A New Playbook for Companies Venturing for Impact

By Elizabeth Boggs Davidsen

Elizabeth Boggs Davidsen is acting chief of the Multilateral Investment Fund (MIF)'s Access to Markets and Skills Unit, with expertise in corporate engagement, local development, social innovation, and youth employment. She also advises on partnerships for the MIF's grant and investment activities.

The Paris-based food products company Danone, the Spanish-based bank BBVA, and the British utility company Centrica have something important in common: each of these large multinationals has figured out effective ways to bring together its core financial, human, and technological strengths, along with massive networks, to provide business support to social entrepreneurs. Innovation and investment teams within large companies are coming together to design strategies that allow their businesses to explore and experiment with new models that are intentionally trying to create positive returns to the communities where they operate.

This is in part due to complex macro-economic trends -- climate change, big data, mass urbanization -- that require strategic considerations and introduce greater levels of uncertainty in operations. It is also in order to appeal to the values of millennials, who companies like Danone, BBVA and Centrica employ and hope to retain, as well as "hipster" consumers who are willing to purchase a product or service to support a cause they believe in, even if it means paying a bit more.

Growth strategies for businesses today require creative thinking about how to generate positive returns. While most businesses are adept at measuring their financial outputs, few know how to measure or think strategically about their positive effect on society or the environment. Yet, when they do, and are intentional about creating positive returns to communities, everyone benefits. Creating positive outcomes is not a distraction from profit, but rather reinforces and enhances it. This was the conclusion of a Harvard Business School study that analyzed data on firms from 1992 to 2010. Those that proactively adopted sustainability processes significantly outperform their counterparts over the long term.


Part of the quest for positive outcomes entails using traditional tools, such as venture capital, in new ways. While venture capital has traditionally been used only for high-growth and high-return expectations, today we see these tools being used to seed corporate startups, as many large corporations are moving into the startup business. They are deploying capital to innovate with entrepreneurs and invest for the future. Corporate accelerators, co-working spaces, and social investment facilities are springing up. These investment vehicles have expectations of financial return, but they also require that the startups make a positive social and/or environmental difference.

Centrica, for example, created Ignite, the UK's first impact investment fund with a focus on energy. Ignite Social Enterprise provides funding of £10 million over ten years, has an expected minimum return for each investment, and runs a blended portfolio of 6% minimum return on capital.

Companies are not the only ones seeking positive outcomes. This has long been the domain of development organizations and policymakers. Increasingly, though, new partnerships are emerging, and it is not uncommon today to see a development bank partnering with a large food or beverage company to design a new approach to microdistribution. For example, Danone and the Multilateral Investment Fund are supporting a project in Brazil where there is a dual focus on measuring increases in micro-distributers' livelihoods, together with sales and market penetration.

The more aligned the business objectives are with positive outcomes for society and the environment, the more likely the model is to succeed. And the key for lasting success is partnering. This is the conclusion of a new playbook recently released at the Global Corporate Venturing Symposium in London, The Practitioner's Guide: Steps to Corporate Investment, Innovation and Collaboration.

The authors found that partnerships are the essential ingredient needed to ensure the greatest likelihood of success across all areas where corporations seek to create positive value. New partnerships are forming with financial institutions, companies, and civil society organizations to provide support to entrepreneurs. BBVA launched the Momentum Project to promote social entrepreneurship in Spain, Peru, and Mexico, and then created a Limited Liability Company (rather than a fund) to finance companies that graduated from their diligence and mentoring activities. The key to this program's success is the partnership with business schools and PwC to ensure that the entrepreneurs receive careful mentoring and diligence support.

Like venture capital, corporate venturing is systematically creating new networks for firms and industries so that they can progress and compete in new and changing markets. Only now, companies are venturing for impact, and we can expect to see many new partnerships forming along the way.

From the Multilateral Investment Fund Trends blog