An in-depth conversation with the GIIN

When COVID-19 struck, it quickly became clear that every sector would have to be involved in the response, not only philanthropy and government, but businesses and investors as well. This meant thinking creatively about the role business and capital could play in shaping both the immediate response and equitable recovery. To meet the moment, our grantee the Global Impact Investing Network (GIIN) launched the Response, Recovery, and Resilience Investment Coalition (R3 Coalition) to mobilize and coordinate the wider impact investing community, start to fill financing gaps for businesses and quickly deploy capital to high-impact investments opportunities, particularly those related to health. I spoke with Giselle Leung, Managing Director of GIIN, to learn more about R3 Coalition’s ongoing work in response to the pandemic and the road that lies ahead.

Margot Brandenburg - Ford Foundation:

So to get us started, why don't you tell us about the GIIN and its mission and what it does.

Giselle Leung - Global Impact Investor Network:

The Global Impact Investing Network, or GIIN for short, was founded a decade ago as a global champion of impact investing. For the audience who may not be familiar with impact investments, they are investments made with the intention to generate positive, measurable, social and environmental impact alongside a financial return. So, everything that we do is about supporting investors to put their money towards positive impact in areas ranging from patient access to health to climate change.

Within our membership alone, we work with over 350 organizations from nearly 50 countries to support their practice and how they deploy capital to impact investments. We also do research and develop infrastructure and tools to not only mobilize more capital to impact investments, but also to make sure that the results are really generating the impact that investors seek.

Margot Brandenburg - Ford Foundation:

Thank you for that explanation, Giselle. Can you tell us about the moment that we find ourselves in and what the role of impact investors is in a global pandemic like COVID-19?

Giselle Leung - Global Impact Investor Network:

We are in the midst of multiple crises. This isn't just a health crisis, it's also an economic crisis. If you think about what impact investors are doing, they are really addressing a lot of core issues such as employment, health, access to health care, and job creation. You can draw a direct line from the immediate aftermath of COVID and the type of socioeconomic challenges facing populations around the world and join that straight to the issues that impact investors are addressing. They have a natural role to play, even just looking at the most immediate issues around food insecurity, keeping businesses afloat, not to mention ensuring access to healthcare and many other kinds of health impacts.

Impact investors are very motivated to think about how they can support their investees as well as the role that they play in the path towards rebuilding, recovery, and resilience.

Margot Brandenburg - Ford Foundation:

So if I hear you, the first decade since the term impact investing was coined could be thought of as a warm-up, and then COVID became our prime time?

Giselle Leung - Global Impact Investor Network:

Yes, I think that's right. I think this is also a special moment. If you think about the past five years with the adoption of the UN Sustainable Development Goals, and working towards greater equality, prosperity, and sustainability around the world, again, what COVID is doing is really exacerbating many of those underlying issues addressed by the SDGs. So, absolutely.

Margot Brandenburg - Ford Foundation:

Yeah. COVID is a symptom, not necessarily the cause of a lot of the things impact investors care about. You used those three R words: Response, Recovery, and Resilience. Can you tell me about the three Rs and specifically what the R3 Coalition is?

Giselle Leung - Global Impact Investor Network:

As a global network of impact investors, very early on we were approached by one of our members to develop a broad-based response to COVID-19 that really draws from the assets of the global impact investing industry, in order to accelerate the flow of capital. I mean assets in terms of dollars and capital, but also expertise and the human capital. The goal there is, "Let's work together across different networks to really maximize the role that impact investing can play in crisis response, recovery, and resilience."

The initiative that was launched in mid-May is called the Response, Recovery, and Resilience Investment Coalition. It brought together actors from across the impact investing industry. We're thrilled to have 12 networks from around the globe with the GIIN serving as the secretariat. The participants range from foundations such as Ford and family offices, development finance institutions, other public and private investors fund managers. This is also an initiative that has the support of seven foundations including Ford, six from the United States and one in the Netherlands. We're really thrilled to be able to create a platform to lean into collaboration.

