Impact investing theories of change

Drs Alcanne J. Houtzaager MA, Tools & Thought Pieces on Inclusive² Impact Investing p. 1

Impact Investing Theories of Change Strategies
In Impact Investing goals & ambitions and the limited availability of (inclusive) impact investment products steer
investors towards different(iated) impact levels, preferred investment products & impact assets allocation.
E.g. in fixed income green or muni bonds, health property, farmland REITs or SDG investment funds etc. Of course all
investments have impact, but impact investing aims at doing well & doing good, which in today's investment market
practice varies mainly from doing less harm (the largest offer in investment products) to having positive impact, broad
and/or deep impact. It is an impact ladder developing with growing transparency & product innovation visual page 25.
Defining a Theory of Change is a strategy for impact investors to define how to achieve impact, their societal &
environmental goals. Just as their financial strategy or mandate defines the risk appropriate return goals. I quote
Paul Brest's definition of Theory of Change as published in the Stanford Social Innovation Review (SSIR) in 2010.
''Theory of Change (ToC) is a specific type of methodology for planning, participation, and evaluation that is used in the
philanthropy, not-for-profit and government sectors to promote social change. Theory of Change defines long-term
goals and then maps backward to identify necessary preconditions". https://en.wikipedia.org/wiki/Theory_of_change
Paul Brest also published ''Deconstructing Impact Investing” in SSIR in 2013 with Kelly Born describing the ''increasing
realization that, along with philanthropy and government aid, private enterprise can contribute to solving social and
environmental problems". The definition(s) fit the often used impact investing definition of intended & measured
societal & and/or environmental goals with risk appropriate returns.
For those overwhelmed by the choices, discourse & reasoning in the impact investment universe, I will briefly sketch
impact investment choices i.e. actual market offerings & trends and link them to theories of change.
It is not intended as a philosophical thought piece & soul searching clarification of the theories, on the contrary it aims
to be a simplification regardless of ethical, ideological or sustainability motivations.
THEORIES OF CHANGE are like INVESTMENT MANDATES: guiding principles to achieve goals.'Balancing impact
& return' mandates can be exclusion guidelines and/or allocation to low(er) ESG (Environment, Social & Governance)
Risk Exposure and / or Selection of ESG Opportunity, Best-in-Class investments, SDG & (Deep) Impact Investments.

ESG Management and INNOVATION, RESEARCH & DEVELOPMENT
It is important to realize that many ESG & Impact objectives are (marketing) labels for activities companies undertake
in running their business better e.g. lowering costs of resources (energy), Safety & Health & HR (hiring, satisfaction).
To check efficiency, profitability of companies (investments in) 'sustainability' for 26 management choices in
Environment, Social & Human Capital, Business Model-Innovation & Governance & 11 sectors (87 sub-sectors) use the
online Materiality Matrix developed by the Sustainability Accounting Standards Board (SASB) http://materiality.sasb.org/
Innovation, Research & Development (IRD) activities to introduce new, better and/or cheaper products & services
and grow or at least contain market share often resemble ESG activities. The SASB Materiality matrix e.g. rates
“Product Design & Life cycle Management, Business Model Resilience, Supply Chain Management, Materials Sourcing &
Efficiency & Physical Impacts of Climate Change”. Companies should always have a long term ''10/25 years from now''
goal on the horizon that is part of the boards priorities & agenda. Guided by market research & monitoring competition.
If a company doesn't have an IRD team, ask suppliers & customers what they are working on / want and monitor
market developments & the competition, (wealthy) companies can (acquire), engage or merge with pro active partners.
Analysts & Investor Relations teams 'love'' IRD activities & investments. (But don't always get the impact)
THEORY OF CHANGE: Ethical, Norms Based Investing & Negative Screening
ACTION: Do No Harm by excluding (intended) RE-ACTION: Change Investees & Investment Finance
PRACTICE: Exclusion of illegitimate (investment) products & sectors for countries that ratified UN Conventions
on cluster munition & anti personnel mines. Note that 'Compliance' sometimes is presented as 'Exclusion'.
Exclusion of companies producing or selling harmful products & sectors & Investments. Easily available through
indices & investment products excluding AGTAF: Alcohol, Gambling, Tobacco, Adult Entertainment (porn) & (personal)
Firearms. Note that sometimes a 5% revenues limit is applied.
Cons: exclusion strategies undermine the option to speak out at (as) shareholders (at) meetings.
ACTIONS in EXCLUSION & NEGATIVE SCREENING
-1- Do no harm by not providing capital to harmful products or benefit financially from them;
-2- Raise awareness, change attitudes & behaviour of industries (finance), supply chains & customers;

