1. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Leverage Investment to Create Real Impact –
An Analysis of Impact Investing in the U.S and
Suggestions for Hong Kong and Mainland China

2. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Executive Summary
The United States is a pioneer in impact investing, comparatively, Hong Kong and
Mainland China are still in an initial stage. This report discusses the impact investing
in the United States, Hong Kong and Mainland China. Then, conducts a case study of
one U.S impact investing firm, and interviews their chairman to understand how to
generates social impact and financial return sustainably. Finally, the report provides
recommendations about how to develop and promote impact investing in Hong Kong
and Mainland China as below.
As an MBA candidate at CUHK, I had a great opportunity to take an exchange study
at the Kellogg School of Management, Northwestern University in the U.S. During
the exchange study, I joined the Net Impact student club, went to a national social
impact conference, and more importantly, experience the U.S culture and business
environment to know reasons behind the impact investing. I would express my sincere
appreciation to Ms. Elsie Tsui, Project Director of CUHK Center for Entrepreneurship,
and the CUHK Business School CSR Center, without their support, I cannot finish
this CSR project report.
Remove regulatory
barriers to unlock private
impact investment
Increase the effectiveness
of government programs
Provide incentives for
private impact
investment
Encourage innovative
impact-oriented
organizations and
opportunities
Standardize and improve
measurements

3. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Research background
I have actively led many Corporate Social Responsibility projects, including
improving environmental awareness with World Wildlife Fund in China, initiating
cultural and educational exchange program with AIESEC in India, facilitating China’s
foreign sustainable investment in Kenya, and in May 2016, my team organized the
10th annual CUHK MBA CSR conference in Hong Kong. Throughout these
experiences, I gain a lot of CSR insights, and I am keen on nurturing more impactful
projects in an effective and sustainable way.
Impact investing is an investment with the specific objective of achieving positive
social and/or environmental impact as well as financial return. It covers many areas
such as agriculture, education and energy. Therefore, impact investment can help
encourage more people to involve in socially responsible projects.
Impact Investing and Its Ecosystem
Impact investing (Exhibit.1) can be defined as investments that create social and/or
environmental impact while being financially sustainable. These impact investors
believe in “doing well by doing good”. Historically, governments and philanthropic
organizations have played a key role in improving the lives of the poorest populations
and although both of them play critical roles in providing basic human services
(feeding the homeless, helping earthquake victims etc.), these efforts are not
sustainable. Alternatively, impact investors help enterprises scale with seed/growth

4. The Chinese University of Hong Kong Master of Business Administration QIN KONG
capital and managerial assistance. Furthermore, impact investing has a conscious
focus on social and/or environmental impact unlike private corporations that might
create hundreds of thousands of jobs and thus create a significant social impact. For
such enterprises, financial returns to their shareholders are the key driver.
The Impact Investing Ecosystem includes venture funds, philanthropic organizations
with program-related investments, organizations providing platform for investors and
social entrepreneurs and professional associations.
Analysis of Impact Investing in the United States
Since the 1950s, the country has been involved in nurturing many impactful investors
and social entrepreneurs, and established related regulating and civil systems
(Appendix 1: A Brief History of Impact Investing in the U.S.). For example, in 1968,
the Ford Foundation began experimenting with Program-Related Investments that
offered the potential for social change. In the 1980s and 1990s, socially responsible
investors diverted capital from South Africa to pressure leaders to end apartheid. In
2007, the Rockefeller Foundation convened a meeting in which several leaders in
finance and philanthropy coined the term “impact investing.” By 2016, The Forum
for Sustainable and Responsible Investment reported that the total US-domiciled
assets under management using SRI (Sustainable, Responsible and Impact Investing)

5. The Chinese University of Hong Kong Master of Business Administration QIN KONG
strategies grew to $8.72 trillion, an increase
of 33% since 2014. (Exhibit.2 and
Appendix.2)
Recently, leaders in the social and financial sectors have demonstrated a growing
commitment to impact investing. Businesses, from startups to multinationals,
increasingly see opportunities to serve new markets with products and services that
have explicit social impact. Investors began to work in concert to build industry
infrastructure and centers of investment activity, such as the Global Impact Investing
Network (GIIN) and the Global Impact Investing Rating System (GIIRS).
High-net-worth individuals have shown tremendous interest in impact investing.
Entrepreneurs and investors, have made significant commitments to impact investing
to unleash the power of entrepreneurship to solve significant social and environmental
problems. Private foundations increasingly see impact investing as an important
complement to grant making. Finally, social service providers have been helped by
philanthropy to test and refine ideas.
Numerous trends have shaped the evolution and growth of SRI within US financial
markets. Money managers increasingly are incorporating ESG (Environmental, Social
and Governance) factors into their investment analysis and portfolio construction,
driven by the demand for ESG investing products from institutional and individual

