Impact Investing in the Creative Economy: diving deep into Ethical Fashion, Sustainable Food and Social Impact Media Creatve people solve problems. Increasingly, In an efort to demystfy the creatve economy they are doing it beyond the studio, the for impact investors, impact fund managers and theater and the concert hall. Creatve people other stakeholders, this report dives deep into are harnessing the power of business and the three large and growing consumer industries marketplace to scale and sustain their ideas. within the creatve economy: fashion, food and media. These industries share the capacity to Many of the businesses that artsts, designers intrigue, engage, educate and actvate more and other creatves start balance fnancial mindful consumers so that the benefts of proftability with concern for the planet, ethical and sustainable supply chains and the their workers, and their community. These full power of media to drive positve change can socially-focused companies seek capital from be realized. impact investors who understand the power of art, design, culture, heritage and creatvity to Creatve Economy Defned drive positve environmental and social impact. Together, investors and entrepreneurs can The “creatve economy” was defned by John grow the creatve economy to become more Howkins in 2001 as a new way of thinking and inclusive, equitable and sustainable. doing that revitalizes manufacturing, services, retailing, and entertainment industries with A Creatvity Lens: Impact Investng in the Creatve Economy 1 a focus on individual talent or skill, and art, The Opportunity culture, design, and innovaton. Concern by consumers about how their food, Today, creatve economy defnitons are clothes and entertainment are produced has typically ted to eforts to measure economic grown signifcantly in recent years. Human actvity in a specifc geography. A relevant set of well-being and planetary health may have art, culture, design, and innovaton industries been niche issues in the past, but have evolved is determined, and the economic contributon into mainstream trends. Consumers are of those industries is assessed within a region. demanding sustainable and ethical business A unique set of industries defnes each local practces from the companies they patronize creatve economy refectng the culture, and are votng with their wallets. Social media- traditons and heritage of that place. driven transparency makes it more difcult for companies to hide unfair treatment of workers, Based on industry research,1 Upstart Co-Lab perpetuate gender and racial bias, or mistreat identfed a set of industries comprising the the environment. creatve economy using the North American Industry Classifcaton System (NAICS). These But it’s not only about sustainability and ethics. NAICS codes describe businesses engaged Consumers are also demanding more engaging, in the inputs, producton, and distributon more authentc and a wider variety of products, of creatve products, services, experiences, experiences, and entertainment. Changing and platorms and can be summarized in fve demographics in the U.S. require companies categories: Ethical Fashion, Sustainable Food, to diversify their oferings to appeal to many Social Impact Media, Other Creatve Businesses more distnct audiences. Technology has and Creatve Places.2 redefned the marketplace and made it possible to proftably cater to a range of consumer Please refer to page 5 for the defnitons of preferences and ofer customized products these categories. — with a compelling back-story to boot. Cross- cultural sharing spanning diverse traditons is recognized as a market opportunity. 1 Including research by the Creatve Economy Coaliton (CEC), a By defniton, Ethical Fashion, Sustainable working group of the Natonal Creatvity Network; the Natonal Endowment for the Arts and the Bureau of Economic Analysis; Food and Social Impact Media businesses Americans for the Arts; the U.K. Department for Culture, Media and Sports; Nesta, a UK-based innovaton foundaton; and the intentonally address the signifcant United Natons Educatonal, Scientfc and Cultural Organizaton environmental challenges of their respectve (UNESCO). 