-3- Investors collaboration & PR can increase capital costs for involved companies / sectors depending on the size
& momentum of the exclusion movement. E.g. The fossil fuel divestment claims that it has passed a 20% tipping point
influencing both the investment market (rising exclusion in marketing & product offerings); and the sector itself
steering companies to (accelerate) the green or impact transition: cleaner (gas, no coal) and/or renewable energy.
-4- Promote public awareness through transparency on exclusions, why & how in Annual (ESG) report & websites.
FINANCE: The exclusion universe is growing in size & transparency with the growing theme universe & free
online searchable data bases of involved companies (CSRHub, YahooFinance) & investment products : 100%
transparent ETF's with SRI screening (fail) % by ESG researcher MSCI on etfdb.com & etf.com and iShares ETF's.
Exclusion or negative screening is the dominant strategy in
responsible investing, meaning that investors / asset managers
most often apply exclusions or negative screening i.e. not
investing. Global AuM is almost 20 Trillion U$. (GSIA18)
Note that almost 5 Trillion US AuM are screened against
minimum standards of business practice based on
international norms, such as those issued by the OECD, ILO
(Labour), United Nations & UNICEF (Children's Rights)
INVESTEE OPTIONS:
End harmful activities, e.g. asbestos production in countries
that have banned asbestos import, manufacturing, sales, trading
or use products made from asbestos;
Split the company in a good & bad part (e.g. Siemens will
list it's electricity plants. E.On AG (grid, distribution & trading
electricity) listed Juniper (power generation : fossil fuel energy);
or Sell the part of the company involved with harmful
products. e.g. iRobot sold its military (Defense & Security)
unit. The Robots were developed to inspect investigate, survey,
monitor and manipulate hazardous environments remotely thus
reducing risk for personnel. Blogger: sale avoids technological
progress & competiton towards robotic 2.0: armed & dangerous.

THEORY OF CHANGE: DIALOGUE & ENGAGEMENT
ACTION: Exchanging Ideas & intended RE-ACTION: Affect Investees their competitors & Investment Finance
GSIA the Global Sustainable Investment Alliance defines (corporate) Engagement & Shareholder Action as ''the use
of shareholder power to influence corporate behaviour, including through direct corporate engagement (communicating
with senior management and/or boards of companies), filing or co-filing shareholder proposals, and proxy voting that is
guided by comprehensive ESG guidelines.
A DO GOOD approach aimed at influencing investees to improve their ESG awareness, attitude, policies, work with &
report Key Performance Indicators (KPI, factors), track record and progress(iveness i.e. By becoming a sector leader).
The Theory of Change beliefs & intent are that through Communication & Educating on (Risk) issues companies
& sectors can be influenced in a desired manner. Not just communicating directly at the top level(s) also indirectly by
joining collaborative initiatives for sectors or public relations & stakeholder engagement involving the media, public &
pressure groups. Communication aims at collaboration on achievable goals, specific action(s), time frames & outcomes.
SHORTCUTS / CATALYST
A focus on the financial/investment sector and/or top down on large industries, sectors and companies accelerates
progress. There are many voluntary, self-regulatory initiatives that are supported by encouraging implementation or at
the least declaring ambitions to comply (over time). E.g. Practices in the UN Global Compact (operational principles),
UNPRI (Principles for Responsible Investment) & GRI (Global Reporting Initiative standards for non financial data).
There are initiatives around specific themes such as Supply Chain, Circularity (resources & recycling), Plastic, Climate &
Energy etc. Coordination of agenda setting, legislation (interpretations matter), Surveys & Benchmarking of companies
& sectors create awareness & data and response: competition to be the best / sector leader or at least improve.
RAISING AWARENESS on - initiating / participating in - such initiatives is a Communication & Education strategy.
In the Netherlands the Eumedion foundation "is the institutional investors interests representative in the field of
corporate governance & sustainability. (i.e. risk management & pro active compliance).
Under the new (2017) Corporate Governance Code Accountants & Institutional Investors urge companies to share
future proofing information. An analysis by Dutch PWC consultants of 50 Dutch listed companies shows that they have
become more transparent about long term value creation, non financial information, the contribution of remuneration

to long term value creation, the pay-ratio, the companies non monetary values, goals and results regarding the gender
gap (at board level), risk assessment, and the risk management system. Of course there always is room to improve,
this was the first year the Corporate Governance Code was put to the test and the paper (in Dutch) gives a number of
observations. Brouwer, Scheffe & Janssen's prioritised suggestions are:
Adding a Materiality Matrix, a Risk Opportunity & Impact Assessment and a Future Proof Paragraph.1
SHAREHOLDERS MEETINGS
The result, effect of Engagement, Dialogue is put to the test through 'filing or co-filing shareholder proposals &
proxy voting'. (Public) Actions are planned around (annual) shareholders meetings and events. The larger the
supporting and/or voting shareholders group, the bigger the effect so a lot of lobbying takes place around agenda
setting of issues, questions, proposals & voting for sectors (e.g. Palm oil), issues (e.g. Packaging) or at company level.
This can be around core activities, divesting certain activities, merging & acquiring specific companies and operations.
Action by NGO's and for stakeholders (employees, customers, communities near production sites, ….) functions as a
catalyst by creating direct and public/media awareness. E.g. In the Netherlands FollowThis organizes both institutional
& individual shareholders around one of the Netherlands largest companies: Shell Energy company. It's slogan is:
''Change to World Buy Shell'' and it focus to encourages a more rapid energy transition strategy through shareholders
collaborative questions & motions, voting(s) & publicity. It has given Shell this financial year to show results.
WALK the TALK
In practice a lot of shareholders discussions focus on remuneration & appointments. Dutch academic Fichtner &
Heemskerk from the University of Amsterdam found that even with self acclaimed 'long term' champion asset
managers such as BlackRock, Vanguard, and State Street (named the the ‘New Permanent Universal Owners’)
more action takes place in appeals & shareholder resolutions than actual voting2
. Note: the American dominance.
Just before Blackrock's Larry Fink annual letter to the WEF Davos Forum appealing to companies 'to think long term',
(risks) Blackrock shareholders meeting voting record was displayed in the media, Financial Times to urge real action.
1 https://www.researchgate.net/publication/329540427_De_nieuwe_Corporate_Governance_Code_en_vereisten_voor_niet-
financiele_informatie Arjan Brouwer, Johan Scheffe, Joukje Janssen Dec 2018 Maandblad voor Accountants & Bedrijfeconomie p. 345-359.
2 The New Permanent Universal Owners: Index Funds, (Im)patient Capital, and the Claim of Long-termism Jan Fichtner & Eelke M.
Heemskerk University of Amsterdam / CORPNET (Nov 2018, Feb 2019) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3321597

