robert kraybill

Democratizing the Social Capital Markets

October 16, 2013

Aldaba Theater, University of the Philippines

Quezon City, Philippines

The State of Impact Investing Today

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Monitor Calvert JPM/Rockefeller

Impact Investment Market Size ($bn)

Estimated Near-term Potential Today

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Estimates of the Potential Size of the Impact Investing Market are large… but the potential has not yet been fully achieved

Impact Investment Market Size ($bn)

Source: “From the Margins to the Mainstream.” World Economic Forum. September 2013.

“Impact investing is currently growing linearly. In order for it to grow exponentially, we need to find a way to incorporate

mainstream investors into the mix.”

– Randall Kempner, Executive Director, Aspen Network of Development Entrepreneurs, Aspen Institute

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As quoted in “From the Margins to the Mainstream” by the World Economic Forum, September 2013.

Source: GIIN, J.P. Morgan.

Source of Funds for Impact Investment Fund Managers, 2012

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Impact Investing Landscape

Invest through Mutual Funds

Microfinance Investment Vehicles

Social Venture Capital Funds Private Loans

and Private Equity Investments

Publicly Traded Shares and

Bonds

DFIs

Retail Investors

Broad Range of Institutions

Foundations

Pioneering Institutions

Family Office / HNWIs

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Retail investors want to be involved in impact investing

U.S. Retail Market Study

$120 billion potential today

~50% of Americans interested in Impact Investing

Minimal cannibalization of charitable donations (~10%)

Increased investing activity after first impact investment

Source: Hope Consulting (2010)

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Shujog, IIX and the Impact Exchange

IIX aims to assist Social Enterprises to raise investment capital in order to grow

IIX's mission is to promote inclusive growth, economic development, and environmental sustainability. IIX connects Social Enterprises (SEs) with Investors and facilitates the investment process. In addition, IIX provides technical assistance to SEs in order to get them ready to receive investment.

Shujog is the non-profit sister entity of IIX. Its mission is to explore issues that impact the growth and sustainability of SEs and develop solutions through advocacy, research and assessment.

Shujog aims to create better understanding of the Social Enterprise space

IIX and Shujog: Working together to nurture the Social Enterprise and Impact Investing space

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SEs Seed-stage Early growth stage Mature

Type of investment

Seed capital Equity, quasi-equity Shares, bonds, funds

Investor Incubator HNWI, Family offices Retail, institutional

Capital raise

$ $$ $$$$$$

Impact

Building Social Capital Markets From seed funding to public listings

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Impact Exchange: A Partnership between IIX and SEM

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Leader in Asian Impact Investing sector

Global network of impact investors and other market participants

Pipeline of Asian SEs

Track record in impact investment deal facilitation

Impact Assessment expertise (Shujog)

• Established and innovative exchange operator

• Infrastructure and regulatory oversight

• African network / link to India

• Diversified global investor base

• Commitment to sustainability

Impact Investment Exchange Asia

Stock Exchange of Mauritius

Mission protection

Liquidity, transparency, efficiency

Increased impact

IIX conducts Impact screening and monitoring and will develop the market

SEM operates the Impact Exchange board on its platform under regulation of

the Financial Services Commission

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The promise of a Social Stock Exchange

The launch of Impact Exchange will democratize capital markets…

…providing widespread access to impact investment opportunities

…allowing SEs to move beyond private funding from foundations and wealthy individuals

…providing liquidity to investors, and promoting exits for early-stage investors

…and bringing transparency to the entire process

Mainstream

High-Net-Worth Individuals

Institutions

Social Venture Funds

Family Offices

Foundations

Current investors

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Maximize impact and democratize capital markets

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What it is

• Impact Exchange is:

A dedicated board… …of an established,

regulated stock exchange…

…devoted to listing shares and bonds issued by social enterprises and

social impact funds…

…that meet stringent listing criteria relating to

social and environmental impact.

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What it is

• Impact Exchange is:

The world’s first social stock exchange

A single market where investors can find

opportunities to back leading SEs…

…and SEs can be assured of finding mission-aligned

investors…

…all in a market which provides liquidity and

transparency.

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Why Mauritius? Strategic location – Leading financial hub for investment in Asia and Africa

One of the leading exchanges in Africa – SEM is the third largest exchange in Africa and a full member of the World Federation of Exchanges

International – Very accommodating to foreign investors and issuers; multicurrency listing and trading

Financial hub - domicile for funds with AUM totalling ~$400Bn

Listing process - tailored to needs of relatively small firms

Innovation - “Most Innovative African Stock Exchange of the Year Award” in 2011, 2012

Commitment to Sustainability – strong supporter of government’s “Maurice, Ile Durable” initiative

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Impact Exchange Stakeholders

Investors in Public

Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Issuers

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Impact Exchange Stakeholders

Investors in Public

Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Issuers

Benefits

• Access to capital

• In large amounts

• At lower cost

• Liquidity

• Diversified shareholder base

• Mission-aligned investors

• Triple bottom-line value capture

• Transparency for Impact

• Benchmarking

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Impact Exchange Stakeholders

Investors in Public

Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Issuers

Benefits

• Ease of access

• Single market for SEs

• Open to retail investors

• Connected through brokers

• Liquidity

• Lower transaction costs

• Transparency

• Triple bottom-line returns

• Portfolio diversification

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Impact Exchange Stakeholders

Investors in Public

Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Issuers

Benefits

• Liquidity for top portfolio companies

• Social and environmental value capture

• Invest with knowledge of increased exit options

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Impact Exchange Stakeholders

Issuers Investors in

Public Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Role

• Preparing issuers for listing and financial aspects

• Securing investors

• Assist in meeting ongoing listing obligations

Role

• Preparing impact assessment

• Preparing issuers for listing on social aspects

• Impact verification

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Impact Exchange Stakeholders

Investors in Public

Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Issuers

Role

• Market access for retail and institutional investors

• Secondary market trading

• Market-making

• Research

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Impact Exchange Stakeholders

Investors in Public

Markets

Investors in Private

Placements

Brokers

Social Advisors

(AIRs)

Financial Advisors

Information Providers

Issuers

Role

• Expansion of social and environmental data

• Integrate into current ESG platforms

• Highlight performance and impact for investors

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How to get involved

• We invite all interested parties—including SEs, impact investors, and prospective partners—to visit our website and learn more

• Register your interest in being part of Impact Exchange

• http://impactexchange.asiaiix.com/

Photo credit: National Geographic Page 23

Creating social and environmental capital markets

We envision a future in which:

‣ Capital markets will increasingly reflect triple-

bottom-line value

‣ Enterprises will serve many stakeholders, not only

shareholders

‣ In financial markets, one dollar will no longer

equal one vote

‣ Externalities currently borne by the underserved

will be priced into corporate decisions

‣ Investors will have access to real-time social and

environmental information, not only financial

information

Photo Sources: The Economist, Thomson Reuters

Value

Creation

Stakeholders

Market

Participation

Market

Information

Pricing of

Externalities

Impact Exchange

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Thank You impactexchange.asiaiix.com

www.asiaiix.com

Capital Markets for Social Good