VENTURE AND SOCIAL IMPACT INVESTMENT PRACTICAL CASES FROM EUROPE AND LATIN AMERICA

Webinar, 20 May 2020

SPEAKERS | LATIMPACTO & EVPA TEAM

CAROLINA SUÁREZ ALESSIA GIANONCELLI CEO Head of Knowledge Centre LatImpacto EVPA SPEAKERS | EXPERIENCED PRACTITIONERS

OLIVIER DE GUERRE PIETER OOSTLANDER NATÁLIA LEME PEDRO CASTILLO PhiTrust Shaerpa and SI2 Fund Arymax Foundation Promotora Social Mexico France Belgium Brazil Mexico GOTOWEBINAR | TIPS & TRICKS

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INTRODUCTION By Carolina Suárez INTRODUCTION TO EVPA GUIDE TO VENTURE PHILANTHROPY AND SOCIAL IMPACT INVESTMENT By Alessia Gianoncelli PHITRUST: INVESTING FOR IMPACT IN EUROPE By Olivier de Guerre SI2 FUND: INVESTING FOR IMPACT IN EUROPE By Pieter Oostlander QUESTIONS FROM THE AUDIENCE ARYMAX FOUNDATION: INVESTING FOR IMPACT IN LATIN AMERICA By Natália Leme PROMOTORA SOCIAL MÉXICO: INVESTING FOR IMPACT IN LATIN AMERICA By Pedro Castillo QUESTIONS FROM THE AUDIENCE CLOSING By Carolina Suárez INTRODUCTION By Carolina Suárez PATHWAY TO IMPACT

We are the Latin American community of philanthropists and social that connects and mobilizes (human, intellectual, and financial) committed to achieving more and lasting positive social and environmental impact by promoting the exchange of knowledge on the most innovative and effective models of social investment, management, and impact measurement and by facilitating connections for greater collaboration and co-investment.

We belong to the family of VP Networks

Connected by With the support of OUR GUIDING PRINCIPLES

PRINCIPLE #5 PRINCIPLE #1 • A global • Diverse types • collaborative of • movement • investors

PRINCIPLE #4 PRINCIPLE #2 •Independent • Disciplined •organizations • investment •focused on •serving their own regions PRINCIPLE #3 •Investment •along the full •continuum of •capital Diversity in PRINCIPLE #1 the types of investors

Attract and connect providers of capital

Professional Universities, Service Government Research, Corporates Firms Family Foundations Investors Think tanks Offices related Foster learning, collaboration and accountability Capture and disseminate Connecting actors and fostering Wide array of -added knowledge regional and local collaboration services Enable access to knowledge, assets of global community Multiply positive social and environmental impact

Latimpacto brings together diverse parties with capital (financial, human and intellectual) seeking social impact Investment Along the PRINCIPLE #3 Full Continuum of Capital

PROMOTING & STRENGTHENING VENTURE PHILANTHROPY APPROACH + CONNECTING CONTINUUM OF CAPITAL

Investing for Impact Investing with Impact

(Venture Philanthropy) (Impact investing)

- Social purpose that will Social purpose organizations Social purpose organizations Traditional ESG Compliant never be with a potentially financially traditional

with a proven financially with intentional social

financially/self – self- sustainable sustainable business model impact businesses

Traditional investing investing Traditional making making Traditional grant Traditional sustainable model

Profit first as a Only Social Impact Social Impact as a Priority Priority

Our strategy emphasizes de value of Venture Philanthropy and Social Investment along the continuum of capital, as a catalyst that complements and enables impact investment

* Source: Adaption from EVPA PRINCIPLE #5 A Global Movement

The yellow dots are those countries where Latimpacto is starting to have presences. The purple dots are the ones where our sisters have members. We are diverse peoples with synergistic perspectives, experiences and skills –and shared passion and zeal to improve our world. MISSING GAP

