Impact Investing (eBook)

Wolfgang Spiess-Knafl is the managing director of Next Generation Impact, Chairman of the social impact company Sports Philosophy and trustee of the Freedom for Children Foundation. Prior to this, he worked as a post-doctoral research fellow at the Civil Society Center at the Zeppelin University, Germany. Barbara Scheck is Professor for Entrepreneurship at Munich Business School, member of the Social Entrepreneurship Akademie and co-founder of Volunteer Vision. Her research interests include social finance, impact assessment and corporate volunteering. Previously, she was an assistant professor for social investment at the University of Hamburg, Germany.

Contents 6
List of Figures 7
List of Tables 8
1: Introduction 10
1.1 Context 10
1.1.1 Social Enterprises 11
1.1.2 Societal Challenges and Changes in the Social Sector 13
1.1.3 Capital Providers 14
1.2 Impact Investing 15
1.3 Outline of the Book 17
Bibliography 19
2: Social Entrepreneurship 21
2.1 Social Entrepreneurship at the Core 22
2.1.1 Introduction 22
2.1.2 Defining Social Entrepreneurship 23
Conceptual Challenges 23
Legal Forms of Social Enterprises 25
2.1.3 Differentiation from Other Actors 26
2.1.4 Scaling Strategies 29
2.2 Social Business Model Innovation 31
2.2.1 Opportunity Creation 32
2.2.2 Smart Distribution 33
2.2.3 Ecosystem Engineering 33
2.2.4 Cheap Sourcing 34
2.2.5 Smart Pricing 34
2.2.6 Inclusive Production 35
2.3 Thematic Areas for Impact Investing 35
2.3.1 Introduction 35
2.3.2 Sustainable Development Goals 36
2.3.3 Child Labor 47
Introduction 47
Definition 49
Drivers 50
Bibliography 52
3: Historical Development and Investment Rationale 59
3.1 Introduction and Definition 59
3.2 Rationale for Impact Investing 61
3.3 Investors 62
3.3.1 Donors 62
3.3.2 Investors with Reduced Financial Return Expectations 66
3.3.3 Investors with Market-Oriented Financial Return Expectations 66
3.4 Impact Investment Theories 67
3.4.1 Introduction 67
3.4.2 Trade-Off Considerations Between Social and Financial Return 68
Introduction 68
Trade-Off Conflicts 69
Strategies for the Resolution of the Financing Conflicts 70
3.4.3 Flexibility Restrictions Driven by Public Authorities 72
3.4.4 Sustainability Conflicts 73
3.4.5 Income Streams 73
3.4.6 Crowding-Out 76
3.4.7 Conclusion 78
Bibliography 79
4: The Impact Investing Market 82
4.1 Actors 82
4.1.1 Networks 83
4.1.2 Social Investment Advisors 84
4.1.3 Social Venture Capital Funds 85
4.1.4 Ethical Banks 86
4.1.5 Social Stock Exchanges 86
4.1.6 Crowdfunding Platforms 92
4.2 The Instruments and Mechanisms 94
4.2.1 Socially Responsible Investments 94
Introduction 94
Investor Profile 95
Financial Performance 96
4.2.2 Pay for Success Models 97
4.2.3 Guarantee Schemes 113
4.2.4 Catalytic Structures 114
Bibliography 115
5: Financing Instruments and Transactions 118
5.1 Introduction 118
5.2 Financing Instruments 120
5.2.1 Equity Capital 122
5.2.2 Debt Capital 123
5.2.3 Other Forms 124
Mezzanine Capital 124
Recoverable Grants 125
Forgivable Loan 125
Convertible Grant 125
Revenue Share Agreement 125
Grants 125
5.3 Deals 126
5.4 Exits 128
Bibliography 139
6: Social Impact Assessment 142
6.1 Introduction 142
6.2 Terminology 144
6.3 Impact Assessment as the Central Part of Impact Management 150
6.4 Purpose of Social Impact Assessment 151
6.4.1 Investors and Fund Managers 151
6.4.2 Social Enterprises 153
6.5 Challenges of Social Impact Assessment 154
Bibliography 158
7: Assessment Tools and Methodologies 160
7.1 How to Choose a Method 160
7.1.1 Introduction 160
7.1.2 Target Audience of Impact Assessment 161
7.1.3 Objectives of Impact Assessment 161
7.1.4 Reporting Determinants 161
7.1.5 Scope of Impact Assessment 163
7.2 Existing Social Impact Assessment Methods 164
7.2.1 Introduction 164
7.2.2 Methods for Assessing and Evaluation Social Impacts 164
Target Audience 165
Possible Assessment Functions in the Investment Process 165
Investee Maturity 165
Reporting Principles 166
Functional Type 166
Customizability 166
7.2.3 Data Collection 173
The Universe of Data Collection Methods 173
Indicators 174
Lean Data and the Use of Mobile Technology for Data Collection 175
7.3 Outlook 176
Bibliography 177
Index 179