Download - So Cap2008 Presentation Final
Social Capital Markets 2008 Recap – January 19, 2009Kerri Golden, Karim Harji and Michael Lewkowitz
Agenda
Introduction The Future of Social Capital Markets (Keynote review) SoCap Recap
The emerging marketplace The role of measurement and metrics An ecosystem of solutions The future of investment funds The evolution of deal-flow The influence of social media and movements
Implications for Ontario Questions Open Discussion
Introduction
Welcome What is SiG@MaRS?
Systems Changing Initiatives MaRS Advisory Services Capacity Building
Series of best practice events
Past - Social Enterprise World Forum Debrief Future - Skoll World Forum
Present - Social Capital Markets ReCap
Karim - Michael - Kerri
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The Future of
Social Capital Markets
Katherine FultonOctober 2008
A Member of The Monitor GroupA Member of The Monitor Group
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A convergence of forces
Money seeking diversification
Values driven investors and consumers
Growing inequity and environmental crisis
Track record of early success
Openings for policy change
Talent pushing new careers
Investingfor impactis now “locked in”
CAN ITTAKE OFF?
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Impact investing today
Impact investing in 5-10 years?
Will the promise of this moment be realized?Phases of Industry Evolution
Disparate entrepreneurial activities spring up in response to market need or policy incentives
Disruptive innovators may pursue new business models in seemingly mature industries
Characterized by lack of competition except at top end of market
Centers of activity begin to develop
Infrastructure is built that reduces transaction costs and supports a higher volume of activity
Uncoordinated InnovationUncoordinated Innovation
Marketplace BuildingMarketplace Building
Growth occurs as mainstream players enter a functioning market
Entities are able to leverage the fixed costs of their previous investments in infrastructure across higher volumes
Organizations may become more specialized
Capturing the Value of the Marketplace
Capturing the Value of the Marketplace
MaturityMaturity
Activities reach a relatively steady state and growth rates slow
Some consolidation may occur
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The question for today is whether the bar will be set high enough—whether pioneering leaders will provide the talent, discipline and resources that will be needed to create a coherent marketplace with high standards for impact.
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Investing for Impact: The Risk is that It Will Be…
too HARD to do Insufficient compensation for
risk results in lack of interest in impact investing
There may not be enough good deals
Execution proves to be too difficult
The economics ultimately may not clear in most areas
Hype creates a bubble, especially from overpromising
too EASY to do The current financial markets
and incentives create a major pull toward “greenwashing” and dilution of standards.
The very premise of having a positive impact is undermined and the industry is discredited
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“Yin-Yang” Deals
Financial Return
None
High
Financial Floor
Impact Floor
Solely Profit-Maximizing Investing
Philanthropy
Impact HighNoneNegative
Optimize social or environmental returns with a financial floor
Impact First Investors
Optimize financial returns with an impact floor
Financial First Investors
Segments of Impact Investors
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Building a Marketplace for Impact Investing
Unlock Latent Supply of Capital by Building Efficient Intermediation
Unlock Latent Supply of Capital by Building Efficient Intermediation
Build Enabling Infrastructure for the Industry
Build Enabling Infrastructure for the Industry
Develop the Absorptive Capacity for Investment Capital
Develop the Absorptive Capacity for Investment Capital
Uncoordinated InnovationUncoordinated Innovation
Marketplace BuildingMarketplace Building
Capturing the Value of the Marketplace
Capturing the Value of the Marketplace
MaturityMaturity
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North America
3,300,000 HNWI
41,200 UHNWI
Europe
3,100,000 HNWI
25,000 UHNWI
High Net Worth Individuals (HNWIs) have assets of at least $1 million (excluding primary residence).Ultra High Net Worth Individuals (UHNWIs) have assets of at least $30 million (excluding primary residence).
Asia-Pacific
2,800,000 HNWI
20,400 UHNWILatin America
400,000 HNWI
10,200 UHNWI
Africa
100,000 HNWI
2,100 UHNWI
Middle East
400,000 HNWI
4,400 UHNWI
Merrill Lynch and CapgeminiWorld Wealth Report 2008
High Net Worth and Ultra High Net Worth Individuals
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A convergence of actions
Create industry defining funds as a beacon for how to address specific social issue(s)
Place substantial catalytic, risk-taking capital in mezzanine finance structures
Develop impact investing network
Set the industry standards for social measurement
Lobby for specific policy / regulatory change
CoordinatedLeadership
THAT’S HOW IT COULD TAKE OFF
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All Investing$61.90 Trillion
Negatively Screened Funds + Impact Investing$2.71 Trillion
How Big Could it Be?
Impact Investing in 5–10 years?
U.S. Philanthropy$0.31 Trillion
Impact Investing has the potential to grow to ~1% of total managed assets, which could result in ~$600B of capital channeled towards social and environmental impact
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"I wouldn't give a nickel for the simplicity on this side of complexity, but I would give my life for the simplicity on the other side of complexity."
