In this lecture, we'll be talking a bit about the community of entrants and participants in impact investment. Including what is now an exciting arena of impact investing, the notion of multi-purpose or alternative purpose entities, as well as some longstanding players on the global scene. For example, the United Nation as well as other groups in the communities. In the philanthropic world long dominated by nonprofits, we have a number of new entrants. For-profit alternative purpose companies. These have purposes beyond seeking maximum return for owners, maximizing internal rate of return, net present value, risk adjusted return. The two main types are benefit corporation and so-called B Corps or B Corporations which are themselves certified by the non-profit B Lab. Benefit corporations are chartered under state laws giving management protections and boards protection from lawsuits alleging breach of duty to owners when profits are not necessarily sought to be maximized. Currently, 32 states in the District of Columbia now have such laws or laws that are related to them historically coming from what are called constituency statutes, where constituencies would involve those stakeholders beyond just shareholders. The idea is to modify fiduciary duty and expand business judgment exemptions for management decisions challengeable by owners, essentially, shareholders. The famous business judgment rule provides an exemption or a kind of safe harbor protection for managers to do the ordinary business of the entity, a corporation for example, at arm's length from owners' shareholders over decisions made on every day and sometimes, more than everyday decisions. Essentially, benefit corporations assume duties to stakeholders which can be customers, the environment and philanthropic commitment, in addition to their duty to owners. B Lab, in a similar way but with some exceptions, certifies B Corporations. B Lab was founded in 2006 as a non-profit in Wayne in Pennsylvania by three public spirited entrepreneurs and now has offices around the country including in San Francisco and New York. Because B Lab certifies B corporations, it certifies companies meeting its recognized now standards of transparency, accountability, sustainability, and performance. There are 2,200 B Corporations in more than 50 countries and 130 industries. Among those, famous examples would include, Etsy, an arts and crafts e-commerce organization. The first B corp to go public. Etsy was recently dropped from the B Lab list after its border rejected changing articles of incorporation to recognize duties to non shareholders. Ben & Jerry's ice cream. It's a subsidiary now of Unilever. Patagonia, the well-known outdoor wear company. And Warby Parker eyeglasses founded, in fact, by Wharton students. Some B Corps such as Ben & Jerry's donate a percentage of profits to charity making them, in effect, philanthropies. Other members of the community like the United Nation itself have promulgated concepts like the Global Compact or more recently the now well integrated principles of responsible investment. As a member of the impact investing community, the United Nations has a global perspective and is highly visible. For example, in the creation of the principles of responsible investment, UN Secretary General Kofi Annan convened more than 60 of the world's largest institutional investors and asset owners to draft global principles for ESG investment. This, in particular, as a follow on to the United Nations Global Compact, was launched in April of 2006. Drafters include the names we've already encountered in this course, Cowper's, Calvert, Domini, plus other large pension funds, asset owners including sovereign wealth funds, socially responsible investment funds, banks, and so on. There are now, as of October 2017, more than 1,800 signatories to the UN PRI, 363 asset owners, 1,235 investment managers, more than 230 professional services providers, adding up to 1829 entities committed to the principles of responsible investment. These signatories together have more than $70 trillion in investable assets somewhere held under their aegis. The UN principles responsible investment involves six concepts or six general arenas of principle are voluntary and aspirational in their declaration. The principle number one suggests that signers will incorporate ESG issues into investment analysis and decision-making processes. Principle two indicates that signers or signatories will be active owners and incorporate ESG issues into ownership policies and practices, referencing what in the United States is held by legal construct as ownership through voting and participation being referred to as assets. Principle three, seeking appropriate disclosure on ESG issues by the entities invested in. Four, promoting acceptance and implementation of principles within the industry. Principle five out of six, working together to enhance effectiveness and implementing principles. And six, reporting on our activities and progress toward implementing the principles. So, the essence is, incorporating ESG issues into investment analysis and linking what might be considered not investment or investment related concepts in the ESG domain into traditional and even cutting edge investment analysis, being active in incorporating ESG issues into ownership policies and practices including voting, seeking disclosure and openness on ESG issues in the entities in which