leveraging social capital: its time for change
DESCRIPTION
Arthur Wood - VP, Social Financial Services, Ashoka. Covers the spectrum of social capital investment.TRANSCRIPT
Leveraging Social Capital – “Its Time for Change”Arthur Wood – VP, Social Financial Services, Ashoka
COMMUNICATION
““The coming Social Finance Crunch – “The coming Social Finance Crunch – “Population aging is a Population aging is a
worldwide phenomenon that will affect all G-7 countriesworldwide phenomenon that will affect all G-7 countries””
There is simply not enough money in the current paradigm– There is simply not enough money in the current paradigm– ““Population aging will be a key challenge facing the G7 economies over the coming Population aging will be a key challenge facing the G7 economies over the coming decades”decades”
There is a double whammy comingThere is a double whammy coming “The projected decline in the “The projected decline in the employment-to-population ratio will gradually become a hindrance to employment-to-population ratio will gradually become a hindrance to growth in living standards beyond 2010” growth in living standards beyond 2010”
The Spectrum of Social Capital Investment - The Spectrum of Social Capital Investment - created in 1888 / 1944 – “essentially pre modern capitalism” – the Gap
no financial return below market return market return
High risk
Low risk
Grants
$400bn
50%
Programme-relatedinvestments
Venture philanthropy
Mainstream“For Profit” Investments
Investment plus
Social Responsible Investment circa $4trn
Corporate Engagement incl
CSR
”
NO INDIVIDUAL OR SYSTEM MECHANISMS – THE GAP
Case Study - Value Chain Financing – SanitationCase Study - Value Chain Financing – Sanitation
Grants Recoverable Grants
Investment Plus MainstreamInvestments
no financial return below market return market return
Scale (GAVI) & Synthetic Profit (Corporate incentive)
Increase the credit quality of social capital markets ie. Leveraging - Microfinance / DB Eye fund model
Incentivising Innovation / Collaboration at the bottom of the pyramid – Social Entrepreneurship
Enables a Range of Financing options; incentivising corporates, banks, civil society;integrating “ for profit” and “not for profit” players
Based on “Foundations and Social Investment” Margaret Bolton 2005 and Bates Wells & Braithwaite
Legal Process – ie
L3C / CIC
Financing Mechanisms incentivising Community and Corporates Carbon / Vouchers / Fertiliser / Power
Programme Related Investment
What are the critical Ingredients What are the critical Ingredients ?
•Political Will – The IYS 2008 - Call by Brown / Moon to end of Silo’s
•Metrics and Audit- Clear Cost Benefit Analysis – WHO,UNICEF, DFID,WSP – if not non enforceable Grant
•You can Identify the Community / Distribution chain
•Not enough Money – it is however a business opportunity – a size to attract ?
•Structurally the status quo is not going to be bailed out – - decline in funding
•Banks looking for markets in real scale – this is an under leveraged market
•The more efficient allocation of subsidy – move to scale will bring benefits to many - Quicker R&D for Society and MC=MR
Collaborative Financing Facility NOT Just Funds
Participation
WSSCC, UNICEF, WHO, WSP, OPIC, SuSanna, IFAD, Deutsche Bank x2, UBS, Legal Group – (Caplin Drysdale, Gibson Dumm, Latham’s, Linklaters, Bates, Morrison), Acumen, L3C Advisors, Environtrade, Ashoka 10/40 Fellows incl WTO, Keystone, SROI – we welcome partners
Open Supply Side Model – www.changemakers.net - 250 ideas
UN Foundation (GWC) Funding Competitive / Collaborative – Sanitation supported by CNN, Coke, Hilton Foundation and Morgan Stanley
Facility Not Fund
Many social issues requires Collaboration – ie Water >> Sanitation>>Climate