DONE TALKING
Recently some Dutch institutional investors moved from Dialogue or Engagement to Exclusion deciding that years
of communications & influencing did not deliver the desired results. Over e.g. Tobacco, Coal & Palm oil involvement etc.
ACTIONS in DIALOGUE & ENGAGEMENT: BELIEFS, INTENTIONS & EFFECTS
-1- raise Awareness, exchange ideas about solutions & strategies :) with the objectives to create Interest, Desire
(willingness to act) & Action (AIDA in advertising jargon) a soft coercion strategy;
-2- The stronger coercion part is organized & coordinated action on agenda setting, data collection, dialogue strategies,
shareholders resolutions & proxy voting, public relations, stakeholders engagement, publicity; #GangingUpOnThem
-3- Depending on the size & momentum of the ESG integration movement, this may (in)directly: increase capital
costs for involved companies/sectors & and affect reputation thus valuation & stock price, employability etc..
-4- Promote public awareness of risks, alternatives & solutions through transparency on exclusions, why & how.
FINANCE
The Engagement & Dialogue strategy is the 3rd
largest strategy (2018 GSIA report) with almost 10 Trillion US$ AuM.
It has created a new sector of expertise in theory (of change :), research, standards & KPIs, practice, influencing,
lobbying, communications & campaigning, implementation & assessment strategies etc.
This universe is quite transparent with the initiatives & communication on the issues tackled. Also Asset Managers &
Owners disclose topics discussed & companies they engage with in annual (sustainability) reports & on websites.
INVESTEE OPTIONS: (next to exclusion responses on p.3)
-1- Join industry, sector, national & INDEX initiatives on ESG & relevant IRD topics & issues e.g. on UN Global Goals
or Sustainable Development Goals to get informed & utilize synergy;
-2- Adopt & implement easy & sexy solutions related to indices & benchmarks & utilize actions for Public Relations &
Investor Relations communication;
-3- Take stock of company/sector material ESG topics/issues & -preferably tailor made solutions,
costs & implementation;
-4- Develop tailor made Vision (long term Materiality), (SMART) Mission & Strategy & (USP) Tactic(s) on ESG/IRD;
-5- Utilize as competitive advantage i.e. Future Proof Policy to charm, Analysts, Investors & Stakeholders.

CARROT & STICK THEORIES OF CHANGE
If Exclusion is a 'stick' and Engagement a 'carrot' strategy, ESG Integration can be both: a response to (un)satisfying
results of Engagement & Shareholder Action. One must assume that asset managers do or don''t increase exposure in
companies, unless some or sufficient action is taken. Thus decreasing, freezing or increasing exposure on account of
(un)desired business practices and (in)sufficient progress in tackling specific issues regarding ESG practices.
BIG ISSUES: Environment, Social & Governance
Investors limit exposure of sectors or companies facing finite & limited resources in both Planet (e.g. energy, metals,
water) & People (due to ageing & social movements in developed markets) as the cost of doing business will rise. An
Achilles heel for companies is Governance & their (good) reputation, when that is a risk -due to e.g. compliance,
scandals, liability lawsuits & corruption- stock prices are directly influenced sometimes even implode. Note that
decreased stock value due to Governance failure, is another cause for liability lawsuits creating Reputation Risk...
Again many ESG activities companies undertake are Innovation, Research & Development, IRD based to introduce
new, better and/or cheaper products & services (through operations)
and grow or at least contain their market share.
THEORY OF CHANGE: ESG RISK INTEGRATION
ACTION: Limiting Exposure & intended RE-ACTION
Affect Investees, their competitors & Investment Finance
ESG Risk integration aims to limit financial & negative impact
exposure of companies, (sub) sectors or industries by a moratorium
on starting, expanding or decreasing invested capital.
E.g. Dividends are not re-invested; exposure is phased out depending
on intent/action/progress on topics with exclusion as the last step.
ACTIONS in ESG RISK INTEGRATION
Considerations & intended effects
-1- Limit negative impact & financial risks by limiting exposure;
-2- Limit negative impact & financial risks through improved
investees ESG policies. #WIN-WIN