It’s about how to find a streamlined and efficient way to close the financing gaps and direct additional dollars into investment opportunities starting with healthcare, be it production/manufacturing of PPE, telemedicine, vaccine and diagnostics, but also addressing food insecurity or security issues due to the disruption of the global supply chain. Investors are looking into other areas too, such as water, sanitation and hygiene. The goal is to bring investable opportunities to those investors that are setting aside capital to participate in the response to COVID. What we are also looking to do broadly as an industry is really to pave the way to recovery, and to make sure that recovery is inclusive and sustainable.

We know that COVID has really shined a light on the fissures of our current system in terms of inequalities, not just here in the United States but also around the globe. We’re engaging the dialogue and exploration of what finance and investments can do towards an inclusive and sustainable recovery and ultimately pave the way to a society and an economic system that can be more resilient to future crises.

Margot Brandenburg - Ford Foundation:

Wow. So a really ambitious goal and kind of a global, multi-stakeholder collaboration at a time when resources, creativity, and innovation are more needed than ever. Can you say a little about how R3 works and how the impact investors and the networks that participate are sharing information and sharing deals? Are there any examples you can offer because these sound like all the right things but they're somewhat abstract for a lot of people? Is there a sample investment or opportunity that you could describe to make this come alive for people?

Giselle Leung - Global Impact Investor Network:

We leverage this global coalition to curate co-investment convenings and to service co-investment opportunities in priority areas. Through these co-investment convenings we have teed up investors that are already invested in a particular opportunity or are in the due-diligence phase and are very motivated to share investment opportunities with their peers. Again, this is about thinking, "What are the constraints that we are operating within and with?" We can't travel. There's no longer the ability to just go to conferences and run into folks and compare notes on what's going on. So, the goal is to be very curated, with the GIIN serving as the secretariat, sourcing co-investment deals that can be presented along specific themes, such as around healthcare interventions, food security, education, and other areas.

There are so many incredible examples to share. For example, one foundation presented on a company that is leveraging its supply chain network to provide personal protective equipment to hospital systems around the U.S. The company was seeking a working capital loan or equity investment to enable it to procure PPE more quickly.

Another impact investor focusing on access to healthcare presented on an enterprise that is managing low-cost clinics for blue-collar workers in Kenya and South Sudan. The clinics offer consultation, medicines, and lab tests, including rapid testing for COVID-19.

Another impact investor focusing on food security is working to improve the livelihoods of smallholder farmers by increasing agricultural yields and incomes. One of the opportunities surfaced works directly with over 1 million farmers per year, delivering seed, fertilizer, and solar equipment on credit to each client.

Margot Brandenburg - Ford Foundation:

You mentioned investors sharing tips, for example, on how they can adapt their diligence processes in an era where no one wants to travel, and social distancing guidelines are in place. I can only imagine how many tactical workarounds investors that participate in the GIIN have figured out and are sharing with each other. Stepping back, what has the GIIN learned so far from the activities of R3 as a whole?

Giselle Leung - Global Impact Investor Network:

One important facet is surfacing co-investment opportunities. We have already showcased over 40 investment opportunities. But the other piece of it, through our engagement with the investors in R3 Coalition, is to highlight trends, what kind of patterns we’re seeing in terms of how investors are adapting to this new environment, which may be the new normal for some time, which can then be shared across these leading networks.

There is investment capital available, but in order to adapt to this environment, particularly the challenge of conducting due-diligence, impact investors really have to think creatively to get the information they need in order to put their money to work. So, that means relying on Zoom calls to meet with the portfolio or pipeline company's team, relying on WhatsApp as a way to conduct due diligence on the potential investee's clients. They're also short of being able to go to the site of the business, relying on collaboration with other investors, sharing documentation or due-diligence information, financial models, valuation etc. So, we're seeing a lot of reliance on technology and collaboration.

Some are relying on partners they have on the ground or even proxies. For example, a program manager of a foundation on the ground might support the investment team that is based elsewhere, to do the due diligence or at least collect some of the information.

