Impact and Business Cases for Corporate Impact Investing

The Impact Case

Scale the Impact: Many social innovations struggle to realise their full potential due the 'missing middle' issue, which refers to the difficulty of securing the right type of funding to grow and scale. Impact investing plays a crucial role in bridging this gap by providing the necessary financial support to enable scale. With the help of impact investment, social ventures can reach a stage where they become attractive to commercial investors or can engage with businesses on a commercial basis, such as becoming suppliers or partners.

Rabo Foundation, Rabo Rural Fund and Rabobank help farmer-based organisations scale their impact on smallholder farmers and their communities in developing countries. The impact fund fills the gap between the philanthropic foundation and the commercial bank. As a result, the three entities are able to operate along the continuum of capital and provide continuous support to farmer-based organisations at each stage of development, ensuring they do not get stuck in the so-called missing middle.

Deepen the Support: Adding impact investing to the existing tools helps solve specific social or environmental challenges. Organisations and beneficiary groups receive multi-faceted support, tailored to their specific needs. This will eventually contribute to profound and lasting change in the supported communities.

Schneider Electric has a holistic approach to providing access to electricity, which involves its foundation, its inclusive business and several impact investing funds. The foundation makes technical and vocational training in energy-related fields available to disadvantaged people. The inclusive business makes affordable and green energy products for low-income population living in remote rural areas available. The impact funds make capital and technical support available for innovative local start-ups with energy access solutions. As such, impact investing is a crucial piece of the puzzle to provide access to electricity in certain areas.

Extend the Impact Strategy:  Adding impact investing  allows for the engagement of a wider range of stakeholders or the coverage of a wider range of causes. This may include additional social challenges, geographies or stakeholders. Extension may not be feasible through existing methods alone, which makes impact investing important to ensure no critical areas are overlooked in pursuit of overarching impact goals.

Repsol Foundation is dedicated to the energy transition with social impact. To achieve this, the foundation has several pathways in place which run in parallel to extend the reach to a wide range of beneficiaries. One of them is Repsol Impacto Social, a special vehicle 100% owned by the foundation, created in 2019 to extend the foundation’s strategy to the social entrepreneurship ecosystem through impact investing. Its activity is focused on four areas: carbon offsetting, sustainable mobility, circular economy and energy efficiency.

Bridge Impact and Business: Corporate impact investing targets investees close to or part of the company's sector. This proximity underscores the importance of what the company can offer beyond financial support. For instance, the company may provide the investee with access to its expertise for technical assistance or to strengthen the business model. Furthermore, the brand association can enhance the investee's standing within the sector. As such, impact investing is a way to make the company’s strength available where it can add the most value in terms of impact.

While Renault Foundation pursues a traditional philanthropic approach, focused on non-profit organisations, the impact fund Renault Caremakers Invest aims at creating impact alongside economic viability. The impact fund’s investees are social entrepreneurs seeking for economic sustainability and scaling-up. They have a stronger need to benefit from Renault’s business acumen and industrial expertise than the organisations supported by Renault Foundation. Caremakers Invest, with the support of Renault Group sponsors from business units, provides knowledge on business strategies, industrial processes, logistics optimisation and scaling operations effectively alongside financial support. By aligning with Renault's strengths in business and industrial practices, Caremakers Invest enhances investees' growth and sustainability.

The Business Case 

Learn about New Markets: Impact investing often operates in riskier or underserved markets that go beyond a company's core commercial activities. By engaging in impact investing, companies gain valuable insights into the specific needs and circumstances of these underserved communities. This firsthand knowledge can uncover opportunities for the company to adapt or expand its business to better serve these populations. Impact investing thus becomes a strategic tool for market exploration and discovery.

ENGIE Rassembleurs d’Energies was set up in 2009 by the French utility company ENGIE. Its initial focus was on energy access in emerging countries and the energy scarcity in developed countries. In 2015, the company decided to expand its commercial activities in African markets by providing access to electricity through its own business. The impact fund’s experience in the market and its portfolio of relevant investees accelerated and de-risked this endeavour. ENGIE’s acquisition of one of the fund’s portfolio companies, Fenix International, illustrates this acceleration.

Learn about Inclusive Business: Impact entrepreneurs exemplify the integration of impact and financial goals within their business model. Companies aspiring to be inclusive and sustainable can gain valuable insights from these entrepreneurs, who have mastered the delicate balance between impact and profitability. By engaging in impact investing, companies can gain inspiration and practical knowledge to implement similar approaches within their own contexts, fostering greater inclusivity and sustainability in their business strategies.

Danone wants to demonstrate that business can be a force for good. In addition to pursuing a B Corp certification, the company leverages impact investing to pioneer ways to be more inclusive. Through investments in the Livelihoods Funds, Danone and other companies support solutions that address common supply chain challenges. Danone also set up Danone Communities, which invests in impact start-ups that are reaching sustainable social impact by leveraging business mechanisms. The impact fund shares insights from its investments in business models, demand creation or innovative financing model with Danone to inspire the company to do business differently.

Transform the Value Chain: Companies can tip their value chain towards inclusivity and sustainability by investing in supply chain projects or in social entrepreneurship. Supply chain projects generate tangible social, economic and environmental benefits for key stakeholders (e.g., farmers). Supporting the social entrepreneurship ecosystem can increase the pool of businesses available to be integrated in and positively contribute to a company’s value chain. Both approaches will enhance the overall positive impact of a company’s operations.

IKEA wants to create a better everyday life for as many people as possible by including products and services from social entrepreneurs in its offer. While the first business partnerships were developed from within the company in 2012, the success prompted Inter IKEA to set up IKEA Social Entrepreneurship B.V in 2018. This entity aims to accelerate the movement of social entrepreneurship in general, while also looking for new, innovative partnerships between social entrepreneurs and IKEA. To date, 12 social business partners are part of the Inter IKEA production, providing 11,200 job and income opportunities.

Deliver on the Corporate Purpose: Today, many companies have articulated commitments that go beyond their core business activities and encompass stakeholders who are not directly targeted by their products or services. These stakeholders often belong to underserved communities lacking the same access to the essential products and services as others. Impact investing is a tool to support social innovations that align with the company's purpose, but fall outside its core business scope.

Sanofi wants to build a healthier, more resilient world. However, not every region in the world has a sufficiently developed market for pharmaceuticals, a main barrier to providing access to healthcare. Sanofi recognised this limitation and set up the Global Health Unit (GHU), which addresses this barrier in countries where Sanofi is not commercially active. The GHU is built on three pillars: (1) Support for NGOs and health ministries and healthcare professionals (HCP) associations, (2) access to affordable medicine and (3) an impact investing fund. The impact fund supports startups and innovators who can deliver scalable, sustainable healthcare solutions in underserved regions. It ensures the company lives up to its purpose beyond the core business.

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This brief was excerpted from How to do Corporate Impact Investing. Read the full report to learn how impact investing can be a bridge between impact and business.