Preferably in core activities (transition to Basic Needs and/or Impact Tech) or operations.
-3- Join collaborated (institutional) investors & stakeholders action;
-4- -depending on the size & momentum- to raise awareness, change attitudes or behaviour;
-5- idem increase capital costs for impotent (feeling) companies & sectors or those 'in denial';
-6- Promote public awareness through transparency, why & how of ESG integration.
FINANCE:
ESG Integration is the 2nd
largest strategy (GSIA 2018 report) with almost 17,5 Trillion US$ AuM. GSIA does not
give separate data on Risk & Opportunity but RISK RULES. It builds on the expertise of Dialogue & Engagement
utilizing expanding knowledge universe of ESG Rating, Momentum, Sentiment, Relevance, Materiality etc.
It is accelerated by growing regulation & supranational cooperation & transparency on ESG & SDG performance.
The growing ESG universe is transparent with academic and collaborative & competitive initiatives from Service
Providers, Asset Owners & Managers, ESG research companies, benchmarks, indices & investment product developers.
INVESTEE OPTIONS resemble Dialogue & Engagement response:
-1- Join industry, sector, national & investment INDEX initiatives on ESG & relevant IRD topics & issues
e.g. UN Global Goals or SDGs to get informed & utilize synergy;
-2- Adopt & implement easy & sexy solutions related to indices & benchmarks &
utilize actions for public relations & investor relations communication;
-3- Take stock of company/sector material ESG topics/issues &
-preferably tailor made- solutions, costs & implementation to reduce ESG risks;
-4- Develop tailor made Vision (on long term Materiality), (SMART) Mission & Strategy & (USP) Tactics;
-5- Utilize as competitive advantage i.e. Future Proof Policy.
THEORY OF CHANGE: ESG OPPORTUNITY INTEGRATION i.e increased exposure
ESG opportunities is the mirror image of ESG Risk integration: Investors increase exposure to sectors or companies
proactive in facing finite & limited Natural or Human Capital affecting returns. Companies operate Future Proof
prioritising good (E+S) Governance embracing the (long term) intentions of voluntary initiatives and the spirit of
regulations. Not 'What can we get away with at the lowest costs & effort'', but optimum compliance.
Compliance IT & implementation are maturing industries with market competition creating availability & affordability :)

ACTIONS in ESG OPPORTUNITIES: Considerations & Intended Effects
-1- Increase positive impact & return by increased exposure;
-2- Increase innovation & market competition availability & affordability for positive impact #WIN-WIN
Preferably in core activities (transition to Basic Needs and/or Impact Tech) or operations.
-3- Join collaborated (institutional) investors & stakeholders action;
-4- -depending on the size & momentum- to raise awareness, change attitudes or behaviour;
-5- idem decrease capital costs for active, collaborative companies & sectors;
-6- Promote public awareness through transparency on ESG Opportunities.
FINANCE:
Again ESG Integration (Risks & Opportunities) is the 2nd
largest strategy (2018 GSIA report) The USA has almost 10
Trillion US$ AuM ESG Integrated. ESG Opportunity investing is the foundation of Best-in-Class investing, investing in
companies showing leadership in ESG practices and thus influencing sectors & industries (standards) & regulation.
INVESTEE OPTIONS identical to Dialogue & Engagement & Risk integration:
-1- Join industry, sector, national & investment INDEX initiatives on ESG & relevant IRD Opportunities;
e.g. UN Global Goals or SDGs to get informed & utilize synergy;
-2- Adopt & implement easy & sexy solutions related to indices & benchmarks &
utilize actions for public relations & investor relations communication;
-3- Take stock of company's/sector's Material ESG Opportunities &
-preferably tailor made- solutions, costs & implementation to implement ESG Opportunities;
-4- Develop tailor made Vision (on long term Materiality), (SMART) Mission & Strategy & (USP) Tactics;
THEORY OF CHANGE of POSITIVE/BEST-IN-CLASS SCREENING:
ACTION Select companies on highest ESG scores in sectors REACTION: Competiton to improve ESG, be the best.
GSIA defines positive/best-in-class screening as 'investment in sectors, companies or projects selected for positive ESG
performance relative to industry peers'. Apart from academic research showing that best in class investing is smart
investing, it is a win-win for impact investors as best in class companies are often large caps multinationals that
influence governments, sectors & industries with their ESG policies, progress & achievements.

Introduced as an exclusive financial service a couple of decades ago Best-in-Class benchmarks & indices are now free &
transparent. CSRHub gives Environment, Employees, Community & Governance benchmarks of over 30.000 companies
(public & private), 143 industries in 134 countries. YahooFinance gives data of a few thousand (large and/or American)
companies on ESG performance relative to industry peers' collected by ESG research expert Sustainalytics.
Funds are rated on ESG levels by major raters such as Morningstar (globes) S&P (colors) resulting in capital shifts :).
ACTIONS in Best-in-Class Screening & Intended Effects:
-1- Increase positive impact & return;
-2- Increase innovation & market competition availability & affordability for positive impact #WIN-WIN
Preferably in core activities (transition to Basic Needs and/or Impact Tech)
Since best-in-class companies are often multinational large caps with huge operations, the effects of ESG management
internal & on the competition, chasers, followers & laggards is huge.
-3- Join collaborated (institutional) investors & stakeholders action to encourage sector leadership;
-4- -depending on the size & momentum- to raise new issues & topics (awareness, attitudes & behaviour)
-5- idem decrease capital costs for active, collaborative companies & sectors;
-6- Promote public awareness through transparency on ESG topics & issues.
FINANCE:
Positive/Best-in-Class screening is the 4th
strategy (2018 GSIA report) with over 2 Trillion US$ AuM. The USA holds
almost 2/3 of the Best-in-Class AuM. ESG leadership is correlated with long term innovation, research & development.
In Europe France is best-in-class king EuroSIF 2018, with Netherlands following at a distance.
http://www.eurosif.org/wp-content/uploads/2018/11/European-SRI-2018-Study.pdf
INVESTEE OPTIONS
-1- Research best in class investment INDEX initiatives & Best-in-Class market leader actions & Awards;
-2- Monitor sectoral Innovation, Research & Development (IR&D) & Awards;
-3- Take stock of company/sector Material B-in-C Strategies & Solutions
& -preferably tailor made- solutions, costs & implementation in the company;
-4- Adopt & Implement successful B-in-C Strategies & Solutions, preferably related to indices & benchmarks
& utilize actions for public relations & investor relations communication;
-5- Develop Tailor made B-in-C Vision (on long term Materiality), (SMART) Mission & Strategy & (USP) Tactics;

