Investing_for_impact Credit Suisse — Schwab Report

The report lead me down an interesting thought path on the “next steps” of the sector…

Evidence:  The report highlights several successful social enterprise models that are part of Schwab’s network. My personal favourite was Bam Aquino of Hapinoy in the Philippines — investment funds that creates sustainable distribution channels and business development strategies to empower formerly isolated and informal sectors of the Filipino economy. The report above, complements the Data Driven JP Morgan-GIIN report, that drills drown into the numbers and breakdown of social enterprise in different sectors.

As a next step, I would love to see a report that focusses more on the accessibility and availability of investments in the space — from an investors perspective. Coming from an asset-management background, I have developed a strong belief that understanding the investment is just as important as knowing your investment options. Currently, main-stream investor’s exposure of ‘social’ in investments are SRI offerings — they need to be educated on different entry points and impact investing product offerings ranging from an institutional and private client perspective. A great starting point to this step is Impact Asset’s 50: A listing of Impact Fund Managers.

Failure: With the industry in a growth stage, as great as it is to know the successes and the landscape, it is just as important to know the failures. Where did we go wrong? What worked? How did you manage to pivot? How do you prioritize your mission and your finances? When did you know the time to scale? There is such a stigma with failure in the non-profit/charity world. This stigma should NOT be carried forward into the impact investing/social enterprise sector. Failure is a gift — and the ability to speak freely to learn from them, should be embraced by this sector. A wonderful example of embracing failure is the EWB Canada’s Failure Reports. I would love to see a similar initiative in the impact investing sector. Even internally within organizations — as a start.

Road-Map: There is a wealth of information on impact investing that has been churned up within the last few years or so. The issue is knowing where to look: from funding social enterprises to exiting an investment. A natural next step to this would be for various stakeholders to share their “how-tos” and points of consideration in the impact sector. Some organizations have already begun to pave the way for this, but what we need is for more road-maps to appear so at the very least, when you’re at the starting line — you have a general sense of direction on where to go.

In the social enterprise world, one key issue that constantly resurfaces, as it would in any growing sector, is one of funding and identifying a proper investment pipeline. The accessibility and  availability of start-up funding is crucial to startups, and in the case of social enterprises, a largely untapped market. Here’s whereInvest2Innovate (i2i) comes into the picture. They are a social enterprise intermediary that supports the growth of social entrepreneurship in new markets, helping funders and early stage entrepreneurs see eye to eye.

I had the opportunity to connect with Kalsoom Lakhani the founder and CEO of i2i to interview her about her recently launched social enterprise. A trailblazer and native to Pakistan, Lakhani launched i2i’s pilot in Pakistan in September 2011 with plans to expand operations to other countries post 2012. Here’s what she has to say about her startup and the space:

1) What is most interesting to you right now in the social enterprise space? 
There are many interesting innovations taking place right now – from groundbreaking SMS crowd-mapping tools to agriculture-based innovations for small farmers. Innovative tools & approaches of engaging and empowering low-income communities are coming up constantly. But I’m also extremely interested in the growth of the impact investment space, and where we are right now in terms of the community as an emerging asset class, whether or not this type of investment breeds better social impact metrics, and whether the capital is flowing to the right places. There are still a lot of spaces we need to fill when it comes to connecting capital to social enterprises, particularly at the early-stage, and it’s interesting to see how crowd-funding and other innovative ways of raising capital are becoming potential solutions to help fill that gap.

2) Why start up i2i? Why is this the time to enter into the market? 
i2i was launched in order to help address some of the disconnects in the social entrepreneurship space. Prior to launching the company, I worked in venture philanthropy for over three years, providing seed funding and support to early-stage social enterprises mainly in Pakistan. I was first exposed to the “space” then, and quickly immersed myself in all things social entrepreneurship & innovation. It has been fascinating and motivating to see growing ecosystems in markets like India, Latin America (Mexico, Brazil, Chile are good examples), and East Africa. Beyond higher access to capital (a lot of impact investors operate in these countries), we’ve seen the growth of other players that further support social enterprise – incubators, accelerators, government policies (in some cases), intermediaries, etc.

i2i was founded to take a similar ecosystem approach in the “untapped” markets – that’s a lot of jargon I know, but essentially we provide tailored services to early-stage social enterprises to grow their businesses and connect them to capital. Pakistan, our pilot market, is a great example of a country where there is a significant need for more innovative and market-based approaches to development – 66% of the population live on under $2 a day – but where the environment for social entrepreneurship is relatively new. Entrepreneurs often lack the tools & services to maximize the potential of their models and attract capital, especially in markets like Pakistan, where the volatile political and security situation hurt the investor environment. There is a lot opportunity for i2i, as an intermediary, along with other partner organizations, to be the architects of the ecosystem, fostering the social entrepreneurship space both from the top-down and the bottom-up.

