Caspian Companies in Top Quintiles in GIIRS Annual Update

Caspian Advisors is pleased to announce that its portfolio companies are among the first to update their annual ratings by GIIRS (Global Impact Investment Rating System). All nine companies participated in the GIIRS rating process, and the average score is 123 – in the top 2 quintiles of GIIRS rated companies – with five companies scoring in the top quintile. The score of 123 compares to an average score of 100 (4 stars) for all GIIRS rated companies operating in emerging markets (n=293).

Caspian’s portfolio companies have been key throughout the GIIRS process. We are very impressed by their dedication to transparency in social performance reporting and are proud to have them as partners.

For the full press release, please visit: http://www.csrwire.com/press_releases/36421-Caspian-Companies-in-Top-Quintiles-in-GIIRS-Annual-Update.

For the third consecutive year, Grassroots Capital Management PBC has been selected for the ImpactAssets 50 2013 (IA50). In its third year, the IA50 is an annually updated list of experienced private debt and equity impact investment fund managers.  The IA 50 serves as a gateway for those interested in achieving social and/or environmental, as well as financial, returns on their investments.  Fund managers included in the IA 50 2013 manage a combined $10.8 billion in assets within the impact investing market. Firms were chosen based on experience, impact, and with an eye toward reflecting the diversity of impact investment opportunities.

For Grassroots' profile, click here

 

The Critical Role of Non-Commercial Capital in Funding of Impact Investments

On September 19^th, the World Economic Forum hosted a panel discussion in New York to introduce its just-published report, “Fromthe Margins to the Mainstream – Assessment of the Impact Investment Sector andOpportunities to Engage Mainstream Investors”.  The panel included Goldman Sachs, Morgan Stanley, Equilibrium Capital and Social Finance USA.  The discussion and the report itself made a number of points of relevance to microfinance and other impact sectors targeting low income populations.

Among the good news:  a survey of the “millennial generation” finds them most often identifying  the purpose of business as “improving society”, albeit followed closely by generating profit; both financial intermediaries, like those represented on the panel, and advisors like Cambridge Associates appear to increasingly incorporate impact sectors into their portfolio constructs for clients. 

Among the challenges:  family offices / HNWIs and Development Finance Institutions continue to be the leading source of capital for impact investments, but these sources represent just a small proportion of total global asset ownership:  2.5% compared with 48% and 39% held by pension funds and insurance companies, respectively.  And these institutional investors continue to find impact investments challenging, due to scale, standardization and in some cases, risk adjusted return mismatches. 

Evolution of Pricing Transparency in Microfinance

For the fifth anniversary of its founding, MFTransparency traces the evolution of the pricing transparency movement in microfinance with the help of four industry leaders: Chuck Waterfield – CEO of MFTransparency, Mårten Leijon – CEO of  Microfinance Information eXchange (MIX), Paul DiLeo – Founder and Managing Partner of Grassroots Capital Management PBC, and Rupert Scofield – CEO of FINCA.

A turning point for pricing transparency in the industry, according to Chuck Waterfield, was the Compartamos IPO in April 2007, which called attention to the high profits possible from small loans to the poor. In early 2008, MFTransparency was established as a facilitator for the industry to collect and process data on pricing in a standardized way and report them transparently to help the industry mature and evolve.

For Paul DiLeo, more than just a natural evolution of a maturing industry, the focus on pricing transparency goes beyond information and consumer education to what differentiates microfinance from other industries: microfinance not only realizes a latent market opportunity, it looks to generate some improvement in the conditions, products and prospects of clients. MFTransparency, and the whole pricing transparency effort, has become part of a larger effort to examine microfinance and whether it is indeed providing benefit to clients.

Please click the following link for more on the points of view of these four industry experts: http://vimeo.com/74194251. 

What to Expect When Impact Investing (by Paul DiLeo)

This past Thursday, September 5, I attended a panel discussion on Impact Investing organized by CGAP in Paris.  Unfortunately, I arrived late, left early, and didn't catch all the discussion in French. With those caveats, though, I did find a few interesting themes in the discussion I did catch.

At various points during the discussion, the moderator posed questions that attendees could vote on using individual clickers that had been distributed.  In response to one question, 67% of participants either agreed or strongly agreed that “expectations for impact in impact investing are too high.”

While there was no opportunity for respondents to specify how exactly their expectations had been disappointed, one reasonable inference in light of critiques of recent years is that the ability of impact investing to achieve impact had been oversold and it was necessary for us to moderate our expectations with respect to possible impact on poverty, gender equality, and other social ills.

