Elevating Impact: Impact Advisory Councils

By Ander Iruretagoyena and Priya Parrish

Welcome to our new series, "Elevating Impact.” As an investment firm committed to driving positive social and environmental change, we recognize that leaders in the field must be as intentional and focused about driving excellent impact as they are about driving excellent financial returns. Because we invest in both funds and companies, across early stage and late stage, and across three different impact themes, we are fortunate to see a very wide swath of examples of impact (inclusive of impact management and measurement, environmental-social-governance management, diversity-equity-inclusion, and more) efforts across the industry. We hope it will inspire and inform others in the industry to highlight and share them through this series.

Today, we will start by highlighting the concept and significance of Impact Advisory Councils (IACs). These councils, established by General Partners (GPs), play a pivotal role in shaping and guiding a firm's approach to impact. Typically comprised of experts, stakeholders, investment team members, and sometimes even portfolio company CEOs, the most important role of an IAC is to act as a sounding board on impact opportunities or challenges that could arise, such as in relation to: screening processes, due diligence, company metrics, deal terms, investor reporting, team member responsibilities, certifications, or market positioning. This could be in the context of a policy or program, or even a specific investment where there might be debate about how to approach impact or whether the potential impact meets the firm’s bar.

In addition to having a trusted body to turn to, the existence of an IAC can signal a firm’s commitment to continuous improvement in areas that are rapidly evolving, reinforcing to both investors and companies the importance placed on these issues. Furthermore, these councils provide LPs who are passionate about impact an opportunity to engage more deeply and build stronger relationships with the firm. 

While there is growing consensus in the industry that IACs are a beneficial addition to impact investing firms, there is no universal agreement on the optimal structure for these councils. As an impact investing firm with a network of over 990 different GPs, Impact Engine has observed a wide variety of council structures tailored to meet the unique needs and resources of each firm. Typically, these councils consist of 3-5 members, often composed of LPs, and generally convene 2-3 times per year, primarily through virtual meetings, with some opting to meet in person around their Annual General Meetings (AGMs). The agenda for these meetings usually includes a review of the portfolio and impact report, discussions on new investments, and special topics or projects. While IACs do not typically weigh in on governance issues (this falls under the purview of the Limited Partner Advisory Committee (LPAC)), some do weigh in on compensation matters related to impact, such as tying impact performance to carried interest. 

We currently serve on 12 IACs, and helped form 10 of them¹. While we don’t have a formal IAC ourselves, as a Public Benefit Corporation, our board of directors is legally bound to hold us accountable for both our financial performance and our impact performance. We also supplement the voices and accountability of our formal board with our Advisory Board, who we call upon regularly to weigh in on our plans and progress.

There are clearly many approaches that can be effective. The goal is to always be learning and looking outward for ways to improve, and to have others who can hold you accountable for that.

Spotlight: Lumos Capital Group’s IAC

Lumos Capital Group was founded in 2019 by Victor Hu and James Tieng as an independent investment manager focused on technology-enabled growth-stage companies in the human capital development sector that are bringing transformative products and services to improve the quality of and access to education and training, from early childhood education to workforce development. Lumos’ investment thesis is that the global status quo is unsustainable (most of the global workforce has less than a college degree, annual earnings of <USD20K, and is in danger of being left behind due to accelerating automation), that education is THE crucial lever for systemic change, and that purposefully investing in impactful private sector innovation will drive a more prosperous and inclusive future for everyone.

Lumos’ Impact Advisory Council meets virtually on a biannual basis, and consists of 4 LPs with deep experience in the sectoR (Strada, Steyn Family Office, American Student Assistance, Impact Engine) along with representatives of the investment team. There are three primary objectives for the IAC: 1) To provide an external feedback loop to hold the firm accountable on its impact commitment, 2) To help decide on which impact management and measurement practices to adopt, especially when LPs have different preferences; and 3) Create a trusted group where Lumos can have honest conversations about the numerous challenges of impact management.

Some of the recent topics discussed or considered at the Lumos IAC include:

• Decision to join Impact Capital Managers (ICM) (a member network of private capital fund managers investing with a focus on impact)
• Decision to implement the Impact Management Project’s five dimensions of impact framework throughout the investment process.
• Drafting a theory of change framework with three core pillars to understand market gaps and drive meaningful systemic change through the business models of the portfolio companies.
• Understanding the Sustainability Accounting Standards Board (SASB) and what is appropriate ESG management for a growth equity investor
• Review of individual portfolio companies & potential new investments’ impact merits and risks. For example, Lumos was looking at a software tool used in schools to prevent bullying and was struggling with how to balance that outcome with the privacy concerns it entailed.
• Discussion on how to increase the proportion of diverse founders at the top of the funnel.
• Discussion on how to codify impact into term sheets with companies.