A Platform that will collaborate with existing ecosystem players to 1 2 3 4 5

Connect the entire Connect providers of Connect seamlessly to Operates fully at a continuum of capital capital across all the largest community of Latin American level Promote the most “silos” global social investors From philanthropic effective investment Based in the region grants to full market approaches to achieve From foundations to 1000+ organizations with leadership and rate return impact “impact first” corporates, investors, who are members of governance from the investment, including family offices, EVPA and AVPN, which region talent and intellectual professional services, gives access to cross- capital academia and public border learning and to sector actors foreign-based capital

INTRODUCTION TO EVPA’S GUIDE TO VENTURE PHILATHROPY AND SOCIAL IMPACT INVESTMENT By Alessia Gianoncelli THE EVPA PRACTICAL GUIDE (1/3)

• Overview of all the key practices and activities of investors applying the venture philanthropy approach

• Point of reference for introducing the concept of venture philanthropy and social investment to new comers or to organisations that are exploring the possibility to join the impact space

• 4th edition in 2018, following:  the 1st edition, which was a working paper in 2008  the 2nd edition in 2010  the 3rd edition in 2016 THE EVPA PRACTICAL GUIDE (2/3)

• It includes all the insights and knowledge gathered by the EVPA Knowledge Centre throughout the years, thanks to the exchanges with members and practitioners, including data collected and frameworks developed by EVPA

• It includes practical cases from EVPA members

• Three sections: 1. Setting up a VP organisation 2. Investment strategy 3. Investment process THE EVPA PRACTICAL GUIDE (3/3)

Thanks to the collaboration with LatImpacto Now also available in Spanish and Portuguese! 1. SETTING UP A VENTURE PHILANTHROPY ORGANISATION

Funding model • Grant-making / Social investment (through loans, equity, hybrid financial instruments)

Organisational structure • Background of the team (balance in between investment sector / social sector) • Role and level of engagement of the board (e.g. management-driven model, mixed model, -driven model)

Fundraising • Where the resources come from (e.g. own endowment in case of foundations, , governments, High-Net-Worth individuals, institutional investors, etc.) 2. THE INVESTMENT STRATEGY

Investment focus • Social sector choices • Geographic choices

Type of social purpose organisations to support • Legal structure • Business model • Stage of development

Tailored financing and the different types of financial instruments

Non-financial support • SPO’s social impact related skills (theory of change / impact strategy / impact measurement) • SPO’s financial sustainability (fundraising / revenue strategy / financial management) • SPO’s organisational resilience (human capital support / governance support)

Co-investment policy

Start making considerations on the exit strategy 3. THE INVESTMENT PROCESS 3. THE INVESTMENT PROCESS

The first step of the appraisal process is a preliminary screening procedure of the investments opportunities available (deal flow), followed by a knock-out screening of the applicants that do not meet the standard application criteria (first screening) 3. THE INVESTMENT PROCESS

Detailed screening, which will usually be performed (at least in part) through the analysis and validation of a business plan 3. THE INVESTMENT PROCESS

Including: • Preparing the non-financial support plan • Choosing the best financial instrument • Discussing the exit plan 3. THE INVESTMENT PROCESS

When the investment is actually managed.

The EVPA Guide includes insights of management: • At portfolio level • At the SPO level

3. THE INVESTMENT PROCESS

After having previously assessed the different exit possibilities, the VP organisation executes the exit, choosing whom to exit to (e.g. follow-on investors), balancing its own financial and social impact return expectations. 3. THE INVESTMENT PROCESS

The investor for impact, after the exit, can continue to provide non-financial support in different forms, such as:

• Providing access to networks • Helping the SPO look for follow-on investors • Keeping a seat on the board PHITRUST INVESTING FOR IMPACT IN EUROPE By Olivier de Guerre INTRODUCTION

• History: • A meeting with Ashoka being launched in France in 2005, • Realising that Social Entrepreneurs needed Capital to develop their business and that classical funds/foundations, wil not provide it, • We launched Phitrust Foundation in 2006 to support and mentor Social Entrepreneurs, • We launched our first Social Investment fund in 2007 “PhiTrust Partenaires”, • We decided to apply Private Equity philosophy to support not for & for profit ones,

