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2023 | Book

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Scaling Impact

Finance and Investment for a Better World

Author: Kusisami Hornberger

Publisher: Springer International Publishing

Part of: Springer Professional "Wirtschaft+Technik" , Springer Professional "Technik" , Springer Professional "Wirtschaft"

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About this book

The global challenges confronting us — climate change, poverty, inequality, and many others — can feel overwhelming. Those of us who believe in market-based solutions to these challenges get even more disheartened when we regularly see our existing capitalist system failing us, often causing more harm than good. Many examples show how the capitalist tools of finance and investment can and make real, positive impact. Approaches like blended finance and impact investing can help accelerate progress against the world’s biggest remaining collective challenges. Yet use of these improved capitalist approaches remains far too subscale. Blended finance and impact investing remain 15 to 200 times smaller than traditional approaches to finance and investment. How can we continue to make capitalism work better by scaling these approaches and others? This book looks at how we can start making these necessary changes using strategies, structures, and practices that take advantage of capitalism's strengths. Its goal is to demonstrate how a reimagined financial system can be more inclusive and accountable to all. By shifting away from extractive, short-term practices in the name of shareholder primacy, we can move toward a system that values the role of all stakeholders.

Table of Contents

Frontmatter
Chapter 1. Introduction
Abstract
To restore integrity to finance and make investing once again about creating value for society as a whole we need to make capitalism work better. This book is about how we can start making those changes using strategies, structures, and tools that take advantage of capitalism’s strengths and how they can work in concert to create systems change to address the world’s most pressing challenges. 
Kusisami Hornberger

Seek Financial Health, Not Financial Access

Frontmatter
Chapter 2. Reassess the Financial Inclusion Revolution
Abstract
Financial intermediaries—whether banks, microfinance institutions, nonbank financial intermediaries (NBFIs), insurance providers, or fintechs—are deeply enmeshed in our lives. They provide credit, savings, insurance, and payment services to the growing population of consumers and businesses across the globe. In fact, the global financial services market size reached $23.3 trillion in 2021 and is expected to continue to grow rapidly.1 There are more than 10,000 regulated commercial banks in the United States and Europe Union and more than 10,000 microfinance institutions in emerging markets, according to the ECB, the FDIC, and MIX Market data.
Kusisami Hornberger
Chapter 3. Design Services That Build Financial Health
Abstract
Several years ago, when I had the opportunity to speak to entrepreneurs around the globe for a research project I was working on with a large foundation, I met Ana Penilla, a microentrepreneur based in Lima, Peru. The focus of my research was to learn about the financing journey she had undertaken for her small business and about the challenges she had faced in accessing the right kind of financing to help her grow the business. We also discussed the impact that financing had on her livelihood. What I learned was revealing but also consistent with stories I had heard from microentrepreneurs elsewhere through my travels and work.
Kusisami Hornberger
Chapter 4. “Measure Impact with Client Voices”—An Interview with Sasha Dichter
Abstract
This chapter summarizes my interview with Sasha Dichter, CEO and co-founder of 60 Decibels and a pioneer in promoting the practice of listening to client voices to understand impact.
Kusisami Hornberger

Provide Patient Capital, Not Venture Capital

Frontmatter
Chapter 5. Better Understand the Diverse Needs of Enterprises
Abstract
Over the last two decades, I have spent considerable time supporting entrepreneurs and aspiring entrepreneurs in honing their pitches asking investors to put capital into their ventures. Consider my friend Gabriel Migowski who in the late 2000s in Colombia had the audacity to start a new low-cost airline serving the Latin American market. In his case, given the large and growing addressable market, the ambition, connections, and growth mindset of the members of the founding team, they succeeded not only in raising the financing they needed but in making the business work. Their company, Viva Air, now holds almost 25 percent of the Colombian domestic commercial air market.
Kusisami Hornberger
Chapter 6. Explore Alternative Approaches to Better Serve Enterprise Needs
Abstract
The Silicon Valley model of venture capital established in the early 1970s focused on the quickly developing integrated circuits and computer hardware industries, and venture capital today continues to follow that traditional and rigid ten-year funding cycle. The underlying assumptions of this model no longer hold true, however, especially in emerging markets, leading to misalignment between companies and their investment partners.
Kusisami Hornberger
Chapter 7. “Reimagine Approaches to Provide Capital”—An Interview with Chris Jurgens
Abstract
This chapter summarizes my interview with Chris Jurgens, Senior Director at the Omidyar Network, a recognized thought leader on impact investing and reimagining capitalism.
Kusisami Hornberger

Be an Impact-First Investor, Not an ESG Investor

Frontmatter
Chapter 8. The Difference Between ESG and Impact Investing and Why It Matters
Abstract
Since the early 2010s, environmental, social, and governance (ESG) and impact investing strategies have grown significantly. On the ESG side, fund launches have increased 4× since 2012 which is more than twice as fast as non-ESG fund launches. According to Bloomberg, by the end of 2022 ESG-related investments will reach $41 trillion globally. On the impact investing side, trends analysis from the Global Impact Investing Network (GIIN) suggests that impact investing AUM has been growing by an annual growth rate of more than 18 percent and continues to accelerate year on year.
Kusisami Hornberger
Chapter 9. Raising the Bar on Impact Management and Measurement
Abstract
The main criticism of both ESG and impact investing is that it is not easy to measure and compare investments using existing nonfinancial measures. Take, for example, a recent email I received from a leading finance professional at one of the world’s largest asset managers. In the email she asked, with a hint of criticism, “How can I justify adopting an impact investing strategy if I have to choose among an alphabet soup of reporting standards, none of which clearly and consistently demonstrate results superior than if I was not to adopt them?”.
Kusisami Hornberger
Chapter 10. “Mainstream Impact Management”—An Interview with Olivia Prentice
Abstract
This chapter summarizes my interview with Olivia Prentice, Head of Impact at Bridges Fund Management and former head of content and COO at the Impact Management Project. Through that work she led the development of the now widely adopted and recognized standards of impact measurement and management in the field.
Kusisami Hornberger

