Corporate Impact Funds

Building an Impact VC fund

With the rise of Corporate Venture Capital, we can imagine more and more corporates also start moving their capital to impact space, not just via the CSR route. It’s more practical funding, something like a corporate impact fund instead of a CSR initiative because a corporate impact fund can generate financial returns, while CSR initiatives are pure philanthropy.

What’s in it for corporates to do corporate impact fund or direct investing in the social/impact-aligned ventures?

  1. Access to market insights and disruptive models

  2. Footholds in different markets and brand name recognition. Entrance to mass-market, as large corporations have never been a part of addressing the mass consumer market [the poorest socioeconomic group]

  3. Access to talent

  4. New distribution channels

  5. Acquire inclusive businesses to boost their growth

Why is it the right time?

According to the Global Impact Investing Network (GIIN), the size of the global impact investing is projected to grow to US$2 trillion in 2025. The two challenges that are hindering its growth are:

  1. Lack of appropriate capital across the risk-return spectrum

  2. Shortage of high-quality investment opportunities with a track record

Most importantly, according to the New York Times, US$1.9 trillion of liquid assets exists on US corporate balance sheets, and the question is, can we put it into good use by directing the capital to be inclusive & conscious businesses that not only create impact but also create financial returns.

Examples

  1. Circulate Capital - Impact Investing-as-a-service: I covered an example of Circulate Capital in my post, Impact Investing-as-a-Service. Circulate’s founding investors include PepsiCo, Procter & Gamble, Dow Chemical Co., Danone, Unilever, The Coca-Cola Co., and Chevron Phillips Chemical Co. LLC. They raised it from a set of corporates interested in cleaning up the ocean plastics to build a USD 106 million impact investment fund dedicated to financing innovation, companies, and infrastructure that prevents plastic waste flow into the world's ocean while advancing the circular economy. Fantastic, isn’t it?

  2. Self-Managed Funds: Not all corporates are investing in funds; rather, they create their own entity inside the corporation that invests in business and social enterprises. E.g., Nestlé's $258m sustainable packaging fund, Citi's $150m Impact Fund, and Microsoft's $1bn carbon capture fund illustrate how corporates adapt to new challenges. [Ref]

  3. Tech-for-good: Salesforce Ventures second tech-for-good impact fund, double the first vehicle's size, which it launched three years ago to tackle social, environmental, and inclusion issues.

“We must leverage technology and invest in innovative ideas to drive the long-term health and wellness of all citizens, enable equal access to education, and fuel impactful climate action. Through this new fund, Salesforce will invest in companies solving the world’s most pressing social and environmental challenges.” - Suzanne DiBianca, Salesforce’s chief impact officer [Ref]

What do you think? Share it!

Curated resources for further curiosity

  1. Rise of Corporate Impact Investing: https://philanthropynewsdigest.org/news/corporate-impact-investing-market-estimated-at-2.4-billion

  2. CECP - Chief Executives for Corporate Purpose:http://cecp.co/wp-content/uploads/2016/11/cecp_iwp_interactive_Final.pdf

  3. Citi, Nestle, and Microsoft Impact Funds:https://globalimpactventuring.com/citi-nestle-and-microsoft-launch-impact-funds/

  4. Salesforce Impact Fund: https://globalimpactventuring.com/salesforce-ventures-makes-100m-impact-fund/

  5. Corporate Social Investment:https://www.oliverwyman.com/content/dam/oliver-wyman/global/en/2016/feb/OW_Corporate_Social_Investment_Final.pdf

  6. Corporations hoarding trillions: https://www.nytimes.com/2016/01/24/magazine/why-are-corporations-hoarding-trillions.html?_r=0

  7. Corporate Venture Capital: The Devil...or an Innovative Growth Channel? https://www.toptal.com/finance/venture-capital-consultants/corporate-venture-capital


I am continuously looking for first-time fund managers looking to create their first-time impact funds with an edge or a differentiated value proposition in emerging economies. If you are building one, please do write to me. I would love to learn more from you and would be happy to help in any way.

With Love,

Sagar


"first followers" is founded by Sagar Tandon, a founding member at Moonshot Ventures. You can reach him at sagar@firstfollowers.co.

Occasionally, he blogs about responsible investing, tech for good, venture capital, investment thesis, conscious capitalism, collaborative consumption, community, and humane lifestyle.

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