2 www.upstartco-lab.org/creatvity_lens/naics-codes-creatve- industries. They also ofer safe and healthy businesses economic opportunites for workers across A Creatvity Lens: Impact Investng in the Creatve Economy 2 socioeconomic strata — from food workers The Role of Impact Investng to fashion designers, seamstresses to game The Ethical Fashion, Sustainable Food and developers, producton crew to 4-star chefs. But Social Impact Media sectors are growing unlike other social and sustainable companies, opportunites for impact investors. Dedicated these businesses also delight consumers with incubators and accelerators are helping creatve beauty, deliciousness, and entertainment, entrepreneurs develop and scale responsible connectng them to heritage, culture and and sustainable businesses. The expanding community. and improving universe of impact standards The Challenges help investors to target and measure their environmental and social results. Nonproft While enjoying signifcant market tailwinds, coalitons, industry groups and membership Ethical Fashion, Sustainable Food, and Social networks are building the ecosystem for impact- Impact Media also face similar challenges: driven companies in these sectors. A growing • The lack of agreed-upon standards, body of academic studies, industry reports, and multple confictng standards, voluntary press coverage provide the fact base and stories accountability, and marketng labels that to validate what’s happening. So, it should sound like true environmental, health and not be surprising that more than 50 socially impact standards can confuse consumers responsible and impact funds invested in food, and generate skeptcism. fashion and media over the past 5 years. • Transparency and accountability require Impact investors are atracted to the creatve efort and in complex industries can be economy by its scale: global problems, big difcult to ensure. (But are crucial to avoid market opportunites, large consumer demand. customer critque of greenwashing or even Early impact investors in Ethical Fashion are worse — actual bad practces.) trying to reinvent the global supply chain around sustainability and improved livelihoods. • Consumer demand for rapid home delivery Sustainable Food investors are betng that new, of unique products from around the globe delicious and excitng products and experiences raises environmental and sustainability will translate to healthy people and a healthy questons in the food and fashion sectors. planet. Early movers in Social Impact Media • New products and services — especially see the power of stories from previously under- in the media sector — raise questons of represented voices to shape opinions and drive proftability and investor risk. acton, while simultaneously creatng quality jobs and economic opportunity. A Creatvity Lens: Impact Investng in the Creatve Economy 3 Conclusion Upstart Co-Lab is connectng impact Beyond direct fnancial, environmental and investng to the $804 billion, 10 million- social benefts, the creatve economy has its job U.S. creatve economy. A key part own unique capacity to drive even greater of our feld-building work is research impact. Fashion enables creatve expression on investment opportunites in the and allows each of us to convey our individual creatve economy. Please visit the identty. Food is a way we can share and blend Research secton of the Upstart Co-Lab our heritage and traditons. Film & TV and the website (www.upstartco-lab.org) to new medium of video games help us tell stories fnd our recent reports including: that both refect our history and shape the way HIDING IN PLAIN SIGHT: Impact we see our future. Investng in the Creatve Economy Investng in Ethical Fashion, Sustainable looks at more than 100 funds with $60 Food and Social Impact Media allows impact billion of aggregate assets that have investors to support the growth of companies been investng in the creatve economy that generate deep environmental and social over the past 5 years. impact — while joyfully inspiring us. It’s tme for Creatve Places and Businesses: impact investors to dive deep into the creatve Catalyzing Growth in Communites economy. reviews investable opportunites in the Creatve Economy with the potental to stabilize threatened communites and beneft regions looking to atract and develop quality jobs. The Community Reinvestment Act and the Creatve Economy: Investng in Creatve Places and Businesses as Part of Comprehensive Community Development highlights the range of creatve places and business actvites which have benefted from CRA funding over the past 10 years. A Creatvity Lens: Impact Investng in the Creatve Economy 4 THE CREATIVE ECONOMY DEFINED ETHICAL FASHION Companies producing clothes, shoes, jewelry and accessories that proactvely address industry challenges related to labor, environmental impact, governance, and/or preservaton of cultural heritage. (e.g. fashion companies addressing job quality, working conditons and safety; fashion companies addressing resource conservaton or toxin reducton; fashion companies facilitatng local community engagement or cultural preservaton) SUSTAINABLE FOOD Producers and providers of food and beverage products and experiences that proactvely address and raise consumer awareness of resource conservaton, preservaton of cultural heritage, and/or access to healthy food. (e.g. artsan