3) What is the biggest misconception you see in the world of social enterprise and where do you stand on the issue? 
I think the biggest misconception in social enterprise is that it’s ok to stop at the “warm & fuzzy” and throw the term around irresponsibly. It drives me crazy. Social enterprise ultimately combines the best of the business and the charity world – it begs the question, “Could we magnify social impact if we take a business approach to development?” Social entrepreneurship is not the solution to everything, but in some cases, it can be really effective. For instance, if rural low-income communities that are off the electricity grid use kerosene as their light and heat source, not only is it a costly product, but it poses terrible health and environmental ramifications. Displacing this demand for kerosene with clean energy solutions provides these low-income communities with better alternatives at comparable prices, ultimately contributing to poverty alleviation. Social enterprises need to demonstrate social and/or environmental impact – that is what tends to qualify the “social” in the equation, but at the end of the day, they are businesses that need to have strong models and be sustainable in the long-term. Sometimes that gets lost in the “warm & fuzzy” stories we hear in the space, which are great in communicating an organization’s vision and building a community of supporters, but there needs to be substance behind that story.

4) What is one action would like people to take once they know if i2i? 
If you are a social enterprise, especially in Pakistan (since that is our pilot), get in touch with us to get an assessment of your business and how i2i can provide services (from business development to communications/marketing) to help your organization grow. If you are a potential investor (both for i2i and/or interested in early-stage enterprises in new markets), we’d love to talk to you! And finally, if you are just a supporter, we are always excited to hear your feedback and make our model better.

I’m really excited to announce that I will be speaking at the inaugural Canadian Global Impact Investing meetup in Vancouver on behalf of the group — sharing the acumen model (both on a global and chapter level) to the impact investing community in Vancouver. The event will be held on Wednesday, Nov 23rd from 6:30pm — 9pm at SFU Segal Graduate School of Business in downtown Vancouver. You can check out more details about the event here.

Three other organizations will also be presenting at the event: Vancity, Global Catalyst Initiative and Opportunity International Canada. Also, at the event, they will be giving away door prizes ( 2 books I couldn’t recommend highly enough): Impact investing: Transforming How We make Money While Making a Difference – Jed Emerson, Antony Bugg-Levine and Banker to the Poor – Muhammad Yunus.

See you on the 23rd. Looking forward to connecting with other fellow impact investing/social enterprise champions.

So 2 quick updates. Upcoming (free!) webinars on impact investing.

1) How to Be An Impact Investor hosted by MaRS Centre for Impact Investing

Date: Thurs, Oct 27th 2011

Time: 12pm — 1pm (EST)

Key themes/questions (from event description):

• How do you convert your motivations for a just and equitable society or a pollution-free environment into an effective investment policy statement that will enable you to make both positive impact and seek the financial return requirements of your organization?
• What level of due diligence should you conduct to determine whether a venture is a good candidate for such investments?
• What skills and expertise can you draw on internally or acquire through external advisors or managers to aid in your decision-making process?
• What opportunities and challenges should you be cognizant of as you seek to re-align your investment portfolio with your mission and values, both organizationally and personally?

2) Impact Investing: Challenges and Prospects hosted by Jed Emerson and Antony Bugg-Levine

Date: Mon, Nov 7th 2011

Time: 12pm –1pm (EST)

Key themes/questions (from event description):

• Roots of impact investing, examples of its practice today
• Challenges that need to be addressed: regulations, cultivating transformational leaders, measuring blended value, bringing in philanthropic capital, limits and challenges of impact investing
• Charting a course for ‘blended value’ investment strategies that make money while improving social and environmental conditions.

*The post below was orig­i­nally pub­lished on http://www.socialearth.org on Oct 11, 2011

Capitalism has alot to answer for these days. Members of this group range from ardent Occupy Wall Street protesters to a sense of common vision that seems lacking amongst citizens. Today, we turn to four wonderful publications highlighted at  SOCAP11  that has been creating momentum to redefine capitalism and would be a significant contribution to the public debate.

