Impact Funding, Impact Funding versus Crowdfunding, Socially Responsible Investments SRI, Goals of SRI, Strategies of SRI, Steps in SRI

1. Impact Funding
➢ Social impact investments (SIIs) aim to achieve both social goals and
financial returns.
➢ Freireich and Fulton (2009, p. 11) define impact investing as ‘actively
placing capital in businesses and funds that generate social and/or
environmental good and at least return nominal principal to the investor.’
➢ A more precise definition of SIIs was ideated by O’Donohoe et al. (2010)
who recognized a list of features for SIIs. They focus on:
• the provision of capital;
• the intention to generate social impact;
• the measurement of social impact; and
• the return expectation

2. Impact Funding
➢ India is considered a breeding ground for (social) impact investing due to
the enormous size of its demography and the unfulfilled demands for social
and economic services.
➢ The reduced public investment in priority sectors like primary education,
health, housing, water and sanitation etc. has allowed the growth of the
private entrepreneurial space
➢ While there has been no apparent shortage of private capital to spurt social
innovations, the emergence of dedicated social investment funds is a
rightful recognition of the importance of social impact funds to India’s
economy and job creation.
➢ There are certainly some unique characteristics of these new impact funds,
and have been able to make a policy impetus in areas that require a
dedicated flow of investments.

3. Crowd funding versus Impact Funding
➢ Crowd funding is defined as "a collective resource-pooling practice used to
finance individuals, companies, organizations, funds, projects, products or
groups" (Toniic, 2013). Crowd funding is predominantly facilitated by online
marketplaces, which aggregate the small amounts of capital within limited
timeframes. There are four primary models for crowd funding: equity, debt,
reward and donation-based.
➢ Thus crowd funding is basically for equity and debt in social enterprises
➢ Impact investing has been defined as "investments made into companies,
organizations, and funds with the intention to generate social and environmental
impact alongside a financial return“ Global Impact Investing Network (GIIN)
(2016).
➢ From this, it is clear that the two concepts are not mutually exclusive, but
actually closely related.

4. Crowd funding versus Impact Funding
➢ Crowd funding uses an online platform for which there are different fee
models.
➢ Cross-border equity crowd funding is also be governed by a set of complex
international regulations, which often result in significant compliance costs.

5. Socially Responsible Investments
(source:https://www.fool.com/investing/2016/09/18/what-is-socially-responsible-investing.aspx)

6. Socially Responsible Investments
➢ Socially responsible investing (SRI), or social investment, also known as
sustainable, socially conscious, "green" or ethical investing, is any
investment strategy which seeks to consider both financial return and
social/environmental good to bring about social change regarded as
positive by proponents.
➢ An investment that is considered socially responsible because of the nature
of the business the company conducts.
➢ Socially responsible investments avoids investment in companies that
produce or sell addictive substances (like alcohol, gambling, and tobacco)
and seeking out companies engaged in social justice, environmental
sustainability and alternative energy/clean technology efforts

7. Socially Responsible Investments
➢ Socially responsible investing considers environmental, social and
corporate governance, also known as ESG criteria.
➢ These criteria help many socially responsible investors decide which
companies or funds to invest in.
➢ This includes companies that respect the environment, treat their
employees and suppliers fairly and promote ethical policies.
➢ Some investors believe that companies that practice good citizenship can
yield greater returns than those that don’t.

8. Socially Responsible Investments
➢ An example of socially responsible investing is community investing, which
goes directly toward organizations that have a track record of social
responsibility through helping the community and have been unable to
garner funds from other sources, such as banks and financial institutions.
➢ The funds allow these organizations to provide services to their
communities, such as affordable housing and loans. The goal is to improve
the quality of the community by reducing its dependency on government
assistance such as welfare, which in turn has a positive impact on the
community's economy.

9. Goals of Socially Responsible Investors
➢ Cleaner Environment: “Green” investors prefer companies that don’t
pollute the environment.
➢ Social Justice: Some investors refuse to do business in countries with a
record of human rights violations. Others look for companies
that provide their workers with fair wages and decent working conditions.
➢ Promoting Peace: Peace investors won’t invest in companies that make
weapons or profit from conflict in foreign countries.
➢ Promoting Health: Many socially responsible investors refuse to invest in
companies that sell tobacco or alcohol.
➢ Promoting Morality: Many socially responsible investors avoid investing in
“sin industries.”, such as liquor, gambling, pornography, and contraception

10. Strategies of Socially Responsible Investors
➢ Negative Screening: Negative screening means refusing to invest in
companies that don’t meet the social standards. E.g. many socially
responsible mutual funds screen out tobacco companies.
➢ Positive Investing: This involves choosing companies in the portfolio
specifically because of their socially and morally correct behavior. Positive
investing is also known as impact investing, or ESG incorporation.
➢ Community Investing: This is a specific subcategory of positive investing that
focuses specifically on investing in community-based organizations, especially
in low-income areas.
Community investment provides loans to people and organizations that would
have trouble getting them otherwise. These loans can be used to fund small
businesses and provide services such as housing and education.

11. Strategies of Socially Responsible Investors
➢ Shareholder Action: Socially responsible investors do not just use their values
to choose companies for their portfolios, they also try to influence the
behavior of companies in which they hold stock.
One way to do this is by filing shareholder resolutions – proposals for
management about how to run the company.
E.g.: Resolution requiring the company to disclose all the donations it makes to
political campaigns.

12. Steps in Socially Responsible Investments
Steps
in SRI
1. Choose
Social Goals
2. Choose
Financial
Goals
3. Find
Investments
4. Compare
and Choose