IFC set to catalyse the Impact Investing market

Impact investing focuses on investing with the goal of environmental and social impact in addition to financial return. It has grown significantly over the years and the International Finance Corporation (IFC) estimates that investor demand for impact investing could be $26 trillion.

Despite the scale and scope of investments, impact investing is neither clearly defined nor does it have clearly defined principles. IFC therefore has set out to remedy this and catalyse the impact investing market in reaching its potential size. The IFC spent about 18 months collaborating with key stakeholders — leading asset managers, asset owners, development banks and other financial institutions. This led to the development of the Operating Principles for Impact Management which offer investors clarity and consistency on what constitutes impact investing.

The Principles
The voluntary principles, released recently,  aim to guide investors toward building impact into their investments at all stages of the investment lifecycle, including monitoring and reporting. However, they stop short of dictating which impacts should be targeted or how they should be measured and reported.

The nine principles are grouped into the five stages of impact management system (strategy, origination and structuring, portfolio management, exit, and independent verification). The Principles aim to ensure that impact considerations are integrated into investment decisions at all points of the investment lifecycle.

Strategic Intent
1. Define strategic impact objective(s), consistent with the investment strategy: The Manager shall define strategic impact objectives for the portfolio or fund to achieve positive and measurable social or environmental effects. These goals are aligned with the Sustainable Development Goals (SDGs), or other widely accepted goals.

2. Manage strategic impact on a portfolio basis: The Manager shall have a process to manage impact achievement on a portfolio basis.

Origination and Structuring
3. Establish the Manager’s contribution to the achievement of impact: The Manager shall seek to establish and document a credible narrative on its contribution to the achievement of impact for each investment.

4. Assess the expected impact of each investment, based on a systematic approach: For each investment the Manager shall assess, in advance and, where possible, quantify the concrete, positive impact potential deriving from the investment.

5. Assess, address, monitor, and manage potential negative impacts of each investment: For each investment the Manager shall seek, as part of a systematic and documented process, to identify and avoid, and if avoidance is not possible, mitigate and manage Environmental, Social and Governance (ESG) risks.

Portfolio Management
6. Monitor the progress of each investment in achieving impact against expectations and respond appropriately:
The Manager shall use the results framework (based on Principle 4) to monitor progress toward the achievement of positive impacts in comparison to the expected impact for each investment.

Impact at Risk
7. Conduct exits considering the effect on sustained impact: When conducting an exit, the Manager shall, in good faith and consistent with its fiduciary concerns, consider the effect which the timing, structure, and process of its exit will have on the sustainability of the impact.

8. Review, document, and improve decisions and processes based on the achievement of impact and lessons learned: The Manager shall review and document the impact performance of each investment, compare the expected and actual impact, and other positive and negative impacts, and use these findings to improve operational and strategic investment decisions, as well as management processes.

Independent Verification
9. Publicly disclose alignment with the Principles and provide regular independent verification of the alignment.

Implications of the Principles
Sixty companies have also committed to adopt the principles. With more impact investors joining the fray, stakeholders are likely to guaranteed that a recognised process is being followed and there is a verification to reduce possibility of adverse events.

The Principles for Impact Management  provides clear a common market standard for what constitutes an impact investment. A common language will help accelerate the deployment of capital seeking impact that is currently sitting on the fence. A likely impact of the clarifications is that it will help fill up the funding gap for SDG projects. This will help accelerate the achievement of SDG goals. The release of the Principles is just a start because the social challenges that the world faces are enormous and seemingly impossible. Investors and institutions need to come together to make investing for impact a success.