¹As of the date of this article Impact Engine has allocated capital to 17 different managers; having a formal active role in 15 of them. In firms where an IAC may not exist we find other ways of helping shape the IMM of that firm through other bodies like an LPAC.

Why We Invested in NephroPlus

By Sophia Friedman and Anna Reilly

There has been a significant increase in both the number and severity of end stage renal disease (ESRD) and chronic kidney disease (CKD) cases in India over the past several decades. Of the estimated 1.3M individuals requiring access to dialysis services in India, only ~20% are receiving those services at the recommended frequency. This gap is primarily due to: 1) affordability as the average cost per session is price prohibitive to most; and, 2) supply side constraints given there is a significant gap in supply of dialysis machines, clinicians, and centers. Additionally, geographic location continues to serve as a barrier to access for individuals living in tier II or III cities versus tier I cities. While a number of private dialysis companies have been founded in India, few have been able to scale high-quality, affordable services across high-need areas. Similar challenges exist more broadly outside of India. In The Philippines and Uzbekistan, the number of individuals with kidney diseases continues to grow and the demand for services in these countries has far outpaced supply.

Solution

NephroPlus enables individuals suffering from kidney diseases to resume normal functioning of life through high-quality, cost effective dialysis treatments and services. NephroPlus is Asia’s largest chain of dialysis clinics with ~450 centers across 250+ towns in India, Uzbekistan, and The Philippines. The company offers services through both standalone centers and outsourced dialysis centers located in hospitals within tier I, II, and III cities, and through public-private partnerships. NephroPlus has an in-house dialysis staff training program, which both addresses supply side challenges and ensures high-quality delivery of services. During the last 10 years, more than 1,000 students have been trained and placed successfully at NephroPlus clinics. NephroPlus is well-positioned to serve the large and growing number of individuals with a need for high-quality, affordable dialysis services in India, The Philippines, Uzbekistan, and additional countries in Asia.

Why We Invested

The prevalence and severity of kidney disease cases continues to increase around the world, particularly across Southeast Asia. In India, The Philippines, and Uzbekistan, where NephroPlus operates, there is a significant supply-demand gap in terms of dialysis machines, centers, and clinicians required to care for individuals suffering from renal disease. To combat this discrepancy, the Indian government launched the Pradhan Mantri National Dialysis Programme, which partners with private providers to increase the number of centers, machines, and clinicians offering dialysis services in the country. The governments within The Philippines and Uzbekistan are also offering universal health coverage for these services through government partnerships. However, public programs alone will not be enough to overcome the gap in the number of needed machines. Further, these countries also struggle to properly recruit and train the number of nurses and technicians needed to provide care.

Given the need for machines, centers, and clinicians, NephroPlus is well-positioned to become a market leading provider of dialysis services across Asia. As a single specialty, multi-site provider of high-quality, cost effective dialysis services, NephroPlus will be capable of partnering with governments and outsourcing dialysis services for hospital and center partners. The NephroPlus founding team has extensive experience in the dialysis industry, including effectively scaling the company to ~450 centers since its foundation in 2010. Founder and CEO Vikram Vuppala founded NephroPlus with a clear objective to redefine and transform healthcare in India. Further, NephroPlus’s most significant investor, Quadria Capital, is committed to working together with the company to professionalize and optimize the business as NephroPlus continues to scale throughout Asia. The NephroPlus and Quadria Capital teams share a similar mission to build Asia’s largest network of dialysis centers offering high-quality, cost-effective services in countries with a significant need. 

Impact

NephroPlus addresses all three barriers to services: accessibility, quality, and affordability. The company plans to add hundreds of additional centers across tier I, II, and III cities with the majority of centers added in tier III cities, where there is currently limited access to dialysis services. NephroPlus maintains a highly-qualified clinical board and ensures cohesive standard operating procedures lowering infection rates across centers and markets. Additionally, NephroPlus recently announced the publication of a research study in The Lancet Regional Health - Southeast Asia establishing the first national benchmark for survival amongst dialysis patients in India. The company has partnered with the governments in both The Philippines and Uzbekistan to ensure public coverage for services. Within India, while the company provides the majority of services through government models, either through PPP or offering services under government healthcare schemes, while the rest of services are either private insurance or self pay. NephroPlus intends to continue to partner with the Indian government to provide services through public-private partnership models.