6. The Chinese University of Hong Kong Master of Business Administration QIN KONG
investors. Climate change remains the most significant overall environmental factor in
terms of assets. At the same time, transparency, anti-corruption, gender lens investing
and community investing are growing fast.
Case study of Equilibrium Capital Group and Its Impact Investment
Equilibrium Capital Group is an impact
investing firm based in California, U.S. It
innovates and manages sustainability-driven real asset investment strategies and
products for institutional investors1
. It builds proprietary real asset strategies in three
sectors: Agriculture & Food, Renewable Resources and Sustainable Real Estate. It
delivers institutional quality returns and sustainable alpha through investment
manager-operator portfolio teams.
I had an opportunity to interview David Chen, an adjunct professor of finance and
program director of impact investing at the Kellogg School and chairman of
Equilibrium Capital Group, to discuss impact investing and the Equilibrium Capital
Group. According to David, the firm invests into Asia and emerging markets,
especially the Agricultural sector, with average 12% annual financial return, which
was approximately similar to the 12.25% return from S&P 500 in 20162
. For
Equilibrium Capital, it invests in a company for its good performance, solid growth,
profitability, and the ability to sustain growth.
1 Our firm, http://eq-cap.com/equilibrium-firm/
2 2016 S&P 500 Return, https://dqydj.com/2016-sp-500-return/

7. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Impact investing has changes over years. A lot of the first-generation impact products
were venture capital funds that targeted developing countries. But in the last few years,
impact investing expands beyond the venture capital model into instruments across
the entire asset allocation, including private equities, public equities, fixed income and
debt offerings and real assets. Their clients are looking for impact-investing strategies,
asking for impact products, “my money should do more than bring returns.” And
institutional investors are thinking about sustainability as affected by global
demographics, resource consumption, asset productivity and climate change.
Analysis of Impact Investing in Hong Kong and Mainland China
From 2007, the Hong Kong Social Enterprise Challenge (HKSEC), a social venture
plans competition organized by the Center for Entrepreneurship of The Chinese
University of Hong Kong, has been at the frontier in educating students and the public
about social enterprises in Hong Kong3
. And starting from January 1st
2016, the Hong
Kong Stock Exchange requires HK-listed companies publish annual ESG report
(Environmental, Social and Governance), as one of the investment evaluation criteria.
Comparably, Impact investing is a very new concept in mainland China that is
unfamiliar to majority of local investors. Aside from development focused
organizations such as IFC and the Asian Development Bank, there are only few social
and environmental impact investors in China (Appendix. 3).
3
About HKSEC, https://www.hksec.hk/page/about-hksec

8. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Although impact investing is currently a new concept in Hong Kong and mainland
China, it should be recognized that the philosophy embodied by impact investing is
deeply rooted in our traditional culture. The spirit of impact investing could actually
be traced back to China’s traditional cultural concepts, such as “while an
underprivileged person should maintain his own integrity, a wealthy person should
contribute to the welfare of the society (穷则独善其身，达则兼济天下)”. From this
perspective, the impact investing concept could resonate with local business
community and the report is going to present recommendations.
Recommendations to Hong Kong and Mainland China
Hong Kong as a financial hub in Asia and gateway to China put it in a unique position
to serve as a social finance hub for the region. At the same time, Mainland China can
also take a leadership in the social impact sector to develop its sustainable economy in
a better-balanced society, in other words, to achieve the Modern China Dream. I
believe both Hong Kong and Mainland China have advantages to lead and success in
the impact investing. The first is the emergence of a global movement for impact
investing seeking the most effective ways to generate social impact. The second is the
growing demand from youth for careers providing both money and meaning as well
as from professionals who are eager to add value to society. The third is the demand
for new organizational structures that pursue dual financial and social objectives. The
fourth is a broadening discussion around cross sectoral as well as cross-economy
partnerships.

9. The Chinese University of Hong Kong Master of Business Administration QIN KONG
To take these advantages, the Governments need to advocate below five strategies
within their leadership and policy formulation, and by embracing the Impact Investing,
Hong Kong and Mainland China are well placed to be an international social finance
and innovation hub.
Remove regulatory
barriers to unlock private
impact investment
Increase the effectiveness
of government programs
Provide incentives for
private impact
investment
Encourage innovative
impact-oriented
organizations and
opportunities
Standardize and improve
measurements

10. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Appendix 1 A Brief History of Impact Investing in the U.S.4
4
US National Advisory Board on Impact Investing, PRIVATE CAPITAL, PUBLIC GOOD, June 2014

11. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Appendix 2 Sustainable Investing Growth in the U.S (Billions), 2005-20165
5
USSIF Foundation, Sustainable and Impact Investing In the United States Overview, 2016

12. The Chinese University of Hong Kong Master of Business Administration QIN KONG
Appendix 3 Selected impact investors in Hong Kong and Mainland China6
6
Tao Zhang, Yong Ge and Ruxian Zhao, Creating the Chinese Dream, Nov 2012

13. The Chinese University of Hong Kong Master of Business Administration QIN KONG
References
Kellogg Insight, What Is the Future of Impact Investing?, December 2, 2016
US National Advisory Board on Impact Investing, PRIVATE CAPITAL, PUBLIC
GOOD, June 2014
Tao Zhang, Yong Ge and Ruxian Zhao, Creating the Chinese Dream, Nov 2012
Philo Alto and P. Ming Wong, ADOPTING THE LONDON PRINCIPLES: Policy
Considerations to Grow Impact Investing in Hong Kong, July 2014
Monitor Institute, Investing for Social & Environmental Impact, Jan 2009
The Case Foundation, A Short Guide to Impact Investing, Oct 2015