THEORY of CHANGE : PEOPLE INVESTING
ACTION: Invest in Work & Income: purchasing power for Available & Affordable Basic Needs. REACTION-
–1- investment product distribution, innovation & structuring, investors collaboration more blended finance;
-2- create access to products & services for middle classes (revenues) and the underserved, Base of the Pyramid (poor)
to catalyse & develop markets & sectors.
Focus on Investment which selects long term sustainable Economic Growth & Small Medium sized Enterprises
SMEs which accelerate employment (quantitative education 1.0 in underdeveloped, developing & frontier &
''underserved'' markets & sectors & 2.0 education jobs based on innovation & technological progress in emerging &
developed markets & sectors.
AND Investments which focus on Available & Affordable Basic Needs such as Inclusive Finance & Insurance,
Nutritious Food, Healthcare, Vocational Training & Education, Affordable Housing & Transport, Safer & Clean(er) Energy
FINANCE
People Investing is available as e.g. Micro Finance & Fintech, Inclusive Insurtech (e.g. For Health, Business & Pensions)
& Finance (micro mortgages). It is both a mature sector with a track record of decades of growth and innovative rapidly
developing as a (fin)tech based sector. Micro Finance is closing the gap, reaching the last tier of un(der)banked and
evolving towards Meso Finance: SME finance(the employment catalyst) with lower risks & higher margins.
Note that MFI's should report standardised social impact data & not neglect reaching the last tier of under banked nor
give credit(s) to mature, saturated micro business sectors but support upcoming demand and new business initiatives.
(Digital) Financial Inclusion is a catalyst for all Basis Needs, check out online crowdfunding platforms request for
personal loans on Kiva.org for seed & materials to build shelters for animals, basic health care, medication & dentists
costs, lower & higher education fees, to build a toilet in India, access to clean safe energy, fix a house, get transport...
Note 0% interest receiving loans for cooperatives at Kiva & WakibiNL have just moved up the investment distribution
ladder : they are now available through online crowdfunder Lendahand, mesofinance in The Netherlands at 3,5%
Now think of providing capital to the local entrepreneurs that deliver these services & products and boost local markets.
The seed & tools supplier, the carpenters & builders, the nurses, midwives, medical practitioners, the doctor opening up
an dialysis clinic for kidney patients, the teacher, tutors & school operators, the clean(er), safer energy enterprises,
the companies developing faster cheaper smarter transport systems saving urbanites hours & hours every day.....

FOOD
Investing in the 500 million Smallholder Farmers (access to credit) in developing & emerging markets feeding more
than 2 billion people is a win x 4 : Hunger – Income – Land conservation - Carbon Capturing strategy. It is partially
achieved by inclusive finance & SME investment strategies, and will be boosted by the launch of Green Agriculture
Bonds standards later this year.
Investments in cool Agritech innovation are flourishing. E.g. such as accelerated by Dutch (agricultural) Rabobank
one of the 500 largest company's in the world (2017 Fortune). Agritech export has become the Netherlands nr1 export
product in Agri & Food and the Netherlands, a tiny country, is the 6th
worlds largest exporter of Food.
In Forbes Global 2000 (Chinese) Banking & Finance rule, with the Chinese Agricultural bank on 6.
HEALTH
Investments in Inclusive Health has shown acceleration and Access to Health: availability & affordability are clearly
understood to be most Material in all Health (sub)sector by investors & corporations. E.g. Philips Medial extended it's
commitment ''to improve the lives of 300 million people in underserved healthcare communities by 2025''.
A #DeepImpact cumulative number, Philips reached 153 million people in 2017 +16 million in 2016.
The Access to Medicine INDEX (Big Pharma)
A 100% transparent index of big global pharma, the Access to Medicine Index, benchmarks investments in big endemic
diseases & pricing policies for developing markets. The Access to Vaccine Index is launched to monitor pharmas
commitment to develop & deliver (distribute) cheaper better vaccines. Because (financing of) Vaccination programmes
have both halved child mortality in the last decades but prices went up from 5US% to 45US$ per child...
The health investments index platform also monitors Anti Microbial Resistance activities of Big Pharma.
Ageing in developed markets & the rising middle classes in (large) emerging markets will drive demand & innovation
(biotech, e-health, healthtech) offering revenue based business models (a major upgrade from venture capital models).
AFFORDABLE SAFE SOCIAL HOUSING
With a growing global population & rapid urbanisation: over half the world living in urban area's, housing has become a
critical priority. Acceleration is crucial after decades of underperformance by governments and private markets, leaving
it to the market / prioritising commercial and exclusive properties. Safe housing is a foundation for peoples health,
children's development & education results & better care for the sick, handicapped & elderly.

