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Sarona Asset Management announced today that its Sarona Frontier Markets Fund I LP has committed US$3,500,000 to two private equity funds: US$2,000,000 to the South Asia Clean Energy Fund and US$1,500,000 to the Fanisi Venture Capital Fund.

Investing money to make a difference goes by several names, with "ethical", "impact", "green" and "socially responsible" among the industry favourites. But the definition is generally the same: returns are usually sacrificed in the name of doing good. This view is set to change, according to a report titled Impact Investing in Emerging Markets, by the consultancy Responsible Research.

The report has found impact investing in emerging markets is becoming more attractive to fund managers, private equity companies and retail investors worldwide, because the returns are now more compelling. The research cites a survey by the Global Impact Investing Network which found investors anticipate a return of between 20 and 24 per cent this year on their interests in impact companies working in emerging markets.

Cohen, Sir Ronald Chairman, The Portland Trust and Bridges Ventures Director of Social Finance Sir Ronald Cohen is Chairman of The Portland Trust and Bridges Ventures and a Director of Social Finance. He was the founding partner and former chairman of Apax Partners. Founded in 1972, Apax Partners is one of the world’s leading private equity investment groups, operating in nine countries across Europe, the USA, Israel and Japan. Apax advises and manages funds of over $35 billion. Sir Ronald is member of the Harvard Board of Overseers, on the Board of Dean’s Advisers at Harvard Business School, a Vice-Chairman of Ben Gurion University and a member of the University of Oxford Investment Committee. He is also a Trustee of the British Museum. He was a founder director and past chairman of the British Venture Capital Association and a founder director of the European Venture Capital Association. He was also a founder and former Vice-Chairman of EASDAQ and former director of NASDAQ Europe. He was Chairman of the Social Investment Taskforce and the Commission on Unclaimed Assets. He has recently published “The Second Bounce of the Ball – Turning Risk into Opportunity” about entrepreneurship. He is a graduate of Oxford University, where he was president of the Oxford Union, an Honorary Fellow of Exeter College, and has an MBA from Harvard Business School, to which he was awarded a Henry Fellowship. Recipient of the HBS Alumni Achievement Award.

The human capital performance bond proposal differs from the more familiar social impact bond in three important ways: It is truly a bond.  The social impact bonds -- as used in the UK, explored by the Rockefeller Foundation and Nonprofit Finance Fund in the U.S., and profiled here on SocialFinance.ca -- are really equity investments where the investor’s capital is at risk. Consequently, rates of return can run as high as 14%. Not the case in Minnesota. Rather, investors are essentially guaranteed their money back and the rate of return is expected to be around 4%. The anticipated upside of this model is that a lower required rate of return means more organizations will be able to demonstrate economic value that beats that rate and thus allows them to compete for these new funds. The payment timeline is different. In the social impact bond model, organizations receive the cash upfront and must hit pre-determined benchmarks in order for investors to get their money back. With human capital performance bonds, the organizations (mostly nonprofits) carry most of the risk and are only paid if and when they achieve their goal. They would need to secure PRIs or patient capital to meet their interim cash flow needs. The incentives are different. Social impact bonds depend on investors engaging in a due diligence process to evaluate the likely effectiveness of particular social interventions. The model thus uses investors to create the market forces that purportedly will enhance the efficiency of resource flows. The human capital performance bond proposal, in contrast, does not give investors that role.  An intermediary (details yet to be worked out) would fill this gap.

Crisis and disasters boost zeal for reformBy Patrick Jenkins, Banking Editor Published: June 15 2011 16:43 | Last updated: June 15 2011 16:43

All this has given the concept of sustainable finance momentum over the past year. The values of sustainability – a longer-term horizon and a greater focus on the counterparties with which banks do business – are becoming mainstream.

A minority in the banking world has long specialised in “ethical” behaviour, restricting investments to a “whitelist” of companies deemed to act responsibly. But the environmental disasters in particular have been a spur to such institutions, says Joachim Straehle, chief executive of Bank Sarasin, whose predecessors turned the Swiss institution into a “sustainable bank” after a domestic chemical disaster 25 years ago.