• Our team in France, one of the first to adopt “VP philosophy” and EVPA vision, being convinced that we had to “reinvent” the way social organisations were financed and mentored,

• Our vision is “Impact first” meaning that we aim at a social mission and that economic sustainability is a “mean” to develop impact: • It obliged us to change the way we develop capital into those social organisations, • It pushed us to develop a close mentoring, • We developed our own tools for measuring Impact (philosophy that European Investment Fund uses today) DEPLOYING EQUITY IN THE SOCIAL IMPACT SPACE

• First “French Private investors social fund” and French EusEF (European Social Investment Fund),

• 50 m € invested in social organisations • Mainly in France, Eu, (80%) but also in Africa & South East Asia, being convinced that social innovation is no longer “geographic” but worldwide with specificities, • In young projects (some start ups) and mostly in accelerating ones, • In many “hybrid” models with not for profit and for profit organisations,

• It is Long term investment : We assumed since the beginning that investment will be long term because it is very difficult to manage both ambitions (social and sustainability) in 3/5 years. Therefore: • PhiTrust Partenaires is a (not a fund) with no end date at the beginning, • Our average duration of investments is 11 years… • Liquidity is organised for 2026 (20 years) but many investors want to continue…

• Low risk/Low return: We thought at first that those projects will be very risky. Unfortunately as the market is growing (…) those are not so risky and we discovered: • That our risk was very low (4 failures in 15 years with 37 projects…), • That our expected return was low (3-5%) because we were focusing on social projects. PROVIDING NON-FINANCIAL SUPPORT

• Social enterprises have a double mission: Deliver Impact and Be sustainable… • Non financial support is KEY because it is a real challenge to deliver both… • It is also a way to lower the risk…

• Private entrepreneurs invested in our funds (60% of investors) and 14 of them participate actively in the Investment Committee and in the boards of our investees • Support is mainly strategical support as we can call for specific experts, • Support is always given Probono, • Mentor always participate actively in the governance of the supported organisations,

• Meetings between our investees and investors are organised at least once a year, to create a “network” with the capacity to use investors own networks for social enterprises that have not the same networks,

• Main issue is the cost of mentoring which is not covered by external funding. We have the chance to have Probono support from investors, whuch are entrepreneurs and are very happy to help. They bring strategical value to social entrepreneurs. MEASURING AND MANAGING IMPACT

• Measuring Impact : a long learning process. We looked at many different tools in the last 15 years and built our own referential because we do not found a simple and effective methodology :

• Small organisations cannot support long “impact expertise” from outside or deliver “tons” of objectives for the “sake” of investors because they are small organisations with no specific team,

• Impact objectives are the heart of their mission. Therefore it must be a strategic tool for the CEO and for the board to “pilot” the organisation : • During due diligence process before investment, we ask the organisation to define 3-5 years objectives, • Those objectives are looked annually and discussed between boards, • They can be revised if there is reasons/issues to do so,

• European Investment Fund uses the same methodology and • Has decided that our “carried interest” will be based on the realisation of these objectives, • We decided to give them, if any, to our foundation. SI2 FUND INVESTING FOR IMPACT IN EUROPE By Pieter Oostlander Introducing… SI2 Fund

• We back innovative social enterprises offering breakthrough solutions to • Since 2012 – First in Benelux! societal challenges • Early growth stage SEs • Size = €17 mio • system-changing innovation • Europe (Benelux + UK) • Sustainable business model with high impact

• Opportunity for investors to drive societal change in a sustainable way • Families, HNWI and Foundations

• Goals: high societal impact & fair financial return

Deploying equity in the social impact space

• Ticket size = 250k to 1500k • Instruments = Equity, loans or a mix • Target stake: significant minority stake with board seat

• Bottom-up - The need of the SPO is leading! Is there a fit with the SI2 Fund funding model? • Often need for risk-bearing capital • Unrestricted loss (of funding) countered with unrestricted upside • Result/performance related component

• FROI > 3,0 % (fund level)

Providing non-financial support

• Active board member and partner: • Active guidance, hands-on support, access to a European network

• Bottom up - Tailored to the SPO needs! • Organisational development, leadership and team, strategic guidance, financial control, business development, … • Always: impact measurement and management

Measuring and managing impact

WHY HOW Target SROI ≥ 2 • Key to creating real societal value • 5 indicators = what, who, how = core of impact investing and social much, contribution, risk (*Impact Management Project)

• Preferred method = SROI (*SVI) • IMM = business intelligence • Quantify the value of (+ and -) • Understand what impact you truly effects experienced by create (needs of and effects on stakeholders stakeholders; vs assumptions) • Understand, compare values, identify ways forward,… • Make the right decisions to improve!