The other piece I would highlight is, given the urgency, impact investors are eager to also streamline and find ways to be more efficient in order to get money out the door. So, in some cases they may be rethinking and streamlining, "What's the process to apply for a loan?" Sometimes even the investment committees are meeting more frequently in order to review and approve investments.

The GIIN has made available all of this learning through our R3 Coalition Issue Briefs.

Margot Brandenburg - Ford Foundation:

What's been hard about this, about getting a coalition together and supporting its activities?

Giselle Leung - Global Impact Investor Network:

Investees are facing cash flow issues, the consequences of economic contractions, and a lot of the impact investors were and continue to be checking in to see how they could support the businesses that they are investing in. So, a lot of the tension is just supporting their investees, helping the business stay afloat and maybe even thinking about how to provide some additional liquidity or bridge loans. So, within that context, these investors also want to contribute to what the impact investing industry can do.

It's a balancing act for impact investors to support investees and also work on this broader industry response. As a result, we initially needed to identify what form of engagement would bring value to the market while honoring the constraints that everyone was facing. The virtual co-investment convenings I spoke to earlier are a new way to source investments for many investors who are used to having entrepreneurs and fund managers pitch to them. In this case, we have impact investors proactively sharing investment opportunities with their peers and speaking to both the business case and how the investments are addressing challenges arising from COVID-19. Normally, investors may share deals with others they know well or already work with, but with the R3 Coalition spanning across 12 partner networks, participants are sharing investments or learning about investments from investors they may not already know. Even though we are working under a very different and challenging environment, we are pleased to see anywhere from one to four investors expressing interest in learning more about an average of three deals presented in each co-investment convening.

Margot Brandenburg - Ford Foundation:

You mentioned earlier in our conversation that impact investors are very diverse by geography, by sector, by asset class, by return expectation, risk tolerance, so on and so forth. Impact investing is famous for the kind of layered deals and facilities that people describe as a layer cake, where you'll pair risk seeking or more risk-tolerant capital with more senior risk-averse capital. Are you finding that certain types of capital are easier to bring to the table than others? Are you conscious of that kind of balance of different stripes and types of capital or how does that sort out as you are helping to facilitate investments?

Giselle Leung - Global Impact Investor Network:

When we kicked off R3 Coalition, we surveyed those investors that indicated an interest in being part of the coalition. What we know is that they, much like the impact investing industry, are diverse. Less than half are looking for a market-rate investment, and just a little under half are looking for below-market-rate investments, with half of those looking for those investments that are below market-rate and closer to capital preservation. I think that speaks a little bit to the current risk appetite and also the diversity of investors as to where they play in the layered structure.

What we know as well is that the type of instruments that they have available on hand to deploy, largely mirror the impact investing industry with a lot of interest in or ability to make investments through private debt and private equity. Those remain the two top instruments. I don't have the statistics in terms of deals that are requiring catalytic, risk-mitigating type capital, but I would say that those are the top two asset classes in general. There is an important role for catalytic capital providers as they're able to take on a higher risk in order to bring in additional investors that may be less tolerant, not only for the immediate phase that we're in right now in response, but also in terms of the solutions and investments needed as we move into recovery.

Margot Brandenburg - Ford Foundation:

You mentioned something that we talk about a lot at Ford, which is that COVID has really laid bare the extreme inequality, whether it's racial inequality, hunger inequality, other forms of economic inequality that we were living with long before the COVID showed up. I'm curious how this understanding of that acute inequality manifests itself in the conversations and the deal structures and the activities of the R3 coalition? Is everyone thinking about this as an inequality challenge? What's the conversation about the differential impacts of COVID on different groups of people around the world?

