Impact Investing Digest #10 - 12th June 2024

Ceniarth launched our new website this week - please check it out! It provides a detailed picture of our history, what we mean by "impact-first investing" and the types of catalytic impact levers we prioritise. We're also committed to transparency, so you can find a complete database of active and historic impact investments.

We also released our 2023 Impact Report, covering topics such as:

• Reflections on 10 years since Diane founded Ceniarth;
• A bumper year with $90m of new commitments across 39 transactions, despite challenging global headwinds;
• Co-investment partnerships with other impact-first investors and fund managers;
• Continuing to support pioneering new funds while deepening relationships with long-term partners; and
• Deepening our support for CDFIs in the US and UK.

For anyone looking to deploy impact capital into any of our target geographies and sector, please do reach out if you'd like to know more about any of our portfolio or explore opportunities for collaboration!

ECOSYSTEM NEWS

What's next in impact? Jim Sorenson and Sorenson Impact have been pioneering actors in growing the impact investing ecosystem in both the US and globally. I found this recent summary of emerging trends in the sector very informative, with contributions from many leading players in the sector. A growing "intolerance for hollow impact narratives" ( Robert Brown ), progress with "internalizing externalities" ( Delilah Rothenberg ) and the ongoing need for catalytic capital that is "patient, risk-tolerant and flexible" ( Naina Subberwal Batra ) were all themes that resonated - as were the calls for more discussion of failure and a need for deeper investments in impact measurement. I can't do the full report justice here, so would recommend people reviewing it in full!

The importance of talent solutions in in frontier markets (via NextBillion ): social entrepreneurs are often attempting to solve some of the world's most complex and pressing challenges. This requires exceptional people, but outside of founders human capital is often in short supply and extraordinarily expensive. Paul Breloff of Shortlist Professionals and Daniel Waldron of Acumen point out how "the failure to recruit and retain the right talent is a leading factor in company and investment failure." This certainly resonates with our experiences, and we see great potential in a range of new models from Shortlist Professionals , Open Capital 's Arcadia and Do Good CFO in trying to plug this gap. Acumen found that 60% of failures in their portfolio were driven by poor financial management, and we find that fractional CFO services are a particularly interesting way to try and overcome this human capital gap early on in an enterprise's life cycle.

Private Equity x Employee Ownership: alternative models of ownership and governance are a theme I am increasingly interested in. Transform Finance are real thought leaders in the space, and I enjoyed this recent post summarising both the opportunities and limitations of the recent seeming embrace of large private equity managers such as Blackstone of employee ownership models. As someone still very much in learning mode on this topic, it seems like a strong opportunity to mainstream improved worker conditions even if it lacks the depth of impact of other employee ownership models.

UK Social Investment Tax Relief is a (relative) failure: Nick Temple of Social Investment Business provides a sobering summary of the performance of a UK tax relief designed to incentivise more investment into social enterprises. Looking to build on the success of the Enterprise and Seed Enterprise Investment Schemes, it was hoped when launched in 2014 that the Social Investment Tax Relief might generate ￡480m of investment over the initial five years. The reality was a relatively disappointing ￡31m over nine years, despite laudable efforts from people such as Resonance Limited . Nick points out that other schemes such as the British Business Bank 's guarantee schemes have had much more success at unlocking capital for the social enterprise and SME lending ecosystem.

Family offices insights: building on the evidence from 瑞银集团 discussed in the previous edition, 德勤 released more compelling insights into trends they see among their family office clients. The research draws from data from 354 single family offices with $708bn AUM and $1.3trn in overall family wealth. From an impact investing perspective a few key things stood out:

• Family offices are increasingly investing in the private markets, with 30% of AUM invested across private equity and private credit, as well as large exposures to real estate. Private equity is now outstripping public equity from an allocation perspective. This general shift to the private markets overcomes one of the major hurdles faced dealing with more institutional investors.
• The is huge regional variation in the focus on sustainability - over 50% of European and Asia-Pacific actors are embracing sustainable investing, compared to only 24% in the US.

IMPACT MEASUREMENT & MANAGEMENT

Scaling impact accounting (via ImpactAlpha): It was interesting to see spin-out RG Sciences profiled as they look to build on the work of the International Foundation For Valuing Impacts (IFVI) and commercialise a product for the private markets. I will admit to being slightly sceptical about the worthy attempts to build standardised impact accounting frameworks. This comes from first-hand experience of the challenges in measuring impact, as well as the huge subjectivity involved in comparing different types of impact. That being said, anything Sir Ronald Cohen has been actively involved with has a strong chance of success - see Bridges Fund Management Ltd., Social Finance, GSG Impact and Better Society Capital for evidence!

Impact-Linked finance learnings: Roots of Impact is one of the most innovative actors in the emerging field of impact-linked finance. This report summarising key learnings over the last eight years is a must-read for anyone exploring this theme. It highlights the broad range of use cases, pulls out key lessons and nods to where this tool will evolve over the next few years.

Making the Mark: BlueMark recently published the 5th annual edition of its "Making the Mark" report. This revealed an increased adoption of core impact management practices among impact investors and provides some helpful comparative tools as the sector begins to attempt impact benchmarking across key dimensions. It was positive to see Ceniarth partners such as Bain Capital Double Impact and BlueOrchard Finance Ltd in the investor leaderboard.

SECTOR-SPECIFIC CONTENT

• Harnessing the Potential of Remittances ( Zainab Raji of Vista Equity Partners via Stanford Social Innovation Review ) - remittances are a pivotal financial flow for developing economies, and have the potential to be counter-cyclical in nature.

Thanks for reading - if people have any other interesting content they'd like to share please send them to me directly or add to the comments!