they invest which of course, as we've discussed, may involve a cost as well as a potential benefit, promoting acceptance and implementation of principles within the industry, in other words, a general industry level recognition, and then enhancing effectiveness of implementing principles and reporting. Once again, disclosure being at the heart of the concept of impact investing. Again, what is ESG anyway? Well, environmental, social, and governance concerns or factors in investment decisions. The last several years have seen the social agendas of many investors worldwide shaped in consideration of ESG factors. Our recent numbers suggest itself that on the order of $90 trillion globally, in some way, incorporates ESG or other impact considerations. E would typically include climate change concerns mitigation, carbon footprint, which we'll go into a little bit of detail later in the course. E would include sustainability in other consideration of company policies and outcomes relating to the environment. S, a consideration of a social return factor which is neither E nor G in essence, including diversity considerations, gender lens based investing, and other elements of societal norms. And finally, G stands for governance which in part is a kind of age old way of thinking about activists investing apart from what might be considered today ESG. But ultimately, according to current management theory, good corporate governance is inherently a social good. This would include once again management and board transparency and accountability to shareholders, reasonable compensation policy for all employees, and generally, efforts to reduce the principal agent problem inherent in managing public companies. As a broad notion lately, G has now come to include more specific corporate policies oriented toward promoting social goals. Again, such as, greater board diversity which might fall under S. Some research shows, I should say, improves economic performance of the organization. Corporate social responsibility to meet stakeholder claims on company resources and disclosure of money spent on politics. The UN PRI was meant to be a main global mechanism for climate change mitigation and, of course, on principle, it must be the case that scale here matters. ESG as we've seen, standing for environmental, social, and governance principles. Indeed, the UN PRI organisation itself coined and popularized the abbreviation itself in its early incarnations. Thus, the UN PRI adopters effectively signed onto the UN vision on environmental investment and green finance for the purposes investing in corporate social responsibility. Some authors, Gray in 2009 for example, analyzed the potential and limits of the UN PRI community in reporting and promoting environmental investment principles around the globe. For example, some authors argue that the Kyoto Accord and the Kyoto regime itself is inadequate, mired in political bargaining, problems of inaction or slow action, potentially free-riding, involving a multiplicity of stakeholders and actors, rendering the collective agreement near impossible. Gray, for example, suggests that institutional investors acting through the principles for responsible investment promulgated under the UN's, it just may create an alternative path to climate change mitigation, specifically suggesting that the UN PRI has put together a substantial set of stakeholders including some of the most powerful forces in modern business today, indeed, asset owners who may own substantially the marginal vote and be representative of the marginal owner in the global political economy. Again, institutional investors by what Gray calls the institutional investor value chain. Having the possibility of aggregating, coordinating, developing an environmental regime embedded within actual global finance. Others, however, including some northern European pension plans have pulled out suggesting that the PRI context has become political. That having been said, growth has continued unabated with respect to signatories and those entities signing the PRI agreement. Other community groupings include Impact Investing networks, NGOs, non-governmental organizations. Once again, well-known global actors like the World Bank, an important generator of data scholarship and disclosure transparency efforts. Others like Oxfam, a large influential network for ending global hunger. College Chapters, a network of retail stores included. Specialty networks, regional networks, far too many today to detail here to give you a list, but includes, for example, the Aspen Network of Development Entrepreneurs and albeit professionals in Microfinance and Development sponsored by the Aspen Institute, a progressive think tank. Others like the GIIN have long been influential since their founding in impact investing. GIIN, G-I-I-N, stands for Global Impact Investing Network. There's an analog to the United Nations PRI here with a narrower focus, specifically imposing or developing a uniform impact measurement methodology known as IRIS. It's essentially a catalogue of impact performance metrics distributed, maintained by the GIIN and represents one of the backbones of measurement in the industry. However, I will say, ongoing competition has become fierce to win the high ground and guide further growth of impact techniques. For example, a rival measurement system is B Lab's GIIRS, G-I-I-R-S, Global Impact Investment Rating Systems.