Giselle Leung - Global Impact Investor Network:

I would say that it is very much front, and center based on our work with the R3 Coalition participants over the last few months. COVID has really exposed fissures in society and economy, not only along racial lines but also in equality across different ethnic groups and in gender. Particularly in the US, the COVID crisis also coincided with the Black Lives Matter movement prompted by the murder of George Floyd. But in terms of attention paid to systemic social injustice and inequality, it’s not only in the US but we're also seeing it in other parts of the world. When it comes to impact investors, again, what we see is that they operate within the broader economic system where the kind of inequality and injustices we're talking about are showing up. So, impact investors are very conscious of that and they’re committed to making a positive impact in the aftermath of the pandemic.

I think they're also coming to a reckoning on the role that they play as investors operating within the economic system, with the kind of injustice underlying the economic system. They're really thinking about how, as they are working towards the outcomes, they can consider race, gender and marginalized communities, in order to build back stronger and greener. Concretely, they're looking internally at how they operate as an organization but also looking closely at how they approach various steps throughout the investment process.

Are they bringing a diverse perspective, even internally, from staff to leadership to board, and to their investment committee? They are considering how they are adapting equity and diversity inclusion factors as they source deals, and how they can support investee companies in thinking about delivering goods and services to marginalized populations. So, there is really an array of considerations and strategies that impact investors are using. Some of them have been thinking for some time, but I would say that this really opens a window where we see for many impact investors, social injustice and entrenched inequality coming front and center for many of them.

Margot Brandenburg - Ford Foundation:

I'm really heartened to hear that justice and equity remain front and center for impact investors as we transition toward a recovery agenda. That means that this unfathomable pain and suffering could yield something really beautiful that could point toward a better future.

Giselle Leung - Global Impact Investor Network:

I see this as an opportunity. I think we will come out on the other side. I get a lot of confidence and hope from the impact investment community that we work with and the partners that we work with that are thinking hard about how to change the way they operate and also how they can influence the world and financial markets to operate. Impact investors have a tremendous opportunity to participate in how we rebuild the future, a future that is more inclusive and sustainable.

Margot Brandenburg - Ford Foundation:

It sounds like the members and partners of the GIIN have certainly not treated 2020 as business as usual and neither has the GIIN. So, I'm deeply appreciative of your leadership in this space at a time when it's more needed than ever. So, thank you to the GIIN and thank you to you personally, Giselle.

Giselle Leung - Global Impact Investor Network:

And thank you as well. I think that's what's really special about impact investing as an industry, at least in the 10 plus years that I've been fortunate enough to be a part of, not only this industry and movement, but truly the collaboration and goodwill. It takes everyone, and obviously Ford's leadership is a huge part of it, including everything that the foundation is doing from making available more grant-making dollars, a very innovative way of issuing social bonds, and really just seeing how other folks are following the example. So, thank you as well.

Margot Brandenburg - Ford Foundation:

I think everyone at Ford, and fortunately all the people that we're lucky enough to work with, have really tried hard to raise our game and to rise to the occasion. Definitely reasons to be optimistic amidst so many things to be worried about. You’ve answered all the questions I had, but is there anything that you wanted to add or to get in that I didn't ask about?

Giselle Leung - Global Impact Investor Network:

Well one thing is what we're seeing in talking to impact investors. It's really quite impressive and touching, and also shouldn't be taken for granted. There's a lot of empathy, and impact investors are leading with empathy. I've talked to some that just spent so many hours, particularly back in March and April, just checking on their investees, making sure they're staying afloat, and just making sure that the investees and their families are all doing well. I think it's something to keep in mind as we consider what kind of a world we want to emerge. We talked about greater equality and equity but also just the basic foundation of how we operate with empathy. I think it's probably what the world needs, and it's also how we're going to change the financial system as we know it, that we know isn’t working for all, right now. It's not just about profit maximization. That is one of the things that really motivates me and my colleagues through this work.

Margot Brandenburg - Ford Foundation:

I love that. I think of the GIIN as producing a huge amount of largely quantitative analysis and data and hard numbers. I hear you just expressing a basic affirmation of our shared humanity that has come through to you in the work that you've done this year. I think that's a really beautiful addition to all the assets that the GIIN has contributed to the field over the past decade.

Giselle Leung - Global Impact Investor Network:

Thank you.