• Summary

    Bloomberg BusinessWeek takes note of a trend among business schools — beginning with University of Utah and University of Michigan — to launch student-run social impact investing venture capital funds.

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    The Wall Street Journal's Venture Capital Dispatch blog notes that both University of Utah and University of Michigan have announced student-run venture capital funds focused on producing double bottom lines.

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    Former foundation president Stephen Viederman shares his thoughts about integrating social and environmental values into traditional investment strategies.

    "It's important to recognize that all investments have social and environmental impacts, mostly unintended, some positive, but many not. Sadly, most investors do not give much, if any, thought to the social consequences of their investments. What is different about 'sustainable investing' and 'impact investing' is the effort to include the assessment of social and economic factors as an integral part of the investment process."

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    The Guardian sits down with Caroline Mason, co-founder of Investing for Good which has advised more than GBP 25 million in impact investments since its launch in 2005. Mason, whose background is in traditional banking, shares her perspective on why mainstream investors should integrate social and environmental goals into their investments.

    "[Investing for Good] started out with the basic premise that 'ordinary people generally would like to see their money put to good use.'

    It was a time when figures such as Scottish tycoon Tom Hunter were hitting the headlines by giving away millions, and so the Investing for Good founders first looked into offering their financial know-how to philanthropists. But they soon realised philanthropy did not fit with their fundamental goal of helping social and environmental causes along the way.

    'This concept of making as much as you possibly can, irrespective of what it does, and then giving it away to try and give something back was a two-dimensional view of the world,' says Mason.

    And so Investing for Good turned its attention to a new philosophy of building social and environmental benefits into investment. 'Broadly, it's about positive use of money as an investment rather than as a gift,' she explains."

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    This article highlights some of the key challenges facing social impact investors in developing countries as identified through a survey by GIIN Investors' Council member Gray Ghost Ventures.

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    It is difficult to gauge the actual size of the 'impact investing' sector. Many companies are family offices or private venture capital firms that do not publish data on their size or target sector. However, a survey of 31 of the best-known funds in the sector with around $2 billion of assets under management—conducted this year for Gray Ghost Ventures, an impact investment fund—revealed a picture of the main investor categories. These include non-profit organizations and foundations, public-private partnerships, venture capital funds and corporate foundations. Most impact investment firms are headquartered in the U.S. and Europe, but an increasing number are based in developing countries, with India leading the way.

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    GIIN Investors' Council member Omidyar Network, founded by Pierre and Pam Omidyare, has committed up to $200 million to finance projects in India. The Omidyar Network uses a blended finance model, deploying both grants and for-profit investment to address social and environmental challenges.

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    Omidyar Network, the philanthropic investing firm of eBay Inc. founder Pierre Omidyar, plans to plough as much as $200 million into India in the next five years. The organization's target: businesses and non-profits that can make a "social impact" and improve life for people on the lowest economic rungs.

    The organization has had boots on the ground in India for about a year and is set to launch a formal office in Mumbai in September, said Jayant Sinha, managing director of Omidyar Network India, on Monday.

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  • Summary

    SONG Advisors, which is backed by George Soros, Omidyar Network, and Google.org, makes its first investments, totaling $4 million.

    Hyderabad-based Song Advisors has announced debut deals worth $4 million in India's education and healthcare space. The venture fund, backed by the Soros Economic Development Fund, Omidyar Network and Google, has invested in K-12 Techno Services and Eye Q Vision.

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  • Summary

    Traditional venture capital firms are increasing their investment into social and environmental businesses in India.

    In the 20-company portfolio of Nexus Venture East, a $320 million venture capital (VC) fund, three businesses stand out. There's Suminter India Organics, which does contract farming for organic produce; D.light Design, which provides solar lighting solutions; and Sohan Lal Commodity Management, which provides grain warehousing facilities in small towns and villages in 12 states.

    Nexus refers to them as 'impact investments' - businesses where the pursuit of profits is accompanied by the premise of social good.

    In the four years it has been in India, Nexus has invested $10 million in social businesses. However, in the next six months alone, it expects to match that amount. Says Sandeep Singhal, co-founder, Nexus: "Businesses are targeting the bottom of the pyramid because people have a genuine ability to pay. So, we are looking at a few good deals in this space."

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    SKS Microfinance, the world's second microfinance institution to have an initial public offering, has attracted both institutional and retail investors.

    SKS Microfinance Ltd.'s $347 million initial public offering of stock was subscribed 13.8 times after drawing strong investor demand, one of the bankers involved in the deal said Monday.

    The IPO, the first in India by a microfinance institution, has attracted significant attention to an area of the economy that is still nascent as an organized sector.

    Order-taking from institutional investors ended Friday, and orders from retail investors ended Monday.

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    This opinion piece, which first appeared in the Financial Times Fund Manager section, identifies an emerging market for financial intermediaries in microfinance, an investment sector that satisfies the demands of investors with social motivations.

    Two trains are chugging through the post-crash marketplace - one full of wealthy US investors willing to put their capital toward a mix of investment return and social good, and the other of developing world entrepreneurs and institutions hungry for modern financial tools.

    But for now, they move along separate tracks with no junction in sight.

    While "impact investing" - the concept of forgoing some percentage points of market return in exchange for a measurable social benefit - is not widespread, US advisers say they see many clients today scouting opportunities beyond simple philanthropy.

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    The New York Times writes how the impending initial public offering of SKS Microfinance shares has raised a debate about the future of its non-profit partnerships, and the future of the microlender's social components.

    The question is whether the social good will be as amply rewarded.

    SKS Microfinance is not the first microlender to go public, and there has long been debate over whether social enterprises should be turned into giant commercial operations. Proponents of commercial microfinancing say the money raised can provide even more loans to the needy than relying only on charitable donations.

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