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Zebra’s fix the world

The new world driven by technological changes is seeing a proliferation of startups who are questioning the status quo and disrupting industries. The sectors that are being disrupted are many. 3D printing is disrupting manufacturing, transportation is seeing cab aggregators shake up the industry and the energy sector is seeing a radical shift with renewables and battery solutions. The list of industries that will change or are changing is rapidly increasing. The ones that are facing the brunt of these changes have business models that were created some time back and are faced with significant challenges of scale and people when it comes to being more agile. Newer companies armed with new technologies, a radical new way of looking at things and agile low-cost business structures are threatening their very existence. Most primary focus is on gaining more customers, which in turn drives venture capital funding. In most of these business models, sustainability or social responsibility is an afterthought. This primacy of quantity over quality in the start-up world is creating business models where sustainability and being socially responsible is an afterthought, something to be considered once you start to make a profit.

It is perhaps time to deeply introspect about what all this means in a world where civil society is being weaponised to believe in fake news, where social platforms are having a negative impact on the mental well-being of kids and data on consumers is being collected without consent. In the start-up world where companies are typically asked to ‘move fast, break things” a lot seems to be getting broken. Inequality is at an all-time high, democracy is believed to be under threat and people are many times forced to live without basic necessities.

As opposed to this, a new type of start-up is being discussed these days, called Zebra Start-ups. Sahil Agarwal of IIMAGES, a pan IIM alumni community organised a panel discussion to focus on “We need more Zebra start-ups”. Salil says, “In today’s world where every startup wants to become a unicorn there is room for those that do not wish to break their back and are happy to create sustainable businesses that witness reasonable growth. These are businesses that do not necessarily disrupt the eco system, are usually boot strapped and allow the entrepreneur to create a balance between life and business. The term Zebra Start-ups was coined to connote companies that serve a dual purpose. They are both black and white, for profit and for a cause, also they fix things rather than break them.” Zebra start-ups are designed from the ground up to help rather than exploit, to make a profit and yet solve the problems of society. Pradeep Gupta, Chairman CyberMedia says, “Unicorns are based on extremely disruptive models and the idea is to scale up at any cost. Quite often unicorns may not really be making money. Zebra’s are not social start-ups but socially responsible companies who make money.”

The race to become a unicorn is not just of the founders but also that of the people who fund the startups – the venture capitalists who want accelerated growth and increased market valuation. Accelerated growth requirements lead to an unnecessary focus on adopting questionable business practices. In the long-run, artificially inflated stock prices will correct and impact felt by all – shareholders, employees, creditors etc. Venture capitalists who guide these ventures also put social responsiveness on the back burner. Social responsibility should be a fiduciary duty for the venture capitalists. As much as they are responsible to the shareholders they have a responsibility to the stakeholders. Growth and social responsibility are not binary choices but complement each other. Venture capitalists need to understand this and guide founders  to marry the growth and social responsibility.

Dinesh Agarwal, CEO Indiamart, “We bootstrapped for the first 15 years of our journey. In terms of size we have raised only 32 million dollars twice. Today, after 23 years since we started every 20th person in India uses Indiamart.” Sanjay Agarwala, MD Eastern Software Systems says, “We are happy to grow slowly and responsibly and work with partners.”

However, it’s not been easy for most Zebra start-ups who have to constantly fight against perceptions. Take the case of Nasofilters, a company started by a team of engineers from IIT Delhi. They created a respiratory nasal filter that sticks to your nose and prevents entry of harmful air pollutants (PM2.5). Prateek Sharma, CEO Nasofilters says, “The general trend is that people rate our success on the basis of total amounts of funds raised. They don’t take into consideration the number of lives we have saved, the repeat customers who are delighted with our products and the profits we make.” This story is repeated often by other companies who are in the Zebra start-up space. Despite these adverse perceptions by peers, these journeys do have a silver lining. Indiamart despite being slow to raise funds is now being listed on the stock market with a possibly 1 billion-dollar valuation.

M P Jaiswal, Director IIM Sambalpur says that Zebra start-ups promote a culture for inclusiveness. “Cultures, values and business models are often ignored by the start-up culture. The Zebra movement is based on the ground realities that people need to be part of the process of making profits. A culture that promotes wellbeing is perhaps what is needed in the India of the twenty first century.”