If correct, this conclusion would seem to raise an obvious question:  why would we not have high and indeed, rising expectations for impact investing?  In other businesses we expect continuous quality improvement.  Road builders need to build safer, more durable roads; appliance makers more efficient, useful appliances.  Why for a business where “impact” is the product do we seem to be lowering rather than continuously raising expectations?

Divesting from global fossil fuel companies

Anders Ferguson, Partner at Veris Wealth Partners, discusses the broadening debate over the movement to divest from fossil fuel companies, Veris’ approach and the broader implications for impact investors and their portfolios. Read more here:  http://www.veriswp.com/2013/08/23/all-in-the-family-fossil-fuel-divestment/

Manager's Reflections on Ten Years of the Gray Ghost Microfinance Fund

Gray Ghost, Since conceiving of and launching their pioneering microfinance fund-of-funds a decade ago, Gray Ghost and Paul DiLeo have played a critical role in shaping the microfinance landscape and expanding the pool of private investors providing liquidity to the microfinance industry.  Now that the Gray Ghost portfolio has exited more than half its investments, Paul DiLeo reflects on the successes and challenges of their groundbreaking work and the implications for the industry going forward. The paper is available here. Click "Read more" below for the manager's comments.

Grassroots Is Delaware's First Public Benefit Corporation

On August 1st, Grassroots joined 16 other leaders (listed below) who registered as the first Delaware benefit corporations. In addition to these forerunners, more than 600 companies celebrated this big day by signing an Open Letter to Fellow Business Leaders. Links to the Open Letter and other information on this inspiring event are provided below. . .

Here’s the Open Letter inviting business leaders to join the movement redefining success in business

Here's a Conversation with the Early Adopters published on CSRNewsWire

An article by Chrystia Freeland 'Capitalism, but With a Little Heart' from The New York Times

Governor Markell's Press Release and OpEd 'A New Kind of Corporation'

Registering Companies: Alter Eco, American Prison Data Systems, Better Than We Found It, Exemplar Companies, Fair Parenting Project, Farmigo, Grassroots Capital Management, Ian Martin Group, Imani Energy, Method, New Leaf Paper, Plexx, Plum Organics, Profile Health Systems, RSF Social Finance, Socratic Labs, Venture Pilot 

Companies Committed to Register:  Performance Management, GOOD Worldwide, Honest Company, Roozt, SustainAbility

Grassroots is becoming a Public Benefit Corporation!

On July 17th, Grassroots attended the signing of Public Benefit Corporation (PBC) legislation by Delaware Governor Jack Markell in Wilmington.  Delaware is the 18th state to create a PBC form, and by far the most important given Delaware's unique position as a leading state for incorporations and leadership in corporate law. Grassroots is among the first companies that will convert to the new structure and has changed its name to Grassroots Capital Management, PBC, effective August 1. Grassroots has been a certified B Corporation since 2008 and our funds are GIIRS Pioneer Fund Managers. Becoming a PBC helps Grassroots preserve its mission and ensure that the interests and rights of all our stakeholders are protected, contributing to a better, more just world.  

Grassroots is looking for a Summer Intern

Grassroots Capital Management makes social investments globally that have both a financial and social return. Currently, Grassroots and its partners manage/advise five impact investment funds covering predominantly microfinance as well as small medium enterprise, affordable housing, and sustainable agriculture sectors.  Grassroots is looking for a short term intern to help develop pipelines of MFIs and investors. In undertaking this research, the intern can expect to develop a good familiarity with MFIs around the world with varying degrees of financial and social performance, the networks and resources that support them, and the investor communities that are engaging with the microfinance industry.

Responsible pricing and balanced returns - How much is enough?

By Dirk Elsen, Director of Emerging Markets at Triodos Investment Management
'We all read the stories in the media about microfinance institutions charging over 100% interest on their loans and making way too much profit from the very people they claim to serve. These statements are not new. Making too much profit is not responsible practice. I’m sure that all players in the inclusive finance sector agree with that."
Read more: http://www.triodos.com/en/investment-management/who-we-are/news/newsletter-emerging-markets/dirk-elsen-how-much-is-enough/

Reflections on Annual SPTF Meeting: Balanced Returns and Understanding Microentrepreneur's Profit Margins

Last week, the Social Performance Task Force (SPTF) held its annual meeting in Panama City, Panama. A large part of our attention at this meeting was on better defining “balanced returns” – the balance between the social and financial performance of MFIs and investors and how this ultimately affects the end-clients.  Grassroots has been focusing on this balance dating back to the early days of microfinance investing and actively supportive of the SPTF’s ongoing work to develop guidance and indicators on this controversial topic. A few key highlights below:

Profitability in Microfinance: Chu-Waterfield Debate

"How much profit is too much?" when those profits are made from the poor and when investors/ businesses bear the label of "social" or "double bottom line"? This topic was explored in a webinar discussion between Michael Chu and Chuck Waterfield this past Friday (May 24).