FINANCE
In the US & Scotland Social Housing is a priority in Social Investing with adequate financing facility e.g. US foundations
using Programme Related Investments, a fiscal instrument & in Scotland government capital is catalytic & attracting
institutional capital.
In the Netherlands billions are raised for Social Housing with Green Bonds. The focus of private investment on
commercial property has created improved management of Planet factors e.g. green(er) building materials & green
renovation, efficient energy & water use. GRESB an Index serving property owners, managers, financiers & investors
steers capital flows towards Planet investing in Property.
INVESTEE OPPORTUNITIES
-1- Research the companies & relevant sectors contribution to People's needs & affordable demands
Note: tech can be a major catalyst but focus less on unlimited possibilities and more on practical use...
-2- Monitor sectoral ESG & IRD (Awards) focused on Peoples needs: Employees & Clients, Stakeholders.
-3- Take stock of company/sector Material Strategies & Solutions -preferably related to indices & benchmarks-
the costs & implementation of embracing People Investments;
-4- Adopt & Implement successful People oriented Strategies & Solutions, preferably related to indices &
benchmarks (Human Rights) & utilize actions for Public & Investor Relations communication;
-5- Develop Tailor made Vision (on long term Materiality), (SMART) Mission & Strategy & (USP) Tactics;

THEORY of CHANGE PLANET INVESTING
ACTION: Invest for Climate, Green Energy Transition thus
Renewable Energy, Water Management, Green Properties
& Cities, Clean & Green Tech, Electric Vehicles &
Environmental protection.
REACTION: Global action by Finance, Companies &
Consumers to act, develop new standards of practice &
(financial) products.
FINANCE has responded well to investors preference for Climate
& Green investment. The Planet Investment universe is larger &
more popular than People Investing. Catalytic was interest in
Renewable Energy, Green & CleanTech (investment)
Catalytic was the European Investment Bank's launch of a
Climate Bond kick starting the Green Bonds market & asset class
offering of investment products with intended, standardised
reported green impact verified by accredited experts (raters).
The financial sector developed green bond principles for the
financials & proceeds management. Also a a game change was
FTSE Russell Green Revenue Index in 2016 a LSE company.
Climate Bond Initiative data on 2018 of Green Bonds, mainly
sold to institutional investors, show > 50% of Assets invested in
green(er) (public) Transport. 257Billion US$. Green Energy
attracts half: 128 Billion US$ Investments.
It also shows that green retail investment products are
on the rise. See visual from their 2018 market Update, p. 20.
Enlarge for a better view (low image resolution).
https://www.climatebonds.net/resources/reports/green-bonds-state-market-2018
INVESTEES OPTIONS under FINANCE

THEORY of CHANGE SDG INVESTING
ACTION: Invest in companies
that contribute to the UN Global -Sustainable
Development- Goals
A Global Consensual Synergetic Agenda
for policy, people, business & investment.
REACTION by FINANCE has been rapid:
Rating agency MSCI launched a transparent SDG
Global Impact index (100 large caps), Blackrock
structured the ETF. MSCI data on Global Sustainable
Impact exposure % of ETF Funds is transparent in
iShares ETFs & on etfdb.com for FREE. It's own SDG
score is 75% (-5% SRI fail) competitor impact expert
Impact Shares ETF SDGA gets 6% impact exposure.
https://etfdb.com/etf/SDGA/
The World Bank launched an SDG Note & retail fund on
the Italian Stock Exchange based on a VIGEOEiris index (50 large caps transparent). Fund managers such as UK fund
manager WHEB link companies in their investment portfolios to the SDGs. TONIIC, the Impact Investment network for
wealthy investors launched an online transparent searchable directory with it's members investments linked to SDG
contribution. https://www.toniic.com/toniicd/
SDG investing competition & marketing is accelerating & catalytic. Dutch asset manager NN IP won prizes with it's
Impact Fund linking the portfolio companies to SDG contribution and recently reported that the investible SDG universe
is actually much larger then previously assumed. NN IP found “a surprisingly large number of stocks with a positive
impact – (is) almost 3,000 out of the 15,000 in our chosen universe (the CS HOLT database). This is partially
explained by expanding the universe to include small caps. Our results reveal that, contrary to conventional
perception, positive impact companies tend to grow faster and have a lower cost of capital than those with a
negative or insignificant positive impact. When the universe is adjusted for size, they also have a better cash flow
return on investment (CFROI); an indication of financial quality. These new findings underscore our belief that
financial & societal returns can go hand in hand”. https://www.nnip.com/it-IT/advisor/insights/bigger-and-better-impact-universe

In SDG investing I expect an investment to contribute to:
SDG 8 : Economic Growth & Decent Work + SDG 9: Industry, (frugal) Innovation & Infrastructure + Any SDG(s).
Any investment needs a sound financial foundation & employment creation to finance demand & counteract social
discontent caused by unemployment causing poverty. To realize global satisfaction of basic needs frugal innovation,
simple & at low cost is essential. I love (Impact) Tech as an effective way to scale & interesting investment option:
SDG aim to uplift poor developing countries and be appealing to all peoples in all countries. It is also matter of
preferences & smart choices, based on moral, geographical, local considerations.
SDG investments for developed, emerging, frontier & developing countries can be very different.
The Global SDG contribution of sectors NOT capital investment efficiency was analysed & benchmarked by prof
Eccles, Betti & Consolandi in 2018. They benchmarked Sector Contribution to SDG's. The premises are that the
achievement of SDGs is advanced by improving ESG outcomes material for a company (profit & future) and the
contribution to one or more SDGs3
. Detailed tables on page 20.
3 3 tables from MIT Sloan Management Review Bob Eccles & Consolandi work on SDGs in https://sloanreview.mit.edu/article/supporting-
sustainable-development-goals-is-easier-than-you-might-think/ & Forbes https://www.forbes.com/sites/bobeccles/#345f308d5aa6
Academic foundation paper; The Relationship between Investor Materiality and the Sustainable Development Goals, 29 Pages by
Gianni Betti University of Siena, Costanza Consolandi University of Siena; Department of Business and Law, Robert G. Eccles University of
Oxford - Said Business School (April 15, 2018) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3163044

