The Impact Investor: Lessons in Leadership and Strategy for Collaborative Capitalism

CONCRETE LESSONS FOR IMPACT INVESTORS The Impact Investor is simply a must–read for those interested in the fast–growing field of impact investing and its emergence as a new and distinct approach to asset and wealth management. The book presents a definitive and indispensable guide for the seasoned entrepreneur, policymaker, investment professional, and MBA student alike. Matt Bannick, managing partner, Omidyar Network; cochair, US National Advisory Board on Impact Investing This book comes at a critical juncture in the development of impact investing. A growing set of global investors are excited about impact investing yet remain uncertain about performance and how to achieve it. Fortunately we can now learn practical lessons from those in the trenches. If you are about to invest your first $20 on vested.org or place a clients $10 million in impact products, you need to read this book. Antony Bugg–Levine, CEO, Nonprofit Finance Fund; coauthor, Impact Investing: Transforming How We Make Money While Making a Difference The authorsall longtime leaders in the impact investing spaceprovide valuable insights for a new class of investors. Their new book uses real–world examples from funds that meet investor expectations of return on capital and that support impact businesses that are using market–based solutions to solve some of our greatest social challenges. Jean Case, CEO, Case Foundation A must–have for all interested in impact investing! Annie Chen, Founder and Chair, RS Group, Hong Kong The Impact Investor takes the field of impact investing from theory to proven best practices, demonstrating not only that the train has left the station but also that the destinations along the journey are proving quite attractive for both commercially and socially focused investors. Ron D. Cordes, executive cochairman, AssetMark This is a significant contribution to the development of impact investing. It moves the debate from well–meaning rhetoric to the challenges faced by real managers making real investment decisions to solve real problems. Nick ODonohoe, CEO, Big Society Capital, London In these times of global transformation, aligning business and investment with our goals for positive social change is not merely a matter of preference, it is an absolute necessity. The Impact Investor introduces us to the innovators on the front lines already making change happen in markets across the globe. Darren Walker, president, Ford Foundation

Tables and Figures ix Foreword by Sir Ronald Cohen xi Preface xix Introduction 1 Part One Key Practices and Drivers Underlying Impact Investing 17 1 Inside Collaborative Capitalism 19 The Roots of Collaborative Capitalism 20 The Collaborative Capitalism Pyramid 34 Three Core Elements of Collaborative Capitalism 39 Putting It All Together: Collaborative Capitalism in Action 44 Looking Ahead 56 2 Raising the Curtain on Impact Investing 58 Sizing the Market 62 Key Actors and Activities 66 The Fund Perspective 73 The Twelve Funds 81 Performance Numbers 93 The Impact Investing Fund Landscape 98 Part Two Four Key Elements of Successful Impact Investing 109 3 Impact DNA 111 A Means to an End 114 The Need for Clarity 117 The Impact Value Chain and Theories of Change 118 Getting Everyone Aligned 127 From First to Last: Measurement and Reporting 129 Bringing It Together: Sequencing the DNA of Impact Investors 138 Mission First and Last Approaches 141 The Mission First and Last Tool Kit 149 4 Symbiosis as Strategy 155 The Practice of Policy Symbiosis 156 Public Sector Innovation in Alignment with the Private Sector 158 The Public Case for Impact Investing 159 The Policy Symbiosis Tool Kit 181 The Five London Principles 191 5 The New Deal 196 The Terrain for the New Deal 196 Myths of Catalytic Capital 200 Four Purposes of Catalytic Capital 203 The Catalytic Capital Tool Kit 222 6 Multilingual Leadership 229 New Skillsets for New Leaders 230 Multilingual Leadership in the Research 232 Multilingual Leadership as Cross–Disciplinary and Collaborative 235 Defining Multilingual Leadership for Impact Investing 239 The Multilingual Leader: From Individual to Team to Firm 243 Building a Multilingual Team: Acquiring Multilingual Capacity 247 The Multilingual Leadership Tool Kit 249 Beyond Impact Investing 254 Part Three Looking Ahead: Trends and Challenges 257 7 The Writing on the Wall 259 8 Concluding Reflections 285 Ongoing Challenges for the Field’s Development 287 Using the Right Tool for the Right Problem 291 The Road Ahead 291 Impact Investor Resource Guide 293 Notes 308 Acknowledgments 324 About the Authors 332 Index 335

CATHY CLARK is director of the CASE Initiative on Impact Investing (CASE i3) and a professor at Duke Universitys Fuqua School of Business. She also co–leads the Social Entrepreneurship Accelerator at Duke, part of USAIDs Higher Education Solutions Network. She is a leading authority on for–profit social entrepreneurship, impact investing, and impact assessment. JED EMERSON is senior advisor to three family offices, each of which is executing 100% impact/sustainable investment wealth management strategies. He is also chief strategist of ImpactAssets and a senior fellow with the Centre for Social Investment at Heidelberg University. BEN THORNLEY is the founder and managing director of ICAP Partners and a strategic advisor to REDF and Pacific Community Ventures (PCV). He created the Impact Investing Policy Collaborative at PCV, with partners from Harvard University, and consults with CalPERS and other leading financial institutions on the social and economic impacts of over $25 billion of targeted investments.