1) Impact Investing: Transforming How We Make Money While Making A Difference – Jed Emerson, Antony Bugg-Levine

This ground-breaking book should be your first choice to pick up to explore the transformative power of impact investing. The book explores an integrated alternative to traditional philanthropy and investing – highlighting the applications of impact investing as well as its potential. It demonstrates how it is and can be a positive disruptive force. Perhaps the most interesting angle of this book is the usage of time with impact investing, providing a historical and predictive perspective enabling readers to have a solid understanding of what the present holds. The authors ultimately offer a optimistic vision for what we can collectively achieve when our assets work in unison with our values. As a bonus, I can assure you that the authors are as inspiring in person as they are in the book. No jokes.

Further Resources:

• My interview with one of the authors, Antony Bugg-Levine
• The HIP Investor: Making Bigger Profits by Building a Better World

2) Innovations Journal: SOCAP 11 – Impact Investing Special Edition

I’ve been a big fan of Innovations – quarterly compilations of commentary, research and essays from leading innovators in their field. There was a special edition of Innovations for SOCAP11 containing a myriad of perspectives on building the intersection on money and meaning as part of the solution to global challenges. Below is the complete list of contributors in this special edition.

My pick out of all the essays was one by Robert Katz and Brian Trelstad of Acumen Fund on Mission, Margin and Mandate. The essay firstly unwraps the definition of scale and sustainability and then lays out the three paths to achieve this goal through mission, margin and mandate. I was particularly hooked on the dilemma presented: what should take precedence when building out a social enterprise?

• “At what point do you evangelize your solution to raise mission-based grant capital or volunteer support to work on that new product?
• At what point to you buckle down and simply execute on sales and service to grow your margins?
• When do you approach the government for changes to policy that might help get that mandate to scale?”

Further Resources:

• You can obtain a free copy of their essay here
• Bonus offer: Write an Amazon review for the SOCAP11 Impact Investing Special Edition and receive a free subscription to the Innovations Journal.

3) Design for the Other 90% – Cynthia Smith, Paul Polok

“It is a discipline that uses the designer’s sensibility and methods to match people’s needs with what is technologically feasible and what a viable business strategy can convert into customer value and market opportunity”. Tim Brown, Change By Design

This book is an extraordinary collection of more than 30 design projects targeted specifically to design low-cost solutions for the world’s population that have little or no access to most products (the other 90%). The stories and brilliant illustrations (partnered with the Smithsonian’s Cooper Hewitt, National Design Museum) takes the reader through unique ways to provide better access to basic needs and how innovations in design are often the most successfull in addressing these issues.

Further Resources:

• IDEO’s Human Centered Design Toolkit
• Support: IDEO’s mission to design an end to poverty

4) A New Foundation for Portfolio Management - Portfolio 21, RSF Social Finance

One of the fundamental concepts that permeates portfolio construction and the asset management world is Modern Portfolio Theory (MPT) – how do you maximize portfolio expected return for a given amount of risk by choosing various proportions of assets. This paper is a great starting point in a call to arms to reevaluate MPT in light of the impact of ecological limits and global impact of investments. The premise of the paper focuses on: 1) Integrated Risk; 2) Selective Growth; and 3) Multidimensional Utility Function to provide investors clarity on the long-term implications of managing a portfolio that goes beyond a purely financial purpose.

Further Resources:

• Portfolios of the Poor: How the poor live on $2 a day  - Daryl Collins, Jonathan Morduch, Stuart Rutherford, Orlanda Ruthven

There are three things about development data that you need to know: 1) It is beautiful; 2) There is a hidden story within each combination; and 3) It needs to be set free.

Last year, the World Bank released it’s prized possession of data – one that tells the stories of economic, socio and political realities around the world. This is a push to “democratize development data” and embrace its open information policy. It’s absolutely incredible what has been done with the data and I wanted to highlight some of the initiatives that have been born out of this:

1) http://data.worldbank.org/

This is the main Knowledge Bank where you can information from poverty rates to the average life expectancy of a country. Data is sorted by topic, countries, indicators, sectors and the World Bank even made a neat feature of key development indicators around the world. It covers over 200 counties and in some cases, dates back as far as 50 years.

The data is updated regularly and as you can see from the screenshot below, you can even find information on the newest country in the world – South Sudan! The site includes the Bank’s widely-used and extremely useful datasets: the 2010 World Development Indicators (WDI), Africa Development Indicators (ADI), Global Economic Monitor (GEM) and Global Development Finance.