Why We Invested in Mae Health

By Sophia Friedman

The United States is facing a maternal mortality crisis. Maternal mortality rates in the US exceed rates in other high income countries (by more than ten times in some cases, such as compared to Australia, Japan and Spain). Specifically, Black women are most negatively impacted and are 3-4x more likely to die from pregnancy-related complications. Further, 15% of Black births are premature, 35% of Black births are via c-section, and Black women are twice as likely to experience pregnancy-related complications. Various factors drive this inequity in care including access to care, social determinants of health (SDoH), and structural racism. Notably, structural issues such as implicit biases of caregivers and a lack of cultural competency materially contribute to these outcomes. 

Solution

Mae Health is a culturally competent digital health platform connecting Black expectant mothers with critical resources to elevate the standard of care for Black women, with a focus on improving maternal health outcomes. Mae works in concert with healthcare payers and states to address the significant disparities in maternal health outcomes for Black mothers across the country by pairing a community-based model of doula support with best-in-class digital interventions.

Mae’s core offerings include continuous digital engagement and culturally aligned support. The continuous digital engagement provides multi-modal touchpoints such as culturally aligned content, virtual, small group ‘Mae Momma classes’ that offer programming on specific topics, SDoH monitoring, care flags to identify risks early and track data, and analytics to share with healthcare providers and payors. Mae’s culturally-aligned support offers virtual or in-person perinatal support from credentialed doulas. Mae connects expectant mothers with doula networks for the provision of care and also provides various levels of support to doulas including a client management interface, workflow tools, and billings and claims submission support.

Why We Invested

We believe that Mae’s approach is unique as it is entirely focused on reaching Black expectant mothers, and their sales traction to date has been 100% with Medicaid payors (though the company does have D2C users who can access free content). Some competitors have avoided contracting with Medicaid payors because of the complex reimbursement dynamics that vary by state, and inherent challenges to engaging these patient populations, but Mae has tackled this head-on and is a first mover in this space. Mae has proven a  strong value proposition to payors by clearly mapping the cost savings of providing doula support and has seen great success with signing and launching new Medicaid payor contracts in recent months.

Further, the doula-centric approach is also unique, and Mae has made progress ahead of other players in building out a bench of doula talent. While there are several players in the maternal health market broadly, Mae’s approach is unique in its focus on optimizing doula benefits for Medicaid populations. Doula support has been directly linked to improved health outcomes as women who give birth with a doula present have a 22% lower risk of undergoing a c-section. By employing this model, there is significant impact potential in a market that not many companies have been willing to focus on. Lastly, the team is extremely impact motivated and brings relevant lived experience to the platform. Founder and CEO Maya Hardigan has prior experience on the innovation team at Pfizer and as the mother of three young girls, she has personally experienced the inequities that she is trying to address.  

Impact

Mae aims to elevate the standard of maternal health care for Black women, with a focus on improving maternal health outcomes. Believing that many of the disparities Black women face are driven by biases in care, its model prioritizes on-the-ground support from community-based doulas who are known to improve pregnancy experiences and outcomes. Mae has already begun to demonstrate improvements, and its solution is linked to reduction in maternity cost of care, improvements in health performance metrics (HEDIS metrics), and enhanced member literacy, satisfaction and engagement.  From an access perspective, at the time of investment, Mae’s enterprise users were 100% Medicaid patients, and several quantitative measures suggest that the approach is driving positive health outcomes amongst this population. Specifically, Mae has shown a 31% reduction in c-section rates and a 58% reduction in preterm birth rates amongst its users. 

While not specific to Mae, many of the tactics Mae is employing have demonstrated a direct link to an improvement in clinical outcomes. For instance: women who attend a childbirth education classes are 26% more likely to have a vaginal delivery than those who do not; women who have a birth plan are 98% more likely to have a vaginal delivery than those who do not; and, mothers who use a lactation consultant are almost 71% more likely to exclusively breastfeed within the first month of the baby’s life. Thus, with time, Mae expects to collect additional data to prove its positive impact on health outcomes.

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Our investment in Mae Health was part of a fundraising round led by Jumpstart Nova.