Blended value

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Blended Value refers to the concept that the nature of value is whole and indivisible; integrated, yet consisting of components of financial, social, and environmental value. This value may be pursued through a variety of organizational forms and capital structures or investment instruments. The term was first introduced by Jed Emerson in his working paper “The Nature of Returns: A Social Capital Markets Inquiry into Elements of Investment and The BVP,” published in 2000 during Emerson’s tenure as senior research fellow on the faculty of Harvard Business School. In this paper, Emerson critiqued what he framed as the mainstream, bifurcated value proposition (which asks one to do either good or well, work in a nonprofit or for-profit, invest or make grants, etc.) and proposed that all financial value propositions are inherently tied to social and environmental elements (and conversely that all social and environmental propositions are integrated with financial value).[1] In order to optimize the total value proposition, individuals must recognize the true, blended value nature of all propositions, and take steps to maximize this full range of potential returns and opportunity.

Five silos of Blended Value[edit]

In his initial research paper “The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social, and Environmental Value Creation,” published in 2003 while Emerson was a Lecturer in residence at Stanford University, Emerson charts the various organizational areas implementing a “both/and” agenda of “simultaneously valuing social equity, environmental sustainability and economic development” (in essence, organizations that are actively seeking to maximize blended value).[2] He identifies five “silos” by which these fields are organized:

  • Corporate Social Responsibility (CSR) Programs: CSR describes companies and business managers/leaders who consciously integrate strategies that seek to create environmental and social value into their business models, operations, and supply chains.
  • Social Enterprise: Social Enterprises are organizations with primarily social objectives in either the for-profit or nonprofit sectors, and are typically small to medium in size.
  • Social (Impact) Investing: Impact Investing seeks to produce both financial and social/environmental value and returns, by investing in organizations and businesses that create social and financial value.
  • Strategic/Effective Philanthropy: Strategic/Effective Philanthropy includes a wide variety of philanthropic practices and methods. It is distinguished by its commitment to viewing philanthropy not as charitable giving, but as an investment in the creation of social value.
  • Sustainable Development: Sustainable Development refers to initiatives and practices that seek to increase eco-efficiency and improve economic and social conditions in the environmental world.

Blended Value In Practice[edit]

Impact Investing[edit]

In pursuing blended value within the investing sphere, investors must seek to optimize various levels of financial return (including philanthropic) while maximizing social, and environmental impacts.[3] Emerson’s foundational work regarding pursuing blended value through capital investments (later titled Total Portfolio Management)[4] along with others in the field, helped pave the way for the formalization of impact investing, a term agreed upon by a group of investors and asset owners gathered by the Rockefeller Foundation in 2007[5] and is synonymous with the pursuit of blended value returns.[6] Emerson and Antony Bugg-Levine co-authored the first book on the topic of impact investing, titled Impact Investing: Transforming How We Make Money While Making a Difference, which received a Nautilus Gold Book Award. As defined by the Global Impact Investing Network (GIIN), impact investments are “investments made with the intention to generate positive, measurable, social and environmental impact alongside a financial return”.[7] According to The GIIN’s 2018 Annual Impact Investor Survey, 229 of the world’s leading impact investing organizations collectively managed over USD 228 billion in impact investing assets.[8] In the “ImpactAssets Handbook for Investors,” Emerson and co-authors offer a guide to investors interested in optimizing blended value returns, stating that “impacting investing is not an asset class, but rather an overall approach to maximizing the total performance of a portfolio in pursuing of generating sustained, blended value within the world we want to live in.”[9] Furthermore, it is recognized that all capital creates impact, and so many in the field describe sustainable, responsible impact investing as a connected set of investment practices. The US-SIF’s 2018 Report on SRI Investing Trends takes this view of capital, stating that SRI assets in the United States now total approximately $12 trillion.[10]

Measurement and Metrics[edit]

There is currently no single standardized measurement system that can be used to evaluate the social and environmental components of blended value returns, though efforts are being taken by organizations like the GIIN and GIIRS to create a standardized set of measurement tools and metrics. Current systems and approaches include:

Though the impact investing industry is growing in scope, pursuing blended value through capital investment is still challenging in a number of ways. Emerson outlines these challenges in “Maximizing Blended Value—Building Beyond the Blended Value Map to Sustainable Investing, Philanthropy, and Organizations,” citing “the inefficiency of raising capital, the lack of accountability, and the current policy and tax structure” as barriers to pursuing and capturing blended value.[11]

Supply Chain and Endowments[edit]

In pursuing blended value, organizations can look to a number of their own operating areas to optimize returns. A high-impact area that manufacturing companies might consider is the management of their supply chains.[12] In engaging with blended value, an organization would select suppliers deemed themselves to generate high blended value, for example sourcing from a fair trade certified manufacturer. Similarly, a foundation pursuing blended value might seek to maximize total returns (financial, social and environmental) generated through the whole of their endowment. In 2001, it was reported by the Foundation Center that 55,120 independent foundations gave away about 5.8% of their assets (quite close to the legally mandated percentage)[13] as part of a strategy to manage the majority of their assets around financial gains.[14] In recent years, however, this statistic has increased; during the period of 2008 through 2011, foundations averaged 11.6% in payouts.[15] According to Emerson, focusing on the payout percentage of a foundation’s total assets is only a piece of a comprehensive blended value strategy. Rather, foundations should focus on investment strategies including grantmaking, asset investment, and the use of low-interest loans, to maximize blended value returns.[16] In 2017 the Mission Investors Exchange, a network of foundations pursuing impact investing approaches for philanthropic institutions, released an “Impact Investing Guidebook for Foundations” including a roadmap for foundations interested in building out their impact investing practice.[17]