2) Apps for Development

With the launch of the the above resource, the World Bank organized an Apps for Development Competition – bringing together the best ideas from developers and data to create useful software applications that is related to the Millenium Development Goals (MDGs). The competition was a tremendous success and the Bank received apps from 36 countries: 30 of the 107 final submissions from Africa. You can check out the winners from this competition here.

A side spinoff from this competition was also an International Day Hackathon on Dec 4th last year where developers write applications using open data to support and encourage the adoption of open data policies by the world’s governments. My favorite application is the San Francisco Crimespotting – an interactive map of crimes in San Francisco and a tool for understanding crime in cities. Helping keep people safe with open data. Amazing!

3) Mapping for Results

This Platform provides detailed information about the World Bank’s work in poverty alleviation and development around the world. It provides access to interactive maps that highlights locations of the bank’s projects around the world and involved releasing data provided by governments and other entities.

4) Data on the Go!

The World Bank is bringing accessibility of data to a whole new level by providing information on an iPhone app. They have six apps ( 4 published and 2 in the pipelines) that are being developed and the interface and usability for the data is just incredible. My personal favorite is the classic Datafinder – an app that lets you access 50 years of WB data on global economic indicators that can easily be shared in presentations, research and projects. Two more apps are being released in August 2011 – The World Bank at a Glance and the World Bank’s Finances.

Data is truly beautiful and with the world’s development data at your fingertips, we can use, analyze and even criticize.. but the only thing we shouldn’t do is ignore it. The video below is an example at how magical data can be. 4 minutes – 200 countries, 200 years by world renown economist – Hans Rosling.

I had the privilege to speak with Antony Bugg-Levine, Managing Director of the Rockefeller Foundation, Board member of the Global Impact Investing Network and one of the thought leaders and influencers in impact investing. He leads the Foundation’s impact investing team that works to harness the capital and expertise of investors making “impact investments” that generate a social and financial return. This in an insider interview to his book, Impact Investing: Transforming How We Make Money While Making a Difference. This book was co-authored with Jed Emerson, an executive atImpactAssets, Senior Advisor with the Sterling Group (Hong Kong) and a senior fellow with the Center for Social Investing at Heidelberg University. In our conversation, he shared key highlights in the book as well as his hopes for the book. Note: This interview is being posted in three parts; stay tuned for Part II and Part III over the next few days.

1) The premise of the book is on impact investing. How do you intend for people to read this book? What mindset should people be in?

Firstly, this book is not a ‘How-to’ guide for practitioners or investors who are looking for simple guidelines on how to construct an impact investing portfolio. There are other guidelines or resources that are available for that. We step back from the day-to-day work of constructing a portfolio of impact investments, but instead ask the more fundamental questions about how impact investing, as a new approach to addressing social problems and deploying capital, is disrupting our existing systems. The book is constructed in two parts.

Part 1, The Terrain of impact investing, takes a quick overview of impact investing’s historic and current role in the following sectors

1. Accelerating the growth of microfinance
2. Supporting the international development agenda
3. Helping to build the social enterprise sector

In each of these cases, we examine how impact investing is generating opportunities as well as a set of challenges and questions.

In Part 2: The Implications of impact investing, we examine the fundamental systems around which our society is organized and how, one after another, they are going to need to change to accommodate the aspirations of impact investing and to take advantage of the potential that this field offers.

This is really the core of the book: In our society, especially in the West in the past 50 years, we have organized our society around two fundamental pillars that support our current systems:

1. The only way to solve a social problem is through philanthropy and the government
2. The only purpose of investing is to make money

If you accept these two fundamental pillars, then the system we currently have makes sense, and will support your activity. However, if you believe in the fundamental premise of impact investing, that we can integrate our investment and our social purpose, then these systems do not work. So in the book we highlight how impact investing is challenging various systems to change: the legal system, the philanthropic system, the system by which we develop leaders, our capital markets and our systems for measuring value.

We provide a framework for thinking about the new systems we will need to build. We think what is really exciting about impact investors is the opportunity to build a new set of systems to realize the great potential of impact investing.

However, we are not overly prescriptive partly because we don’t claim to have all the answers. We do not know, between Jed and myself, exactly what these systems need to be, but there are clear guidelines on how as a community, we have to engage on this.