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Marico’s Sustainability Journey is driven by innovation, says Saugata Gupta

Marico Limited is one of India’s leading consumer products companies operating in the beauty and wellness space. Agricultural commodities form the base of all Marico products ranging from coconut oil, flax seeds, rice bran oil and many more. One out of every 10 coconut grown in India is used by Marico. It is therefore no surprise that sustainable procurement has become a critical area for the business. Additionally, reduction in waste, water and energy management are also important areas. The business responsibility program covers climate change, product responsibility and community development. The business sustainability program has also been aligned to Sustainable Development Goals (SDGs)

MD and CEO Saugata Gupta, says, “Our journey towards sustainability is driven by innovation at its core. In 2003, the Marico Innovation Foundation was formed to support innovative products and techniques from entrepreneurs from all walks of life. Over time, innovation became part and parcel for everyday activities. This culture also became embedded in our sustainability approach and we drive all our efforts with a single-minded focus where we ensure value for all stakeholders while we grow responsibly.”

The company buys coconuts directly from farmers so that they receive the best price for their produce. This was an uphill task in the initial days, as the coconut trade was largely controlled by intermediaries. However, the company persevered and built direct relationships with the farmers. Today, an important part of the business responsibility program is “Kalpavriksha” or The Wishing Tree. This program partners with coconut farmers in enhancing farm productivity, giving inputs regarding better farming techniques and overall helping them achieve higher income. Marico deploys agronomists who reach out to farmers in close by areas. To scale up these interventions, the company has also deployed a mobile app and a toll free line so that more farmers can benefit from this knowledge base. Since its inception, two years ago, the program has reached over 1.3 lakh farmers through direct and digital interventions.

While the initial numbers were good and so was the uptake from farmers, the company realised that the agriculture sector needed innovation and scale to improve quality and productivity. While traditional methods of farming were quite popular, farmers were slowly realising the need for innovation to increase yield and productivity. New-age farmers wanted solutions to augment traditional methods but there was a gap between innovation in labs and cultivation practices on ground. This gap arose because of various factors including lack of awareness of innovative practices, archaic farming practices, and rigid mindsets. Marico Innovation Foundation stepped in at this juncture. Their agriculture focussed program has a cohort of 37 start-ups with unique solutions to farmer issues; of these the Foundation will be taking 12 solutions to farms for testing over the next few months. The aim is to nurture innovation in agriculture to eventually impact the framer’s income by reducing inputs and/or improving productivity or yield. Marico Innovation Foundation thus plays a catalytic role to bridge the gaps in the agriculture ecosystem to benefit all stakeholders.

Marico has prioritised the creation of a sustainable supply chain across all its product categories. Various centre of excellence and partnerships have been created to facilitate a seamless exchange of ideas. Suppliers and energy conservation platforms, skill development and warehouse programs have been set up.

Says Saugata Gupta, “Sustainability is a journey, but we are committed to being responsible corporate citizens and staying true to our corporate purpose of making a difference in everything we do, every day. Our aim is to impact 20 lakh coconut farmers and make a difference in their lives by enhancing their income.”

Based on a conversation with Marico MD and CEO Saugata Gupta

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Enhancing the lives of persons with disabilities, Meenu Bhambhani of Mphasis

5-6% of India’s population has some or the other form of disability, of these only 1% or so are employed. Mphasis an IT services company wanted to change this scenario. Meenu Bhambhani, the VP and CSR head of Mphasis, who has been instrumental in this says, “I joined the company in 2007 when the company was looking for a CSR head and also for someone who could manage Diversity and Inclusion function as well. Coming from a disability background, I started my journey with a twin-track approach – working internally with staffing training and admin team to increase the number of employees with disabilities and bringing about systemic changes through equal opportunity policy, reasonable accommodation and working towards making built and technology environment accessible. We also used CSR grant making strategically to pilot solutions that address barriers faced by people with disabilities in leading a life of dignity.”