• Bottom up + always ongoing • More impact ànd/is better business!

Any questions? Q&A Q&A SESSION

OLIVIER DE GUERRE PIETER OOSTLANDER PhiTrust Shaerpa and SI2 Fund ARYMAX FOUNDATION INVESTING FOR IMPACT IN LATIN AMERICA By Natália Leme INTRODUCTION

The Arymax Foundation is a philanthropic family foundation that focuses on supporting initiatives that promote the productive inclusion of people in economic vulnerability, aiming at generating work and income and increasing productivity in Brazil.

The purpose of our theory of change is to impact economically vulnerable populations in Brasil with stable and lasting access to work and income. For this, we seek three impacts:

1) Healthy enterprises that generate jobs and income; 2) Vulnerable people better qualified and with greater access to employment; 3) More investments and more mechanisms to support Productive Inclusion initiatives.

Guidelines for our operation

We support networks, alliances and We support initiatives in which we coalitions and we want to be part of recognize effective potential for impact; them, fostering cooperation and synergy relations in the ecosystem;

We support initiatives that reach scale We consider that is essential to and in large populations; strengthen players who are already in the field with accumulation of experiences and knowledge; We support initiatives that offer We want to produce relevant innovative and inspiring solutions to knowledge and solutions that support, current and future challenges of the with good evidence, productive productive inclusion agenda; inclusion initiatives in Brazil;

We support initiatives that can act as a We monitor and evaluate our demonstration effect for other players; actions and those of our investees to learn, improve and gain power.

DEPLOYING DIFFERENT FINANCIAL INSTRUMENTS

 Arymax is a Grantmaker Foundation. Therefore, we directly support only via donations/grants;

 However, we support organizations that promote blended finance;

 We help to mobilize different players to make grants or to use other financial instruments to compose the capital of the supported initiatives, such as other foundations and .

Exemples: PROVIDING NON-FINANCIAL SUPPORT

Key premises beyond funding:

It is essential to develop trustful relations with other players in the field and to strengthen them;

We offer recurring medium to long term support;

We offer permanent institutional support with active listening and dialogue, providing knowledge and tools to our investees. MEASURING AND MANAGING IMPACT

Questions related to the quality of what is being Questions related to the effect of the developed, the use of resources, the fulfilment actions in reality, the transformations of agreements, timeline the production of obtained, the expected and actions, etc. unforeseen results, the impacts, etc.

Measuring Managing

In terms of the quality Which results in productive of the process, how have the inclusion have been achieved in grantees performed? the entrepreneurship and employability portfolios?

36 KPIs and different instruments for evaluation, built in collaboration with Arymax grantees PROMOTORA SOCIAL MÉXICO INVESTING FOR IMPACT IN LATIN AMERICA By Pedro Castillo

| | http://www.psm.org.mx/portafoliodeInversion.html

Condiciones que propicien el Emprendimiento Magnitud de Impacto Social y el Desarrollo del Ecosistema

Estudio Educación Omidyar Network En Promotora Social México Atlas of entendemos que los vehículos Economic financieros en forma de donativos, Complexity créditos e inversiones son cruciales Diccionario para impulsar el sector de impacto NAFIN social, sin embargo resultan Libro de insuficientes. innovación Publicación Desde el equipo de Front Office, Enseña por Sistema B Líderes hemos traducido lo que comprende la México Mexicanos construcción de ecosistema, en los siguientes componentes: Historias Fábrica de Balloon Inspiradoras Líderes PSM 1) 1) Generar conocimiento México Embajadores