2) What do you hope this book would inspire people to do? What is the next step? Spread the word? Become actionable? Start building systems?

Everyone has a different role to play. Every human system in which we live is the result of both intentional decisions we make and unintentional actions we take. We believe that anyone reading the book has the ability to participate.

If you are a student, you could challenge institutions in which you are learning to not fall back on easy stereotypes, but rather recognize the great potential in combining social impact and investing.
If you are fortunate to be a holder of wealth, you could read the book and challenge your wealth advisor to not give an easy answer that rejects how you can put your investments to work towards a social purpose.
If you work in the financial services sector, we hope you consider putting your skills to work to build a more efficient social capital market.

At the same time, we are not so naïve as to think that reading this book would inspire many people to change their current life path — and we don’t think you need to. In the book, we profile some inspiring heroes who have stepped out of mainstream work to pioneer new institutions and approaches, including Canadian based Sarona Asset Management and Social Capital Partners. However, we don’t believe that impact investing is a domain only for radicals.

We recognize that in order to be truly powerful, impact investing needs to be accessible to regular people as well. We emphasize in the book that we don’t want to perpetuate the idea that only the most revolutionary or entrepreneurial people have a right to be part of impact investing. Leadership is going to come in many forms, and not only from the charismatic individuals who start new enterprises or quit their jobs. Instead, we anticipate it will come from the many more thousands of people who can embrace impact investing at whatever scale they are able to.

3) What do you think this field is picking up momentum only now, given that it has been around for years? Why do you think people are realizing the importance of this space so late?

Impact investing has been going on for decades — but the coining of the phrase “impact investing” around four years ago has allowed different communities to share their aspirations under a common language and to come together more visibly.

In the book, we talk about this phenomenon. Many people are increasingly frustrated with business-as-usual approaches. There is a growing number who do not think that the model of philanthropy their parents adopted is enough.  At the same time, we talk about a new generation of people who have been raised within the social enterprise movement and seek to integrate business and social purpose throughout their career, not in sequence.

In addition, the recent financial crisis has shaken people’s confidence in old approaches. Governments, also, are increasingly intent on figuring out how to do more with less, and are mobilizing impact investing capital to complement government spending.

4) If you had one message for this community, what would it be?

Let us all go from rhetoric to action. We need to see real deals proliferate that generate social impact and financial return. We also need to recognize that we are part of a longer-term movement to change the fundamental systems and mindsets that currently limit us.

5) What was your favorite aspect in working on this book?

It has been a great honor and intellectual privilege to work with my co-author, Jed. He’s a real visionary. By its nature, impact investing will be best when it brings together people from different perspectives, even if that is not always the easiest and most comfortable way to work. For me, working with Jed was a real-world manifestation of this idea—we brought different perspectives and experiences to the process and challenged each other to both broaden and sharpen our ideas. I hope the result is more interesting and insightful for our readers.

Antony Bugg-Levine is the co-author, with Jed Emerson, ofImpact Investing: Transforming How We Make Money While Making a Difference (Wiley, 2011) which will be released in early September and is available now for download as an e-book. The opinions expressed in this article do not represent the official views of any institution with which he is affiliated.

Photo credit: Jai Catalano

SOCAP is a organization dedicated in exploring the intersection of money and meaning. Their annual conference in San Fran is THE event to attend for leading global investors, innovators, curators and social entrepreneurs to build this social capital markets space.

I will be publishing a few pre-conference pieces and will write throughout the conference on socialearth.org. I will also be live tweeting during some key speeches (will be revealing who as the conference draws closer!) — so follow me on twitter if you want to be updated! If you are planning on attending, presenting or speaking at the conference, I would love to be in touch. You can contact me here. I would seriously love to hear from you.

My goal at the conference not only includes highlighting and reporting the event, but to also: 1) deepen my personal understanding of this intersection; 2) meet other individuals who are passionate about this cause and 3) learn about opportunities and initiatives in this intersection of money and meaning. Who knows what we may create after this!

Check out more about the conference here.

OpenIDEO is an online crowdsourced platform “where people design better, together for social good.” It’s a beautifully designed concept which highlights 5 principles — inclusive, community-centered, collaborative, optimistic and always in beta. My favourite principle is the last one because it really reflects continuous learning, improvement and evolution. Something which most platforms do not traditionally announce — usually platforms aim to be out of beta mode, signalling “perfection.” It is founded by IDEO, a design and innovation firm that leverages design thinking  to help organizations innovate and grow.