Mphasis started with Project Communicate in 2007, in partnership with the Diversity and Equal Opportunity Centre (DEOC) to train and provide employment support to candidates with disabilities. This program became an industry benchmark and most IT companies till today continue to work with train and hire model. The culmination of this program was through train the trainer and enablement of other organisations to prepare the employable pool of youth from underserved communities. This led to Mphasis partnering with Headstreams in 2009 and the launch of Aalamba programme which targeted youth from low socio-economic backgrounds, who do not attend school or college. The objective was to reach out to over 300 youth directly, with employment and skill training (BPO or trade skills) and job-information exchange. 30 of the brightest youth from these groups would be selected for intensive mentoring and entrepreneurship development program. The programme also focussed on their financial inclusion by giving them training in finance, financial products, getting them access to banking through bank accounts, loans, credit system, among others. By 2014 the programme had evolved into training over 3000 youth and set up of 163 livelihood units

Out of the Aalamba programme came the Arivu programme. Many of the beneficiaries wanted their children to access English medium education, and the programme enabled them to access this through government schools. Arivu which means ‘Knowledge’ focuses on improving English reading and comprehension for children in Karnataka middle schools (Grades VI to VIII).

Around 2015, taxi services like Ola and Uber were becoming ubiquitous. And, Mphasis realised that transport was a huge challenge to persons with disabilities. Even if they had jobs reaching their workplace was an arduous task as public transportation remains disability unfriendly. This led them to tie up with Uber. The plan envisaged converting 50 cabs to be disability-friendly. “However, the issue of providing accessible taxi/cabs is rife with several regulatory and policy barriers which make it prohibitive to even venture into this area. While there is a Central Motor Vehicles Act that guides the federal entities to operate within the guidelines set by the Act, each State’s Road Transport Authority interprets these guidelines in their own way. We straightway ran into problems. The RTO rejected the vehicle saying that no modifications can be made to a commercial vehicle. We stayed with it for two years till we got approval,” says Meenu. Mphasis and Uber were not creating anything new as the technology was already there, the cost was primarily the cost of the cars, modification and training of drivers. The services, UberAccess and UberAssist, emerged out this initiative and has been a boon not only to persons with disabilities but also the elderly.

A challenge that the speech and hearing-impaired face is communication with the world. To help them, Mhpasis has partnered with academic institutions such as IIIT Bangalore where it has set up a centre of excellence in cognitive computing. The centre has developed a technology that enables speech to sign language. Another project involves the prevention of child trafficking using heterogeneous information sources to derive intelligence. On the entrepreneurship front, Mphasis collaborates with institutions like IIM Bangalore’s NSRCEL and Villgro in IIT Chennai. It also collaborates with NASSCOM Social Innovation Forum and the Nudge Foundation’s N/Core for incubation purposes.

Disability is an area that the company feels strongly about and so involves itself into policy advocacy too. What Mphasis can do would always remain small. To create an impact at a larger scale with a lasting impact requires intervention at the policy level. For instance, railway stations, Bus stands, airports are all government owned, and improvements can only be brought about through policy changes. “With smart cities being promoted, inclusive policies can bring about an impact right from the start. So, if disability inclusion is already added in procurement policy, then the documents will include disability-friendly designs and construction will happen accordingly,” says Meenu.

Mphasis has been supporting NCPEDP (National Centre for Promotion of Employment for Disabled) people for many years. Along with NCPEDP, Mphasis recognised that the laws relating to people with disabilities had many lacunae and did not comply with the United Nations Convention on the Rights of Persons with Disabilities (UNCRPD). Sustained and strong advocacy along with NCPEDP has led to a new Rights of People with Disabilities (RPWD) Act. The new Act empowers people with disabilities. Mphasis’ sustained efforts led to it winning the Zero Project Award at the UN recently. According to Meenu, “Changes are now becoming visible on the ground, and several PILs have been filed to make government accountable. One outcome has been that the Delhi government is now procuring disable friendly buses.”

