Creating Shared Value

Rockefeller Foundation's Justina Lai throws light on the growing investment opportunities for impact investing and how the foundation supports the concept of shared value

Published: Jul 16, 2012 06:15:30 AM IST
Updated: Feb 27, 2014 06:13:51 PM IST
Creating Shared Value

Justina Lai works with the Rockefeller Foundation’s Program Related Investments (PRI) portfolio and on the impact investing initiative in New York.

Q. How is the Rockefeller Foundation supporting shared value through private partnerships with stakeholders in India?
We know that our resources, combined with other philanthropic and public spending, are insufficient given the magnitude of the social and environmental challenges in the world. Similar to our rationale for being involved in impact investing, we recognise that we need to leverage corporate and investor resources to achieve the impact we care about. We hope to support the concept of shared value, while holding stakeholders accountable for impact, in a similar way globally. Within India, we have supported the Monitor Group in their work around low-income housing for the urban poor. We have also worked with Intellecap to organise the Sankalp Forum to bring together stakeholders across Asia to share information on how market-based mechanisms can provide efficient and innovative solutions that address the needs of the poor. With our support, Intellecap has also explored how to engage the private sector in building urban climate change resilience and landscaped emerging business opportunities that can benefit the poor. Through our programme-related investments portfolio, we have invested in Aavishkaar India Micro Venture Capital Fund, which provides risk capital and assistance to micro and small businesses primarily in rural areas in order to commercialise innovations that arise from, and are marketed to, people at the base of the pyramid.

Q. Will impact investing gain mainstream recognition as an asset class?
Impact investing has certainly gained significant momentum and traction over the past few years partly due to the recognition that there simply is not enough philanthropic or public money to address the growing social and environmental challenges in the world. In addition, investors and consumers are increasingly looking to align their purchases and investments with their values. There is a growing number of people who don’t like hearing that their only options are to invest for maximum returns and then give a small portion away in charity. They want to move away from that binary mindset, and think about their investments as a tool for achieving social change aligned with their values. We are also seeing track records of success—sustainable business models are gaining traction and being replicated in different geographies and funds are showing positive and oftentimes, stabilising returns in a volatile market.  

Q. What is the scope?
In the US, which has the single largest philanthropic sector, the combined assets of all foundations is $580 billion and only about $43 billion is given out in donations each year. At $200 billion per year, the combined funding of bilateral donors is a bit higher than foundations but this is still far short of what is needed even when combined with philanthropy. In contrast, there are tens of trillions of dollars in the global capital markets. So the real opportunity lies in harnessing a portion of that funding, as well as the creativity and reach of the private sector, to put to work toward solving social and environmental problems.  

Q. What interest are you seeing among institutional investors in the US to fund social projects in the global south?
We’re seeing a broad range of investors entering the field including significant institutional investor interest and activity. Foundations such as the Gates Foundation are making programme-related investments and using their balance sheet to provide guarantees. Family offices have been pioneers in the field—investing in funds and making direct investments that align with their values. Banks are establishing social finance units—Morgan Stanley Sustainable Finance, UBS Values-Based Investing, JPM Social Finance to name a few. A more recent survey conducted by JPM and GIIN [Global Impact Investing Network] in December 2011, indicates that almost $4 billion is planned for investment over the coming year from the 52 investors that responded.

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