Blended Finance[edit]

In 2006, Emerson contributed to a paper published by the World Economic Forum titled “Blended Value Investing: Capital Opportunities for Social and Environmental Impact,” illustrating innovations within capital finance promising to “bridge market-rate interests with strategic opportunities to create blended value.”[18] In 2015, a new paper was published through the World Economic Forum titled “Blended Finance Vol. 1: A Primer for Development Finance and Philanthropic Funders” introducing the concept of blended finance. The paper defines blended finance as leveraging development finance and philanthropic funds to attract private capital into deals, emphasizing financial returns in line with market expectations, and focusing on investments driving social, economic, and environmental progress, concepts also explored in the Forum’s initial Blended Value paper.[19]


References[edit]

[20] [21] [22] [23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37]

[38]

  1. ^ Emerson, Jed (2000). "The Nature of Returns: A Social Capital Markets Inquiry into Elements of Investment and The BVP" (PDF).
  2. ^ "The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social, and Environmental Value Creation" (PDF). 2003.
  3. ^ Emerson, Jed (2000). "The Nature of Returns: A Social Capital Markets Inquiry into Elements of Investment and The BVP" (PDF).
  4. ^ Emerson, Jed (2017). "The ImpactAssets Handbook for Investors: Generating Social and Environmental Value Through Capital Investing". Anthem Press.
  5. ^ Case, Jean. "Bringing the Last Decade of Impact Investing to Life: An Interactive Timeline". Case Foundation.
  6. ^ "Riding The Wave: Impact Investing for Blended Value".
  7. ^ https://thegiin.org/impact-investing/need-to-know/. Missing or empty |title= (help)
  8. ^ https://thegiin.org/research/publication/annualsurvey2018. Missing or empty |title= (help)
  9. ^ Emerson, Jed (2017). "The ImpactAssets Handbook for Investors: Generating Social and Environmental Value Through Capital Investing". Anthem Press.
  10. ^ "Report on US Sustainable, Responsible and Impact Investing Trends 2018". US SIF Foundation".
  11. ^ Emerson, Jed (2005). "Maximizing Blended Value—Building Beyond the Blended Value Map to Sustainable Investing, Philanthropy, and Organization".
  12. ^ "The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social, and Environmental Value Creation" (PDF). 2003.
  13. ^ https://grantspace.org/resources/knowledge-base/payout/. Missing or empty |title= (help)
  14. ^ Emerson, Jed (2003). "Where Money Meets Mission: Breaking Down the Firewall Between Foundation Investments and Programming". Stanford Social Innovation Review.
  15. ^ McGlaughon, King (2014). "Think You Know Private Foundations? Think Again". Stanford Social Innovation Review.
  16. ^ Emerson, Jed (2003). "Where Money Meets Mission: Breaking Down the Firewall Between Foundation Investments and Programming". Stanford Social Innovation Review.
  17. ^ https://missioninvestors.org/resources/impact-investing-guidebook-foundations. Missing or empty |title= (help)
  18. ^ Emerson, Jed; Spitzer, Josh (2006). "Blended Value Investing: Capital Opportunities for Social and Environmental Impact". World Economic Forum.
  19. ^ "Blended Finance Vol. 1: A Primer for Development Finance and Philanthropic Funders". World Economic Forum. 2015.
  20. ^ Emerson, Jed (2000). "The Nature of Returns: A Social Capital Markets Inquiry into Elements of Investment and The BVP" (PDF).
  21. ^ "The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social, and Environmental Value Creation" (PDF). 2003.
  22. ^ Emerson, Jed (2000). "The Nature of Returns: A Social Capital Markets Inquiry into Elements of Investment and The BVP" (PDF).
  23. ^ Emerson, Jed (2017). "The ImpactAssets Handbook for Investors: Generating Social and Environmental Value Through Capital Investing". Anthem Press.
  24. ^ Case, Jean. "Bringing the Last Decade of Impact Investing to Life: An Interactive Timeline". Case Foundation.
  25. ^ "Riding The Wave: Impact Investing for Blended Value".
  26. ^ "What you need to know about Impact Investing".
  27. ^ "Annual Impact Investor Survey 2018".
  28. ^ Emerson, Jed (2017). "The ImpactAssets Handbook for Investors: Generating Social and Environmental Value Through Capital Investing". Anthem Press.
  29. ^ "Report on US Sustainable, Responsible and Impact Investing Trends 2018". US SIF Foundation".
  30. ^ Emerson, Jed (2005). "Maximizing Blended Value—Building Beyond the Blended Value Map to Sustainable Investing, Philanthropy, and Organization".
  31. ^ "The Blended Value Map: Tracking the Intersects and Opportunities of Economic, Social, and Environmental Value Creation" (PDF). 2003.
  32. ^ "What is a 'payout requirement' for a private foundation?".
  33. ^ Emerson, Jed (2003). "Where Money Meets Mission: Breaking Down the Firewall Between Foundation Investments and Programming". Stanford Social Innovation Review.
  34. ^ McGlaughon, King (2014). "Think You Know Private Foundations? Think Again". Stanford Social Innovation Review.
  35. ^ Emerson, Jed (2003). "Where Money Meets Mission: Breaking Down the Firewall Between Foundation Investments and Programming". Stanford Social Innovation Review.
  36. ^ "The Impact Investing Guidebook for Foundations".
  37. ^ Emerson, Jed; Spitzer, Josh (2006). "Blended Value Investing: Capital Opportunities for Social and Environmental Impact". World Economic Forum.
  38. ^ "Blended Finance Vol. 1: A Primer for Development Finance and Philanthropic Funders". World Economic Forum. 2015.