I love crowdsourced platforms,but here’s why OpenIDEO really stood out for me:

1) Listening — there’s something to be said about communities designing for other communities. It has a low barrier to entry and your experiences and input can help shape a better concept. Alot of crowdsourcing platforms are one way highways rather than two ways. I appreciate the openness of the platform where I can simple “applaud” an idea to creating a concept. My involvement is as much as I want it to be. Sidenote: thought I would share a really interesting infographic on a comparison of questions asked to #askobama on Tuesday which breaks down the percent of questions asked for twitter vs. journalists. This disparity in questions asked only goes to show how important listening is to what people want to know and need.

Picture credit: Infographic taken from boston.com

2) Design — Of course! Great job to the team who designed this website. They paid such great attention to detail to the point where you would even had a little heart next to the number of people who had applauded your comment. Sharing the love via great design! 

On a more serious note on design though — I liked the fact that although there were several challenges tied to a broader challenge, the way the design was setup was so that concepts weren’t lost in the noise. Below is the current challenge and we’re currently in the concepting stage. The featured concept ensures that the most popular concept doesn’t just remain at the ‘top’ and the filters at the bottom of the screenshot ensure that each concept gets viewed. Getting proper exposure for each concept is important because I know several platforms that struggle to eliminate the natural bias of selection by viewing what you see first and foremost.

3) Community — In a new platform, it really helps to have a frame of reference on what to do. I really liked the fact they had a community tab that featured their top contributors to the site. I was able to go into their profiles and see what they have done and that definitely sped up my learning process. OpenIDEO also integrated a design quotient into your profile, where it tracks pts on where and what you have contributed. I must admit it was very satisfying to see my points increase after contributing to a concept. I now have 13 pts for collaboration!

My only feedback for the site at the moment would be in this section too. It would nice to expand the community section into one where I can search more than just the top contributors to the platform. The search function on the RHS allows me to search for people but only if I know specifically who I want. It would be great to browse in what way people have contributed to the platform and connect with them. Although, for those interested, there is an informal  twitter list by one of OpenIDEO’s top contributer: @arjantupan/openideocommunity

All in all, a great platform for an even greater cause. I highly recommend taking this for a spin. If you do decide to create a concept, let me know and I would love to check it out!

What all these conversations have given me though, is firstly an understanding that in order to contribute to the impact investing space, I would have to know my own goals better, know my areas of interest and most of all, know what I have to give and gain by being in this space. It is simply not enough to have the heart for this. I have to be honest — with myself and with what we are able to accomplish. I have to know my limits and be humble enough to admit what I actually do and don’t know and do my best to learn what that social capital continuum looks like. I want my idealism to be practical and actionable.

All that being said, I believe that one of the biggest ways to advance this space is to be as open as possible about discoveries that we know. From performance metrics to new initiatives. The impact investing space needs to reach a mass tipping point before it can truly hit mainstream and although we are picking up momentum, we’re not there yet. One of the forums that I admire and has provided a great platform for this sharing of ideas is Social Capital Markets — an annual conference in San Fran that connects global innovators, investors and entrepreneurs. They recently expanded into Europe this year and I had the privilege of covering some pre-conference stories for them. Below is an interview I had with SOCAP co-founder Kevin Jones for SOCAP Europe originally written for socialearth.org a couple weeks ago. I do hope to meet him in person one day and really admire his tenacity and passion for this space. You can view the original post here. Also, Check out the movement that SOCAP has been creating here.

***

In my last post on SOCAP Europe, I wrote about the space, the need and the movement for social capital markets. Since, I had the opportunity to interview Kevin Jones, the co-founder and convener of SOCAP Markets. A remarkable visionary, here is what he has to say about his take on SOCAP, a 10 year vision and his number-one advice to social entrepreneurs:

Q: I love the fact that SOCAP is taking on a more international scene by having one in Europe this year. Can you shed some light on the development trends that you are starting to see on an international scale and how this would impact us here in North America?

A: The biggest trend is toward impact investing being taken seriously by mainstream finance.  At SOCAP Europe, we will have large $100 million plus fund of funds announcing they are integrating impact investing into their portfolios, two banks, one large and mainstream, abn amro, and one deeply mission aligned, triodos are on board as sponsors. Pension funds are also at the table. The issue for impact investing is going mainstream and avoiding losing their mission, what I call avoiding mission risk, the ben and jerry’s problem. Avoiding a microfinance scenario.