For poor countries lacking economies of scale industry & access to energy, SDG7 clean energy is not necessarily vital
but fossil fuel a booster. Academic research into SDG contribution of the extractive (mining, drilling, pumping) &
minerals processing sector showed it's overall score is 30.4 getting third place right after Food & Beverage (36)
and Healthcare (32.6) but before Resource Transformation with 28.4 and much higher than e.g. Consumption's 20.
Actually Oil & Gas exploration gets 41.4, coal operations 35.7(!) and metals & mining (33.5) performing really high4
.
Extractive sector has the least impact on SDG4 (Education) and SDG10 (Inequalities).
Of course Renewables as a (transition) sector contribute to the SDG's as well, BUT It’s overall score is (only) 23.8.
Top scores go to Solar Energy (38.2) and Biofuels (30.8). Wind energy only contributes 18.3... 5
Least impact is on SDG1 No Poverty and also SDG4 Quality Education & SDG10 Reduced Inequalities....
The data is relevant for capital investments as long as investors distuinghish the markets they are investing in:
look at geography, income & distribution, development phase & core activities.
A nice mind puzzle: Enel an Italian energy company is active in Nuclear energy (no carbon, WASTE!) & Latin America
It issued a GreenBond in 2017 claiming it's company contributes to SDG 4, SDG 7, 8 & 13 with KPI's for more SDGs.
INVESTEE OPTIONS
-1- Research the companies & relevant sectors contribution to SDG's
-2- Monitor sectoral SDG activity & reporting, communication
-3- Take stock of company/sector Material Strategies & Solutions -related to SDG indices & benchmarks-
& utilize actions for Public & Investor Relations communication
-4- Adopt & Implement successful SDG Strategies & Solutions
-5- Develop Tailor made SDG Vision (on long term Materiality), (SMART) Mission & Strategy & (USP) Tactics;
4 https://www.forbes.com/sites/bobeccles/2019/01/03/the-importance-of-the-extractive-minerals-processing-sector-to-the-sustainable-
development-goals/#3ac50ea038a3
5https://www.forbes.com/sites/bobeccles/2019/01/20/the-importance-of-the-renewables-and-alternative-energy-
sector-to-the-sustainable-development-goals/#361650076292

Note that SDGs are not only synergetic, but interaction can
sometimes be conflicting as shows in the visual from the
UN Development Programme 'Guidance Note on Financing
across sectors for Sustainable development' … to support
efficient resource allocation for integrated planning and
programming for the Sustainable Development Goals (SDGs).
Note the Health HIV expertise background. Sponsor: Japan.
https://www.undp.org/content/dam/undp/library/HIV-AIDS/Guidance
%20Note_Financing%20across%20sectors%20for%20sustainable
%20development.pdf I
A rapid assessment of co-benefits and trade-offs among
Sustainable Development Goals
Paper presenting a framework that integrates existing knowledge
from literature and expert opinions to rapidly assess the
relationships between one SDG goal and another. See page 26.
https://www.sciencedirect.com/science/article/pii/S0308597X17302026

THEORY of CHANGE for IMPACT INVESTING
ACTION Select investments in Basic Needs & Impact Tech REACTION Prioritise investments in BS & IT
My definition focuses on Basic Needs & Impact Tech, catalytic capital aiming for exponential growth of impact &
return next to safe solid bonds & value stock with impact core activities & good ESG performance. For retail investors
options are limited to regulated crowdfunding & retail public equity. Which isn't often additional / catalytic capital unless
one focuses on raising growth capital as a strategy.
[ Maybe Beyond Meat, BYND NASDAQ IPO changes the rules...]
.
FINANCE
There is and has been great interest in impact investing from
Finance philanthropy, government (aid), private enterprise &
academia & the realization that taxation & philanthropy together
will never be able to solve or finance societal needs nor utilize
capital efficiently in the way (social) enterprises do. This is also
the premise of the United Nations Global Goals strategy.
Over the last decade it's playing field expanded from exclusive
private equity deals in the US for HNWI's to all asset classes.
Some leading organizations still show the origins of impact
investing's roots, big deals & big money aiming at trickling down.
The Global Sustainable Investing Alliance, GSIA defines impact
as community investing ”targeted investments aimed at solving
social or environmental problems, and including community
investing, where capital is specifically directed to traditionally
underserved individuals or communities, as well as financing
that is provided to businesses with a clear social or
environmental purpose”
GSIA reports a growth from 248Billion US$ Impact/Community
Investments in 2016 and 444 Billion US$ in 2018.
http://www.gsi-alliance.org/wp-content/uploads/2019/03/GSIR_Review2018.3.28.pdf

