This document discusses developing an impact investment strategy. It outlines 6 key steps: 1) Developing an investment strategy by setting priorities and defining impact themes. 2) Sourcing investment opportunities through partners. 3) Conducting due diligence on essentials like impact thesis and risk. 4) Getting to deal terms by clarifying investment options. 5) Managing for mutual success through regular reporting and support. 6) Monitoring performance by setting targets and measuring impact and returns. It also discusses thematic investment approaches that classify companies into impact themes aligned with UN Sustainable Development Goals.

1. Developing An Impact
Investment Strategy
By Ratan Rajpal

2. ___
What is Impact &
Impact Investment?
“The only limit to impact is your imagination and commitment”
- Tony Robbins, motivational speaker

3. mpact Investment seeks to
generate a positive social or
environmental impact alongside
a financial return.

4. Key Characteristics of Impact
Investment
Aims To Have A Positive
Social And Environmental
Impact
Delivers a Financial Return
on Capital
Spans a Broad Range of Sectors
and Regions
Measures Social/
Environmental Impact
regularly

5. ___
Impact Investment
Strategies
“I have been struck again and again by how important
measurement is to improving the human condition.”
Bill Gates, businessman and philanthropist

6. The Focus Test:
Arrange in
Order
• Sourcing an investment pipeline
• Conducting due diligence
• Getting to deal terms
• Developing an investment strategy
• Managing for mutual success
• Accessing and achieving performance

7. Investment
Strategy
Process
1. Developing an investment strategy
2. Sourcing an investment pipeline
3. Conducting due diligence
4. Getting to deal terms
5. Managing for mutual success
6. Accessing and achieving performance

8. 1. Developing
an investment
strategy
1. Setting Investment Priorities:
• Impact-first or Financial-first
• What portion of portfolio goes to early-stage
impact investment?
2. Align investment themes along with the definition
of impact
• Articulate company’s mission and values
• Decide on industry, impact goals and
investment themes
• Strengthen sector knowledge
• Recognise geographical preference
• Define ‘Theory of Change’
3. Assess the assets

9. 2. Sourcing an
investment
pipeline
1. Find trusted partners
2. Incubators and accelerators
3. Impact investing funds
4. Networking groups
5. Deal flow and investor networks
6. Key events and conferences
7. Impact intermediaries
8. Crowdfunding(if possible)/ Co-investors

10. 3. Conducting
Due Diligence

11. 3.1 Due
Diligence:
Essentials
1. Validating the investment and impact thesis;
2. Evaluating their strategy for achieving impact;
3. Assessing the experience of the team;
4. Visiting fund offices, investees, and pipeline;
5. Analysing fund economics; and
6. Assessing fund operations

12. 3.2 Due
Diligence:
Managing Risk

13. 4. Getting to
Deal Terms
• Clarify investment options based on country of capital
origin and placement
• Confirm return expectations, the appropriate type and
size of investment based on analysis of the business
opportunity
• Get the terms right
• Close the deal.

14. 5. Managing
for Mutual
Success
1. Establishing a regular financial and impact
reporting process
– Seek constant updates directly from the
entrepreneur in writing
– Use benchmarking techniques/ tools for
portfolio-wide reporting
2. Working directly with the enterprise
– Provide regular concurrent support
– Become a partner, not just oversight
– Structure governance in accordance
with the level of investor’s involvement
and entrepreneur’s needs
– Share success and help with further
investments if required

15. “Ask entrepreneurs what they need regularly and think
about how to help give them access to networks,
resources, etc. Talk with them about the frequency of
check-ins that will make sense for them, recognizing that
earlier-stage businesses might benefit from higher
frequency.”`

16. 6. Monitor and
Achieve
Performance
• Setting clear targets for social and financial
performance.
– Start with the end in mind
– What kind of return equals success shall help
in setting Financial Targets
– Ask the following questions in terms of
Theory of Change to determine Impact
Target:
• What will happen as a result of our
intervention?
• What are the metrics we can track to be
sure that is on the right path?
• How will we know we’ve succeeded?
• Managing financial returns and measure
impact using proprietary or standard
metrics.

17. No Metrics
When investors do not
directly measure
impact, either because of
large unmanageable
portfolios or lack of staff
and resources
Limited Metrics
Some investors start slow
and measure one or two
indicators across their
portfolio, planning to
eventually expand as they
learn more
Standard Metrics
Ideally, investors should
use standard metrics but
supplement with
proprietary metrics
depending on their goals
and strategies

18. ___
What is Thematic
Investment Approach?
Courtesy:
https://www.responsability.com/en/impact-and-esg

19. Insight On Thematic Investment
Approach by Responsability
TRADITIONAL IMPACT FIRSTTHEMATICSUSTAINABLE PHILANTHROPY
Competitive Financial Returns
ESG Risk Management
High Impact Solutions
Agriculture
Energy
Finance

20. Idea behind the Thematic Approach is to
classify potential portfolio companies into
following six impact themes based on UN
Sustainable Development Goals promoted
by the United Nations.

22. Thank you