An interview with John Simon, Founder of Total Impact Advisors.

John SimonPrior to founding Total Impact Advisors, Ambassador Simon was a visiting fellow at the Center for Global Development, where he co-authored « More than Money », a report on impact investing as a development tool. Previously, he held a variety of posts in the US federal government, including serving most recently as the United States Ambassador to the African Union and the Executive Vice President of the Overseas Private Investment Corporation (OPIC). Ambassador Simon also served as Special Assistant to the President and Senior Director for Relief, Stabilization, and Development for the National Security Council (NSC) at the White House. During his tenure at the NSC, Ambassador Simon oversaw the implementation of groundbreaking development initiatives, including the Millennium Challenge Account, the President’s Emergency Plan for AIDS Relief, the Multilateral Debt Relief Initiative, and the President’s Malaria Initiative. 

 

Q. Before starting Total Impact Advisors, you held a variety of positions in governmental organizations. Many investors are skeptical that social purpose can be successfully combined with financial promise, as your website states. How did your experiences in development activities lead you to believe that social transactions can be financially rewarding?

J.S – My experience in government convinced me that investment can have powerful positive social impact, and that it must if we are to effectively address many of today’s current challenges.  When I was at the US Agency for International Development, I saw that while grants alone can help many people facing the deprivations of extreme poverty or the consequences of humanitarian disaster, they have a limited ability to create sustainable social change.  That is because ultimately the needs exceed the supply of resources.  Later, as the Executive Vice President of America’s Development Bank, the Overseas Private Investment Corporation, I experienced an entirely different dynamic: businesses whose products addressed social or environmental needs – housing, agricultural production, renewable energy – generated the resources for scale from their own growth.  The better the businesses did, the greater the social impact.  This allowed the businesses to be both profitable and extraordinarily socially beneficial.

 

Q – Other than convincing the skeptical, what are some challenges facing this sector?

 J.S – The major challenge the sector faces is that it is currently very fragmented – there are more and more players engaging in impact investing every day, but they are not talking to each other, which limits the size of the deals that can be done and the ability to aggregate them into products for more mainstream investors.  What is required is connective tissue between the various players and the social enterprises so that the fundraising cycle can be shortened and transactions can be scaled and ultimately aggregated into a size that is interesting for larger investors.

 

Q. At the same time, what are some key opportunities? 

J.S – The opportunities in impact investing are manifold.  Impact investing offers the opportunity to enter new markets – both in the geographic frontiers of the global economy and in the underserved populations of the developed world.  It allows investors to develop new business models that can have far reaching ramifications – from microfinance to the cell phone scratch card.  And it offers the potential for new financial products that give investors not only a financial return, but also the opportunity to make a substantive change in the world that they can touch and feel.

 

Q – Since its foundation, Total Impact Advisors has been part of a wide variety of projects from tire recycling to East African plant propagation, could you elaborate on a particularly rewarding deal and why it standout. 

J.S – All of our deals are rewarding in their own way.  That is one of the nice things about impact investing: every deal involves a social entrepreneur doing something really important for our world today and for future generations.  One I would highlight is the Medical Credit Fund, a loan facility for physicians and clinics in Africa.  We recently helped the fund close a $10.5 million financing with investments from four major impact investors and a development financing institution – creating the type of collaboration across different players the sector so urgently needs.  However, the work does not end once the transaction closes.  The real goal is to achieve scale and sustainability, and that keeps us busy long after the ink is dry on the closing document.

 

Q – When vetting a new project for potentially satisfying both social and financial conditions for investment, what are some of the key criteria your team uses?

J.S – First and foremost, we must believe the impact story.  That means if the project is successful, the social impact will be something substantial and meaningful.  It is different for every business, but it must be quantifiable, and the business must have a rigorous system to track it.  Then we assess the business fundamental of the project as we would for any investment.  The last, but key, issue for us is the issue of scalability – does the project have the potential to impact a country, a continent, a sector?  We believe it is only at scale that projects can deliver both outstanding social and financial returns.

 

Q – What advice would you offer to young social entrepreneurs of seeking funding while maintaining their social impact perspective?

J.S – Be prepared for a long, hard journey with lots of mid-course corrections.  Fundraising is among the difficult things anyone can do, and no business plan finishes the process exactly as it started.  But the process not only provides the financial resources necessary for your enterprise to grow and succeed, perhaps more importantly, it provides valuable feedback on your endeavour and ideally, key partners that will help you reach your ultimate goal.

 

Written by IUM Prof. Michèle Sisto and Adam Feller, current MSc. in Finance student