I'm pleased to announce that SocialFinance.ca will be helping to coordinate the social media coverage of the Social Capital Markets 2010 conference in San Francisco on October 4th, 5th, and 6th. For those of us north of the U.S. / Canada border, SoCap represents an annual opportunity to check in with our dynamic neighbours to the south as well as many of the movers and shakers in social finance internationally.
Impact Metrics
New support was recently announced for the Global Impact Investing Rating System (GIIRS), a ratings agency that provides comparable and transparent ratings about the social and environmental performance of enterprises seeking investment capital, as well as investment funds that invest in these businesses.
At a summit on entrepreneurship hosted by the Obama adminstration earlier this week, the Rockefeller Foundation, USAID and other partners have contributed $6.5 million to support the development and use of GIIRS to catalyze the flow of private sector investment into businesses that seek blended value (economic, social and environmental) returns in developing countries.
“The question isn’t how do we give better? It’s how do we solve social problems better?” (Antony Bugg-Levine)
Over the course of two days at MaRS (April 6-7) Antony Bugg-Levine, Managing Director of the Rockefeller Foundation and leading visionary behind the impact investing movement, imparted his vast knowledge on many impact investing related subjects to over 200 people interested in the field. Though he is a native South African, Antony has close family ties to Canada and showed he is a kindred spirit, demonstrating a keen understanding of our Canadian context.
Impact investing addresses deficiencies in our current system that attempts to solve the world’s most pressing issues – accessible education, clean water for all mankind, disease prevention, food security, etc. People are starting to realize where the traditional system (foreign aid, charity and government intervention) fails and where new labour and market-based approaches can help. Impact investments can seed innovation to solve these challenges while generating a financial return at the same time. For the new generation of wealth and socially responsible consumers, this makes for a very exciting proposition.
Common business definitions refer to metrics as any type of measurement used to gauge some quantifiable component of a company’s performance, such as return on investment, employee and customer churn rates, revenues and so on.
However, there is a growing need and expectation for organizations with a social purpose to measure the impact of their work on society and/or the environment. This is typically complex to do and existing methodologies appropriate for financial metrics do not serve them. Some of the challenges entrepreneurs grapple with include:
- How do you quantify and systematically measure goodness?
- How much effort should be expended on getting the best possible social metric?
Matthew Bishop and Michael Green have recently written an excellent article for the Innovations Journal titled "The Capital Curve for a Better World". The article is part of a volume prepared for the Tech4Society hosted in Hyderabad, India and offers compelling insights on social entrepreneurship and technology from leaders in the field (view the table of contents or full publication). Bishop and Green are also the authors of the recently-penned Philanthrocapitalist Manifesto, which proposes a number of 'radical' policy changes for the UK.
I recommend reading the entire article, as it spans important issues and opportunities around financing social innovation. There are several examples that illustrate the essential building blocks of a social capital market, and how they have - or can - be implemented successfully. A key theme is linking finance to the right kind of organization structure at the right time - and that this requires a more sophisticated understanding of social impact and metrics. On a related note, intermediary organizations can and should play a vital role in connecting demand and supply for social investment, but there is more work needed to build the right incentives and funding to establish and sustain these intermediaries.
Jeff Mowatt on Three Business Models for the Bottom Billion
Sep 03, 2010