IMPACT BEYOND FINANCIAL RETURN: FROM MEASUREMENT TO INTEGRATION

Transcription

1 IMPACT BEYOND FINANCIAL RETURN: FROM MEASUREMENT TO INTEGRATION Irene Beccarini, PhD Principal Investigators: Prof. Fabrizio Ferraro Prof. Heinrich Liechtenstein IESE Business School 5 th Annual Meeting of the Knowledge Programme European Investment Bank March 7 th, 2017

2 Challenges in Impact Investing Impact Investing has emerged as "an investment approach that intentionally seeks to create both financial return and positive social or environmental impact that is actively measured" (World Economic Forum, 2013: 7). How is impact measured? How is impact integrated in the investment process? 2

3 The Project We explore the process of impact integration We study experienced impact investing firms We observe the process at different levels: Venture firm, Fund, Portfolio firms We analyze: how impact is defined and monitored the conflicting demands venture firms deal with 3

4 HOW DO WE DO IT?

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9 OUR WORK SO FAR

10 First Year Second Year Future Overview Impact Integration (Combo - UK) 3-Months participant observation at Combo Ventures Working paper on hiring and socialization Working paper on impact integration Impact Integration (Buzz and Link) 5-Months participant observation at Buzz Ventures Analyses and preliminary findings Started fieldwork at Link in Spain (February June 2017) Impact Integration Follow-up interviews for Buzz Working paper on cocreation of impact Working paper on identity matching More Interviews with impact investing funds in France, Italy, Spain, London Comparative study 10

11 BUZZ FIELDWORK, DATA, AND ANALYSIS

12 Fieldwork and Data 5-month participant observation 139 detailed field-notes on all their meetings, phone calls, and informal conversations 600 pages, words 62 internal documents Meetings, on-site visits, and calls Informants for creating the deal flow Entrepreneurs for assessing potential deals or closing deals, or entrepreneurs of firms that were being divested from the previous fund Relevant actors in specific sectors for the due diligence Potential co-investors in deals Investors of the fund Investment meetings Company meetings and events In-depth interviews Investment team CEOs of companies invested by the previous fund or to be invested in the new ones All interviews lasted between 45 and 105 minutes 12

13 Data Analysis Field notes and internal documents We run a preliminary analysis of almost 40% of field notes Mapping and cross-tabulation of projects Comparison between invested and not-invested projects Emerging Themes 13

14 The deal flow Sectors Sustainable Living Education & Skills Health & Wellbeing Projects Received Dead on arrival Discussed in investment meeting First meeting only Stand-by Preinvestment due diligence Invested Finance TOTAL

15 Sustainable Living 15

16 Coding Example Second-order categories Generating systemic change First-order codes Co-creation of impact Investing in high risk/return ratio opportunities Changing the structure of the sector Influencing the offer in the market Attracting competitors in the market Social Innovation Distributing the value along the value chain High quality at affordable price Social Impact Representative quotes If they are willing to move more towards the model we are thinking of, it becomes a systemic Project. If we want to have such an impact we need to build it: differently, our job would be easy. Our philosophy is to go where the money from the private sector does not go because the risk/return ratio is perceived as too high. The real impact is that, if the new business model works, it might influence the whole sector. If I look at [Project], I realize we have changed the offer in [Geographical Area]. We have made the market transparent and regulated the prices. [ ] It is already having an effect on the prices of other private operators in the market. Our objective is to create startups that are successful in order to attract other operators. We need to create a win-win process, a process in which all the elements of the chain win, not only the entrepreneur We need to develop processes that do not penalize the productive chain. Also the public sector does good, but it pays its employees 7 euros per hour: what sense does it make? We aim at offering quality products/services at an affordable price. 16

17 BUZZ EMERGING THEMES

18 Co-Creation of Impact Co-creation of Impact: A Process Theory of Investment Decisions in Impact Investing Aligning theories of impact: Impact as systemic change Impact Investing firms need to play a more entrepreneurial role Impact is co-created Gut feel They develop their gut feel in their interactions with entrepreneurs and in the process of envisioning themselves in the investor-entrepreneur relationship Similarities in implicit and visceral attitudes Similarity in entrepreneurs and impact investing fund managers implicit and visceral attitudes, stereotypes and unconscious sub goals Is a necessary condition for identity matching between entrepreneurs and impact investing fund managers 18

19 Challenges in Impact Investing Impact Investing has emerged as "an investment approach that intentionally seeks to create both financial return and positive social or environmental impact that is actively measured" (World Economic Forum, 2013: 7). How is impact measured? How is impact integrated in the investment process? 19

20 IMPACT BEYOND FINANCIAL RETURN: FROM MEASUREMENT TO INTEGRATION Irene Beccarini, PhD Principal Investigators: Prof. Fabrizio Ferraro Prof. Heinrich Liechtenstein IESE Business School 5 th Annual Meeting of the Knowledge Programme European Investment Bank March 7 th, 2017