— Albert Einstein
Social Capital Markets 2008
The Emerging Marketplace Measurement and Metrics An Ecosystem of Solutions Future of Investment Funds The Evolution of Deal-Flow The Influence of social media and movements
The Emerging Marketplace
“It’s a huge market but there’s no marketplace” All investing= $61.9 Trillion Negatively Screened Funds & Impact Investing = $2.71 Trillion U.S. Philanthropy - $0.31 Trillion
Social investing: SRI, community investment Microfinance: funds (Blue Orchard), IPO (Compartamos) Fund of funds: Calvert Giving Fund Ethical and social stock exchanges: UK, Brazil, South Africa Legal structures: L3C, CIC, B Corporation Online giving marketplaces: Kiva, Microplace, Globalgiving,
Missionfish
Risk, Returns, Impact
Measurement and Metrics
What are we measuring, and why?
Measurement costs money, so who’s going to pay for it?
Investment-first investors vs. impact-first investors
Outcome evaluation: learning from foundation experiences
Acumen Fund: Pulse (formerly PDMS) with Google, Salesforce Fdn
Socialmarkets.org: Self-reported metrics + SROI + crowdsourcing
Rockefeller Fdn: Catalogue of Approaches to Impact Measurement
FSG: New Directions in Foundation Evaluation
“You can’t manage what you can’t measure”… or
“Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.”
Measurement and Metrics
An Ecosystem of Solutions
"Let go of ego. You don't have a silver bullet. We need silver buckshot." ~ Jed Emerson
Legal structures New funds Metrics and measurement Brokerages and exchanges Definitions ...
We need it all…
Future of Investment Funds
Investors – different mandates, most US-based entities Social-purpose business investors:
Market-rate fund with scale - Physic Ventures ($159M) Several emerging pilot funds – New Cycle Capital, Good Capital Angels – large and small: Investors Circle, E-Line Ventures
Social enterprise investors/leading philanthropists:
Foundations and their advisors: Skoll Foundation, Calvert Social Investment Foundation, Imprint Capital Advisors ($100M WK Kellogg Foundation Fund)
Funds that support non-profits and their advisors: Nonprofit Finance Fund, Growth Philanthropy Network
Have certain groups recognized the trend “Consumers and businesses buyingand selling goods and services with mission of doing social good” is the “nextbig thing” investment opportunity and will mainstream investors follow suit?
Fund experience to date…
Fundraising is a challenging task Pilot funds and successful social investments needed
Physic’s predecessor was Great Spirit Ventures ($20M)
“Meaning” is personal to investors/organizations
Most success with smaller family foundations and family offices and corporate strategic investors
CalSters opportunity - meaning intersects strategic interests?
Range of financial returns targeted – 0-3% versus 25-30% Is Philanthropy part of the Social Finance landscape?
Will program-related investments and market-driven business plans continue to be funded by different investors?
A few examples presented where capital of these two sets of investors successfully “co-habits” in an organization
Evolution of Deal-Flow
There is consensus on the following:
Widest group of investors will be attracted to deals that deliver significant social impact as well as market-rate financial returns
Current deal flow, seen by funds is clustered in two areas: High financial return, modest to low-level of social impact Significant social impact, modest to break-even financials
The jury is still out on:
Whether social ventures will be capable of delivering high levels of both financial return and social impact
What return is right for majority of blended-rate investors?
A thesis, borrowed from venture capital, emerges:
If additional capital is made available for blended-return entities, will more deal-flow emerge in the market?
Social/Financial Returns
Will the midway point between zero and market-rate emerge asblended-rate level of financial return for this asset class?
As capital emerges looking forblended-rate return, will we seedeal-flow move to the centre?
What level of socialimpact needed tolower expectations forfinancial return?
Social Media and Movements
The social finance movement
has been building for decades will take decades to realize the full potential
We are at a critical juncture with accelerating momentum Social media is about connection and acceleration
Giving is the beginning Kiva MissionFish MyC4 SocialMarkets
New tools increasing engagement and involvement Wikis, blogs, sites etc. Facebook, Twitter, etc.
Implications for Ontario?
Causeway is a national initiative focused on social finance with “the asks” directed at the federal level calling for an expert panel to be established
Causeway is also applying to the OTF for support of their work in Ontario
MaRS and Causeway recently held a Social Finance Forum, presentations are available online, proceedings are pending
SiG@MaRS commissioned a Strategic Inquiry on Social Finance at the Provincial level which is available online
The Ontario government has made several announcements concerning the establishment of a Social Venture Fund – implementation date pending
Finally, the Ontario Nonprofit Network (ONN) has also established a Working Group on Social Finance – we would like you to join us as we develop a plan for this group
Questions?
What interested you about what you heard here today?
What are the implications for your work?
Are you interested in working with others on advancing any issue you heard about here today?
Are you working on a related social finance initiative you would like to highlight?
If you had to advocate for a particular development in this area, what would it be?
Are their key players who need to be engaged in this work?
Are there other key groups we should be linked into?
Open Discussion
At SiG@MaRS we want to understand the value of the “Social Venture Fund” target zone but now it’s your turn – what would you like to discuss?
Allyson HewittDirector, Social EntrepreneurshipT 416-673-8410E [email protected] www.marsdd.com