Another big thing is that renewable energy in the developing world is becoming a clearly investable sector. A new, not published yet report by McKinsey commissioned by mid-year pegs that potential at $6.5 billion. The upside to renewable energy is that it is a public good, in places like rural Africa and rural India; you are removing kerosene lamps that kill 1.5 million people a year through indoor air pollution, cutting power costs by around 1/3 and doing it at high margin.  Unlike microfinance which became a derivative and allowed investors to demand an unreasonable return on their equity to the point that it exploited the poor in some places, there is no chance to saturate the rural African village market with life saving electricity that enhances a family’s ability to be productive. The report pegs that market size at $6.5 billion, but it will be a week before we can use that figure.

Q: You’ve been in the social investing/enterprise space for a while now, and noted in one of your more recent interviews on how the space is continuing to grow on both ends of the spectrum. What do you believe is the biggest barrier/challenge for this environment?

A: What is the biggest challenge? It’s still mindset, the inherited cultural frame in which people think about investing. They feel justified thinking only about financial return on their money and then they do good in giving. On the other hand, I am really encouraged by new research from NESTA that says 39% of folks in the U.K. would take a lower financial return if they could invest alongside what they believe, for causes they care about. and that the percentage goes up dramatically for people under 40.

That said, there will be failures, and people should be ready for them. Not just scams like three cups of tea seems to be, but things go wrong. So hopes could be dashed, etc. if people are naive. We are working on the toughest problems of the world. In new ways, with new tools, but they are still the things that put us all at risk.

Q: SOCAP is a conference that brings together the intersection of money and meaning. How does this conference fit into the picture of bridging the gap between for-profit and nonprofit and where do you see the ideal form of collaboration between these two groups?

A: SOCAP is about bringing all the resources into the market and using what’s appropriate to get the job done. Many if not most social enterprises often start out needing donations or subsidies, or as a non profit working on a problem, a way to pay for the mission without relying only on program money from a foundation creates the need for earned income that then grows into a social enterprise that could be investable as they work out the model.  But the market does not solve all problems. Take malaria: the young mothers and children one to five who comprise 80% of the nearly 3 million who die every year in Sub-Saharan Africa (some say 1 million) do not have and are  not likely soon to have the money to buy insecticide treated nets. So they need to be subsidized.

SOCAP is about using gifts and grants where they are appropriate and when they are appropriate and subsidies that go away over time when that is the way to go, soft debt from mission focused, often non profit lenders like a Root Capital or E+Co when its appropriate and fast moving, catalytic venture capital like equity from an impact investment fund where it is the answer. SOCAP is a big tent event where people who work in silos come together to get more done than they could alone or working with the people they already know or run into in their regular course of work. It’s the gathering that incorporates giving and investing as twin forces for good for a world that needs all the help it can get.

Q: What is your 10 year vision for the social enterprise/impact investing space?

A: What is my 10-year vision… that mixing your money with your meaning will be the way most people think about investing. That a mindshift has taken place. That boomers will contribute to the efforts of millennials who want to change the world they have inherited from us.

Q: What is your #1 advice to social entrepreneurs/enterprises?

Start. Do it now. Fail fast, and fail smart. If you are not relentless, you will not make it. this needs to be not just your peace corps stint. This has to be the way you approach the world. When I started good capital six years ago, I went to the smartest investor in this space that I knew. He told me and Tim, my partner:

- Our idea was wrong
– Our plan was flawed
– We were the wrong guys
– Our chances for failure were high
– And he did not want his name associated with us.

People tell you that all the time when you are an entrepreneur, the more disruptive your approach the more likely smart guys will give you that reaction. and they may be right. Your idea may be wrong, your plan flawed, you might be the wrong guy. But if you need to do this, if its baked into who you are that this is the way you approach the world, and what needs to be done, you will do it anyway. Not everyone should be an entrepreneur. Most people should be employees or help the visionary reach her goals. It takes a certain level of insanity to go against the common wisdom. If you are afflicted with too much sanity you won’t survive as an entrepreneur.

Q: And just for fun: What is your favorite quote?

A: Probably one from Dirty Harry, “A man has to know his limitations.”

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For more information about Kevin and SOCAP Europe, visit europe.socialcapitalmarkets.net.

Simply Wonder-full.

P/s: I also love the Alpaca Reversible hat! Made in Peru by a group of women to improve their family’s income.