impact across all investee firms, portfolios, and firm types in a spectrum of Social Purpose Organizations (SPOs) and overtime. Furthermore, a unifying framework could provide contemporaneous assessment of a SPO’s double or multiple bottom lines, as well as evaluate and manage intended and unintended outcomes of an intervention. These are essential for managerial decision making, business model pivoting or impact scaling. We advocate social impact as that which derives from an impact value chain where we distinguish outputs from outcomes and impacts. We further purpose that the Global Impact Investing Network (GIIN)'s characterization of impact investing can provide a unifying framework for impact assessment along this impact value chain.

https://www.google.com/books?hl=ru&lr=&id=-g8tEAAAQBAJ&oi=fnd&pg=PA77&dq=impact+investing+evaluative+tools&ots=-MJtJSIVr6&sig=emcZDl4gFNZR0PNWP64SkhxltK4

2021, WINGS, Sattva, The Vladimir Potanin Foundation, East Africa Philanthropy Network (EAPN).

Aarti Mohan, Sanjana Govil, Nikita Damle, Samridhi Puri, Barry Knight

This study examines philanthropy support organisations (PSOs) in India, Russia and Kenya, to understand their role in driving the growth and development of philanthropy, giving, and private social investment in these countries. The study examines the development of the sector in each country, by assessing its size, scope and other characteristics. There is some attempt to understand the individual and collective impact of PSOs in each country.

https://wings.issuelab.org/resource/impact-of-the-pse-in-india-kenya-russia-country-case-studies.html

Новая жизнь издательского проекта «Каталог «Социальное предпринимательство России»

Владимир Вайнер

В 2014 году Фонд развития медиапроектов и социальных программ Gladway представил первый каталог «Социальное предпринимательство России». Его печатная версия, изданная при поддержке Фонда «Наше будущее» тиражом 3000 экземпляров, сразу стала бестселлером, ежегодная электронная версия скачивается в среднем около 5000 раз на протяжении пяти лет, участниками стали сотни предприятий, а читателями десятки тысяч человек во многих странах мира. Партнерами проекта в разные годы выступали: ЦСИО «Соль», Impact Hub Moscow, Фонд «Навстречу переменам», «Союз женщин России», Объединенная металлургическая компания (АО «ОМК») и многие другие. К 2022 году формат и содержание проекта меняются: ключевым фокусом внимания становится оценка социально-экономического воздействия, материалы публикуются в специальной рубрике журнала «Позитивные изменения» раз в квартал на русском и английском языках.

В этом выпуске представлены кейсы социальных предприятий, которые первыми предоставили материалы по запросу редакции. Очень разные, но объединенные пониманием значимости импакт-подхода в инновационном и социальном секторе экономики.

Владимир Вайнер,

директор «Фабрики позитивных изменений»

https://youtu.be/zdikeQknjq8

Видео

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