I think their views are more consistent than might first appear, because they are talking about two different things.

New Compartamos Study

Compartamos invited three economists, Dean Karlan, Manuela Angelucci and Jonathan Zinman, to undertake two randomized control tests to find out the impact of Compartamos' lending practices on clients.  Overall, the studies show that microcredit typically benefits borrowers in a variety of ways, even if it does not lift them immediately out of poverty.

For the study, see http://karlan.yale.edu/p/WinSomeLoseSome_Release%20%281%29.pdf

For a recent article in the Economist about the study, see "Mexico: Put to the Test" (http://www.economist.com/blogs/schumpeter/2013/05/microcredit) 

Balanced Returns in Microfinance: Recognizing Two Approaches and their Likely Outcomes

Currently several microfinance industry efforts are underway to define and operationalize the idealistic concept of “balanced returns” which is included in a number of statements of principle or codes of conduct including the PIIF and the SPTF Universal Standards.  These discussions force us to confront two distinct views of what microfinance can accomplish and how:   Is microfinance effective by accelerating the entry of the poor into mainstream markets, specifically markets for financial products, where market forces will ultimately deliver improved lives to the bottom of the pyramid through “financial inclusion”?  Or can microfinance directly benefit the poor by enlisting private capital and market incentives in targeted, pro-poor interventions not available in the mainstream?

A challenge to flat earth thinking in microfinance

According to Sanjay Sinha (Micro‐Credit Ratings International Limited), promotion of microfinance starting from the mid-1990s propagated a strong message on the principles of good microfinance practice. This note argues that while these principles may have been appropriate at the time when they were formulated, the entrenchment of these principles is now damaging the development objective – financial inclusion to serve the needs of poor and low income people, and facilitating income enhancement – and the time has come for a concerted effort to swing the pendulum back to equilibrium.

Read more: http://m-cril.com/article/A-challenge-to-flat-earth-thinking-in-microfinance.pdf

Announcing: the Pro-Poor Principles

The Pro-Poor Principles form the foundation for good practice in reaching and serving poor clients. They also serve as the core of the Seal of Excellence’s assessment framework that will help to identify those organizations doing the most to reach people living in poverty, to meet their needs, and to track progress over time.

Read more: http://sealofexcellence.wordpress.com/2013/05/15/announcing-the-pro-poor-principles/

Indian Regulatory Body to Set Norms for Impact Investment

In order to avoid excesses of the kind that derailed the Indian microfinance industry three years ago, nine impact investors have come together to form a group that will define what they can do and cannot do in their investment practices to always stay aligned with their stated objectives.

Read more: http://articles.economictimes.indiatimes.com/2013-05-08/news/39117121_1_vc-investments-vc-funds-vineet-rai

Triodos Launches New Ethical Investment Funds

Green banking specialist Triodos Bank recently launched two new Socially Responsible Investment (SRI) Funds, dubbed the Sustainable Pioneer Fund and the Sustainable Equity Fund. The funds, which will also be available as part of a Triodos Ethical Stocks and Shares ISA, join the bank's existing portfolio of green and ethical cash ISAs and savings accounts, as well as its Microfinance fund for high net worth and sophisticated investors.

Read more: http://www.syminvest.com/news/triodos-launches-new-ethical-investment-funds/2013/4/30/3704?utm_source=Symbiotics+NewsWatch&utm_campaign=c04e9771aa-Symbiotics_NewsWatch_251_3_05_2013&utm_medium=email

Measuring the Impact and Success of Microfinance

Is microfinance an effective tool for bringing people out of poverty? In recent years, David Roodman, keynote speaker at the2013 Penn Microfinance Conference, has put that proposition through a series of rigorous mathematical tests, only to conclude that the yardsticks for measuring the success of the microfinance sector are more complex, subtle and elusive than people realize.

Read more: http://knowledge.wharton.upenn.edu/article.cfm?articleid=3235