2) 2) Promover PSM FLII 3) 3) Articular Mass Social Impact Red 4) 4) Fortalecer y dar soporte y Challenge Bonds Pro- 5) 5) Financiar Taskforce Bono Emprendedore Social Impact Necesito de s Sociales por Investment Ti Social Yucatán Taskforce Progress Index Laguna Innovadora Portafolio de iniciativas actuales (junio 2017 – abril 2018) CONOCIMIENTO PROMOVER ARTICULAR FORTALECER FINANCIAR Portafolio de iniciativas

El CoMap es un mapeo colaborativo del Ecosistema de Impacto Social que identifica actores y procesos con propósito social e impacto positivo en México con el fin de facilitar alianzas multisectoriales e iniciativas de impacto colectivo.

Portafolio de iniciativas

El Festival Latinoamericano de Inversión de Impacto llevado a cabo en Mérida. Impulsado desde su creación hasta la edición 2019.

Uno de los eventos más relevantes de Impacto Social en México y América Latina organizado por el Tec de Monterrey. Participación en Comité de Contenidos https://www.alumbramx.org/ Portafolio de iniciativas

Impulsada por Fundación Grupo México, la Red es una alianza entre Fundaciones Empresariales y empresas con actividad social que se unen para alinear las opciones de apoyo y así lograr unificar la labor social en nuestro País y de forma global. La red está conformada por +90 donantes y 1,900 OSCs

Iniciativa de Impacto Colectivo para incidir y proponer política pública en favor de la primera infancia desde las candidaturas a nivel federal y en 4 estados de la República Mexicana. Portafolio de iniciativas

Movimiento global para crear una nueva economía. Ofrece herramientas de gestión para empresas que desean tener un impacto social y ambiental positivo.

Aceleradora con presencia global. Participación en Jurado Evaluador de emprendimientos finalistas de Building for the Masses de Facebook y 2do Cohort de Mass Challenge

El laboratorio de emprendimiento e innovación social ESMEX identifica universitarios agentes de cambio para transformarlos en emprendedores sociales otorgando herramientas y métodos para la innovación. Portafolio de iniciativas

Liderada por New Ventures Group, SVX México, Compromiso Social Citibanamex, Promotora Social México, ANDE, y otras organizaciones clave, busca acelerar el crecimiento de la inversión de impacto en el país, como parte de la red global del Global Social Impact Investment Steering Group. Portafolio de iniciativas

El GIIMAP es la primera plataforma colaborativa que mapea organizaciones e individuos que trabajan en el sector de inversión de impacto. En un esfuerzo colaborativo en conjunto con Ashoka, Aspen Network of Development Entrepreneurs, Halloran y Spectron Desarrollo, se logró incorporar a 154 organizaciones clave, 119 empresas socio- ambientales y más de 8,000 colaboraciones.

Bono de Impacto Social apoyado por PSM desde 2015>

Portafolio de iniciativas

Edición de diversas publicaciones en materia de emprendimiento, innovación y problemáticas sociales específicas. http://www.psm.org.mx/Libro_Primera_infancia.pdf http://www.psm.org.mx/pdf/LIBRO_ANIVERSARIO_10_PSM.pdf www.psm.org.mx [email protected] t. +52 (55) 4166 66 00 Q&A Q&A SESSION

NATÁLIA LEME PEDRO CASTILLO Arymax Foundation, Brazil Promotora Social Mexico CLOSING DOWNLOAD OUR GUIDE!

https://evpa.eu.com/knowledge- centre/publications/venture- philanthropy-and-social- impact-investment-a-practical- Thanks to the collaboration with LatImpacto guide Now also available in Spanish and Portuguese! Stay in touch with us! EVPA RUE ROYALE 94 B-1000 BRUSSELS LatImpacto

T +32 2 513 21 31 Carolina Suarez: [email protected] [email protected] Juan David Ferreira: [email protected]

EVPAupdates Alan Wagenberg: [email protected] evpa @_EVPA_ EVPA www.evpa.eu.com Alessia Gianoncelli: [email protected]