Week 1

Question 1

What is the definition of Impact Investing?

Answer 1

The Global Impact Investing Network (GIIN) definition of impact investing: investing with the intention to generate positive, measurable social and environmental impact alongside a financial return.

Question 2

What are the 3 components of Impact Investing?

Answer 2

Intention: the investor must have the intention to achieve both financial returns and positive impact. Therefore, impact investors do not solely assess the potential financial return of portfolio ventures, but also consider the social impact resulting from their investments. Prior research has also shown that impact investors are willing to sacrifice financial returns to achieve social objectives.

Measurement: financial measurement is standard practice for most investments, but the impact investor must also seek to measure the impact of the investment. The measurement of impact is nuanced and the approaches vary widely, from annual impact reports, quarterly key performance indicators (KPI) reporting, or structured qualitative evaluations.

Contribution (aka additionality): but for your investment, would the impact goals have occurred anyway?

Question 3

From the paper of Block. et al. (2021), which criteria matter for impact investors (Donors, Debt holders & Equity holders)?

Answer 3

1. Authenticity of the team (all 3 of them)
2. Importance of the Societal problem (EQ least, Donors most)
3. Financial Stability (Donors least, Debtholders most)
4. Scalability (Debtholders least, Equity holders most)
5. Proof of concept (Donors least, Equity holders most)

Question 4

Name the 6 Impact Investing Developments (mentioned by CEO of GIIN)

Answer 4

1. ESG backlash prompts fundamental questions about what sustainability means for markets.
2. Regulators aim to clarify the sustainable investment market and address the issue of greenwashing.
3. From commitments to results: stakeholders and clients hold investors accountable for impact. People want to see results, not just hear about pledges.
4. From decarbonization to climate solutions. Addressing the climate crisis is bigger than just reducing our collective carbon footprint.
5. Nature gains ground . The climate crisis isn’t the only environmental crisis the world is facing- we are also experiencing an unprecedented loss of nature and biodiversity.
6. Investor attention turns to the “S” in ESG. Climate has dominated investor energy for environmental and social issues around the world. However, it’s clear that the “S” in ESG is garnering more attention from investors. 5

Question 5

What is the governance model of Correlaction and why?

Answer 5

Correlaction operates a two tier governance model embedded in its articles of association:
– Supervisory board provides oversight on behalf of all shareholders
– Executive team is focused on running and growing the business This choice was made for two reasons:

1. Correlaction is a scale up fintech, requiring funding to reach scale: the supervisory board is instrumental in securing the funding in the best interest of the entire company not just the founders
2. Correlaction integrates data from multiple, often competing sources, some of which is classified as Personal Data according to GDPR, the UK Data Protection Act and local legislation. Information security is therefore paramount. Also, whereas Correlaction at the moment may not classify as a ‘payment service provider’, it is to be expected that regulatory environments change. Correlaction’s Chief Information Security Officer reports directly to the supervisory board on all matters concerning information security, legal and regulatory compliance