Offer Catalytic Finance, Not Just Blended Finance

Frontmatter
Chapter 11. Unleashing Private Capital for Global Development
Abstract
As I mentioned in the introduction, the global community has committed to meeting an ambitious set of 17 Sustainable Development Goals (SDGs) by 2030—a wide range of goals including SDG 1, “End poverty in all its forms everywhere,” SDG 3 “Ensure healthy lives and promote well-being for all at all ages,” and SDG 13, “Take urgent action to combat climate change and its impacts.” SDG targets include eradicating extreme poverty, ending preventable deaths of newborns and children under age five, ensuring universal access to quality education, and providing universal access to affordable modern energy services, among many others.
Kusisami Hornberger
Chapter 12. Scaling Blended Finance Effectively
Abstract
Despite the catalytic potential of blended finance, its use remains far too subscale. According to the most recent Convergence State of the Sector report on the global network of blended finance, nearly 680 closed blended finance transactions have taken place to date, totaling just over $160 billion from 1450 unique investors, which averages to $9 billion annually. This represents less than 2 percent of annual official development assistance (ODA) by governments and less than half a percent of the annual financing gap required to achieve the SDGs by 2030.
Kusisami Hornberger
Chapter 13. “Challenge the Development Finance Status Quo”—An Interview with Joan Larrea
Abstract
This chapter summarizes my interview with Joan Larrea, CEO of Convergence the leading global network of blended finance practitioners. Joan was hired as Convergence's first CEO and since then has been a pioneer in the education and knowledge building of how to use blended finance for development finance practitioners.
Kusisami Hornberger

Measure Success Based on Results, Not Activities

Frontmatter
Chapter 14. The Unrealized Potential of Results-Based Finance
Abstract
As one of my first assignments after I joined Global Partnerships—an impact-first nonprofit fund manager based in Seattle was to evaluate a potential investment in Clínicas del Azúcar (CdA), a health company focusing on diabetes treatment in Mexico. I quickly got to know Miguel Garza and Javier Lozano, the co-founders of CdA in Monterey, who had a vision of scaling up low-cost and comprehensive diabetes care for the large and growing population that suffered from the condition in Mexico. Through initial conversations I discovered that their first clinic was a success but that they were looking for additional funding to expand the number of clinics.
Kusisami Hornberger
Chapter 15. When, How, and Why to Use Impact Bonds
Abstract
As discussed briefly in the previous chapter, an unfortunate simplification often undermines the use and scale up of results-based financing mechanisms. Many still equate all forms of innovative finance or results-based finance with just one flavor of contingency-based financing: the impact bond. However, not only are impact bonds not the only type of results-based finance, but they are also inappropriate in many contexts. I learned this the hard way through personal experience.
Kusisami Hornberger
Chapter 16. “Link Financial Incentives to Impact”—An Interview with Bjoern Struewer
Abstract
This chapter summarizes my interview with Bjoern Struewer, Founder of Roots of Impact a pioneer in the development and adoption of the impact-linked finance.
Kusisami Hornberger

Provide Capacity Building, Not Just Capital

Frontmatter
Chapter 17. Enhancing Impact with Capacity-Building Services
Abstract
“If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.” One of my favorite proverbs, this adage is also true for the world of finance and investment. Providing capital alone is often a necessary but insufficient solution.
Kusisami Hornberger
Chapter 18. Fulfilling the Potential of Capacity-Building Services
Abstract
As we saw in the last chapter, capacity-building services that accompany capital offerings can take many forms, and the providers offering them do so with many goals and motivations. As also noted, capacity-building services vary widely in performance. Many well-intentioned programs unfortunately do not realize the outcomes needed to support enterprise success.
Kusisami Hornberger
Chapter 19. “Scale Based on Evidence of Effectiveness”—An Interview with Nicholas Colloff
Abstract
This chapter summarizes my interview with Nicholas Colloff, Director at the Argidius Foundation a leading philanthropic funder of enterprise development to tackle poverty in emerging markets.
Kusisami Hornberger
Chapter 20. Conclusion—What We Can Do to Scale Impact
Abstract
While global challenges continue and the daily grind can distract us from what is truly important, I hope this book has shown you that real progress is already happening and that greater progress is possible. We can work within the capitalist system to reimagine rather than revolutionize it. I have suggested six concrete paradigm shifts in how we collectively can think differently about providing finance and investment.
Kusisami Hornberger
Backmatter
Metadata
Title
Scaling Impact
Author
Kusisami Hornberger
Copyright Year
2023
Electronic ISBN
978-3-031-22614-4
Print ISBN
978-3-031-22613-7
DOI
https://doi.org/10.1007/978-3-031-22614-4

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