Community Investing is a developed sector in the USA (legal/policy framework launched in 2008) focused on grass root
development in underserved area's. It includes: Community Development Banks, Community Development Credit
Unions Community Development Loan Funds & Community Development Venture Capital Funds (0 in the USSIF graph)
The sector grew rapidly +50% from 2016-2018. The USSIF 2018 reports 160 Billion AuM and 180+ Billion US$ AuM
when CF Loan Funds are included https://www.ussif.org/files/2018%20_Trends_OnePager_Community%20Investing(1).pdf
Fintech cNote raised 25million US$ with it's App at 2,75% return for CDFIs. It grew 240% in 2018 and expects to raise
millions more in 2019. https://impactmoney.net/impact-investing/cnote-a-retail-impact-investment-revolution-in-the-making/
TheGIIN, the exclusive -BIG finance- Global Impact Investing Network's definition is 'investments made with the
intention to generate positive, measurable social & environmental impact alongside a financial return.'
It's 2018 Global Survey reports on Asset manager & owners with >10MiO US$ AuM.
A diverse, professional and dedicated crowd of 226 respondents reported 228.1 billion US$ in impact investing assets
under management (AUM). Note the top 2 hold 38% of total AUM. On average respondents manage 92 million US$.
#impinv. https://thegiin.org/assets/2018_GIIN_Annual_Impact_Investor_Survey_webfile.pdf
REACTION Product development & offering of Impact Investments has grown rapidly, sometimes with rebranded
maybe slightly adapted Ethical, Socially Responsible, Sustainable of Planet (the majority) focused investments. As with
all new products financials approached Big Finance : HNWI's, Private Banking Clients, Charities & Foundations and
institutional investors which are required to focus on big deals (compliance & efficiency). Retail is developing slowly.
I see an Evolution of Impact Investing in 4 steps: based on a Chronicle of Events Trends & AuM.
DEDICATED INSTITUTIONS such as Reconstruction & Development banks & start of micro, grass root access to
finance & investment. Mostly Exclusive investing: high nominals, low risks, low returns.
DEDICATED INSTRUMENTS such as Women's Notes, Micro Finance Funds, Vaccine Bonds, Uridashi (Japan) Green &
Sustainability Bonds, Social Impact, Development & Health Bonds. Also exclusive high nominals, low risk low return.
TRANSPERENT & RETAIL investment instruments such as ETFs passive investing in 100% transparent index products
accelerating critical screening of real impact companies & sectors.
INCLUSIVE² Impact Investing through Fintech, crowdfunding, peer to peer, credit co-ops, social enterprise funding,
etc. Mass investing with small amounts : catalytic & a clear message what people want (pension funds) to invest in.
THOUGHT PIECE on https://www.slideshare.net/alcanne/english-the-evolution-of-impact-investing-10-20-30-40

INVESTEE OPTIONS
-1- Embrace the interest, guidance & tools from the impact investing sector: impact standards (IRIS).
Impact Fund Ratings GIIRS, investment platforms & networks, knowledge exchange: reports, training
conferences etc.
-2- Be smart & ambitious: select safe (loans, debt) Broad Impact investments AND research Deep lmpact
Opportunities catalysing capital, interest & synergy.
THEORY of CHANGE SOCIETAL SOLUTIONS
As all investments have impact it is important to measure positive impact such as (economic growth & employment
creating income thus purchasing power & negative impact such as resources (including capital) waste, deprivation or
even exhaustion and emissions & refuse and side effects of price competition such as ''a race to the bottom''.
THEORY OF CHANGE: SOCIETAL SOLUTIONS:
ACTION Monitor AI algorithms insights assessed by expert analysis. (Intended) RE-ACTION Rapid Response
shifting (companies & investment finance) capital investments towards effective efficient impact & return.
In 2014 I developed an impact ladder visual next page based on impact investing portfolio models of pioneers such as
Kl Felicitas Foundation & their asset manager Sonen Capital. Investment choices go from doing no, less harm broad
impact to doing good & having deep impact. In the middle I put ''global threats & solutions'': topics & issues that were
not part of the ESG investment metrics universe and thus slowly prioritized & rectified. I recently replaced Global
Threats and my next impact level ''Basic Needs'' by ''Contribution to the UN Global Goals'. With its 17 Goals and 172
targets : the result of years of collaboration, negotiating & decisions on priorities & standard metrics it covers a lot.....
But a little voice keeps nagging me that the Goals are – unavoidably – a fossilization of current knowledge, thinking,
supranational politics... Some will embrace, some will criticize, some will do a little, some will be completely oblivious
and contribute enormously or not at all or even undermine the global agenda. With the role of business, private
enterprises & investment in achieving the SDG's there is an built in accelerator for opportunities visionaries but still...
I am a ''Trekky & a Techy'' and really bad at Math, which is probably why I keep an eye open for exiting developments
in AI & Tech4Good to contribute to solving societal solutions (WEF Davos News). So lets keep our options OPEN.

Bio: I am an Political Contemporary Historian (Drs, University of Utrecht &
Groningen, the Netherlands) where I graduated on Strategies & Trends in
Dutch Development Cooperation 1964-1984 in 1990. I continued my
studies at the (Erasmus) Institute of Social Studies in The Hague to get a
Masters of Arts degree in Politics of Alternative Development Strategies.
I worked for Dutch foundations, mainly on marketing communication &
fundraising for public health & development cooperation for almost 20 years.
Early in 2011 I started researching impact investing making my first
investment at the end of that year. My impact investing portfolio is 90+%
in public equity & 10%- in (Dutch) regulated crowdfunding.
Questions, Suggestions & Comments Welcome
Please connect on Linked In: https://nl.linkedin.com/in/alcannehoutzaager
And/or Follow me on Slideshare & Twitter:
https://www.slideshare.net/alcanne & @alcanne
Recent posts in English:
6 + 6 Theses on Impact Investing in 2019 from my Dutch eBook
https://www.slideshare.net/alcanne/6-theses-on-inclusive-impact-investing-outlook-2019-128121528
https://www.slideshare.net/alcanne/part-2-more-theses-on-inclusive-public-equity-impact-investing-
outlook-2019
Checklist Impact Investing Funds
https://www.slideshare.net/alcanne/impact-investment-funds-checklist
Impact Investing Perspectives & Dimensions
https://www.slideshare.net/alcanne/impact-investing-perspectives-dimensions
Impact Investing in the UN Global Goals SDG's
https://www.slideshare.net/alcanne/impact-investing-in-the-un-global-goals-part-1-english

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