Many actions undertaken by Mphasis with a strong focus on persons with disability has led to significant improvement in their lives. Mphasis has aided the disability inclusion through various means — helping provide education, training, employment, transportation, policy changes and improved lives. A disabled friendly CSR strategy built around personal experiences of Meenu Bhambhani has been the nucleus of its programmes.

Based on a conversation with, Dr Meenu Bhambhani, Vice President & Head – Corporate Social Responsibility, Mphasis

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Coca – Cola Sparks The Change With The Fruit Circular Economy

Coca-Cola India has a new ambition – to become a complete beverage company. Which essentially means providing more choice to the consumer by offering newer beverages and many based on fruit and fruit juices. This has been inspired by the concept of the circular economy or a virtuous economic cycle. This initiative will create a spurt in the company’s local procurement of fruit and farm level interventions and will have a positive impact on the Indian horticulture ecosystem. The two key components of this project are, launching new and innovative products and sustainable sourcing.

Product innovation and taking them to market is handled by Asim Parekh VP, Fruit Circular Economy, Coca-Cola India who says “To spark the change we’re bringing many other drinks like tea, coconut water, and juices to our customers. We are launching several new local brands at various price points and for different customer categories. Infact, we are now emulating a start up with 17 brand launches in 2018 and many more slated for 2019. We have made small teams that are quick to innovate, quick to market and adapt. Our core philosophy aided by a sustainable supply chain is about reaching customers and mapping their journeys in detail,”

This way of functioning is a big shift and is rooted in the understanding that India is not exactly a homogenous country, besides social and cultural diversity, there is economic classification. In addition, the modern consumer in big and small cities and even semi-urban areas wants personalization of their products and services. Keeping the potential growth of the economy in mind, even seemingly small customer segments could be large value generators.

One such sustainable sourcing program is Unnati Mango. The program was started to increase crop yields, save water, bring in ‘Good Agricultural practices” and improve the livelihoods of mango farmers in Chittoor district of Andhra Pradesh. Emboldened by the success of the program, the company has now extended this framework to other fruits and placed it under a strategic framework called the “Fruit Circular Economy”. Under this program orange sourcing and farming initiatives were launched in 2016 across the water stressed regions of Maharashtra and Madhya Pradesh. It encouraged the adoption of newer varieties of orange that have 50% higher juice content. Says, Ishteyaque Amjad, VP, Public Affairs, Communications and Sustainability, Coca-Cola India and South West Asia , “Entering and staying in the fruit production and processing ecosystem is part of our long term strategy and commitment to the country. Through these sustainable agricultural initiatives we plan to double farmer’s incomes. All projects under the Fruit Circular Economy framework consist of modern nurseries with high quality plants, intensive training to farmers, drip irrigation techniques and an assured buy back. About 250,000 farmers would be benefited over 10 years through these programs. At one level, these projects help the company in creating resilient high quality supply chains at another they also ensure that the shift towards juice based beverages is a smooth transition.”

Coca-Cola’s 2020 sustainability goals put sustainable sourcing of key agricultural ingredients as a top priority. Concerted efforts are being made by the company and nearly 250 bottling partners in more than 200 countries and territories to ensure this becomes a reality. The Coca-Cola Company is one of the largest buyers of Indian agricultural produce, sourcing 95% of its ingredients locally. This helps the company in sourcing high quality produce and also benefits the local farmers who get a ready market. India is the second largest producer of the fruits and vegetables in the world. The country grows the most amounts of bananas, papaya, mangoes, guavas, pomegranates and is the second largest producers of potatoes, green peas, tomatoes, cabbage and cauliflower. However, only 2.2% of fruits and vegetable output in India is processed. Coca-Cola views this as India’s untapped potential.

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