• Different banks / Organisations – with different proposals on the Value chain
• Inclusive, Leverages Different Financial Players / Concepts
• Via Banks - Links into other core funders – Governmental
• Audit Mechanism
• Wider range of Investment opportunities – ultimately integrated
• To many different constituencies including the corporate sector
• Identifying a Single Language and Single platform - Integrating Social and Financial Profiling
NEXT STEPS – SINGLE PLATFORM / SINGLE LANGUAGE
QUALATITIVE PLATFORM >> A MECHANISM DEFINING WHAT IS EFFECTIVE TO THE CORPORATE / BANKING WORLD
PHASE 1 – Completed in March - http://www.changemakers.net/en-us/competition/waterandsanitation
PHASE 2 – Open Model Update with involvement of key Players
QUANTATIVE PLATFORM >> A MECHANISM DEFINING WHAT THE SOCIAL SECTOR HAS TO DO TO GAIN ACCESS TO CAPITAL
Commenced this week with OPIC, UBS, Deutsche Bank, WSP, Keystone, SROI, Ashoka, Acumen, U of Geneva – combining the best of Top Down and Bottom up models – with Feedback Mechanisms and Audit Mechanism
MECHANISM TO ENGAGE ALL PLAYERS IN SCALE Looked at as a Business Problem
SIX GLOBAL BUSINESS LINES TO SOLVE THE SANITATION ISSUE (may be others)
• 1 - Municipal Financing ;2 - Public Toilets; 3 - Mortgage / Housing
• 4 - Small Entrepreneurs; 5 - Methane / Carbon / Energy; 6 – Fertilizer
>> SCALING - Three Tier Corporate Engagement – Primary (i.e. Toilet Manufactures, Secondary (Soap), Tertiary (Companies with an Opportunity Cost)
>> COLLABORATION Social Entrepreneurs, Corporate , Social Sector The New Legal Paradigms >> L3C and CIC and New Intermediaries
>> ENGAGEMENT of the Banks – The need for Banking Skills!!
>> Are we part of a broader solution >> Water, Climate and Sanitation
IF I AM A SOCIAL SECTOR ORGANISATION / CORPORATE - WHAT ARE THE NEXT PRACTICAL STEPS NOW
PHASE 1
• WORK ON PLATFORM – QUALATIVE & QUANTATIVE PLATFORM – UNIVERSITY OF GENEVA
• CREATION OF A GOOGLE WORKING GROUP – SHARE MODELS
• DESIGN BOTTOM UP FEEDBACK SYSTEM WITH KEYSTONE AND SROI – YOUR ENGAGEMENT NEEDED INDEED CRUCIAL
>> CONSUMERS ARE SEPARATE FROM FINANCIERS
• WORK WITH WSP TO VERIFY FINANCIAL MODELS AND PROCESS AND MARRY TO TOP DOWN
THE SYSTEM CAN BE CHANGED A NEW PARADIGM - “IT IS TIME FOR CHANGE”
PHASE TWO
• APPLY TO BUSINESS LINES ACROSS ALL POTENTIAL RETURNS > CAPACITY @ -100% to FOR PROFIT MODELS – DESIGN TEMPLATE
>> WHERE DOES YOUR EXPERTISE FIT?
>> NOT JUST SILVER BULLETS BUT THE MAGAZINE OF SOLUTIONS – NOV 2007 PM –GORDON BROWN AND UN SEC GEN - BAN KI MOON – “AN END TO SILOS”
PHASE THREE
>> INTEGRATED REINFORCING ASKS CREATING A COLLABORATIVE MARKET CAPABLE OF SCALING
>> NOT JUST AT “FOR PROFIT” AND “NOT FOR PROFIT” BUT ALL INVESTORS AND INVESTMENTS TO ADDRESS THE ISSUE
HOW DOES FINANCE CHANGE THE INCENTIVES FOR ALL THE PLAYERS
>> A SYSTEM THAT REINFORCES COLLABORATION BETWEEN ALL THE PLAYERS IN MOVING A MARKET TO SCALE NOT FRAGMENTATION
WHAT DO I DO IF I AM A BANK OR GOVERNMENT ? Paul Martin - Former PM of Canada “The question I would put to you is quite simple” – Nov 2007
“If we are prepared to use these kinds of (tax / legislative) incentives to enable business entrepreneurs to tap capital markets for the betterment of the economy, why would we not provide similar incentives to social entrepreneurs as they seek to tap capital markets for the betterment of society.
• Financial experts ought to be developing new cutting edge instruments to make funding available to social entrepreneurs
• Tax experts ought to be thinking about mechanisms that can support social enterprise in a meaningful way.
• Legislators should encourage an environment that allows foundations to become more imaginative in support of social enterprise”.
SUMMARY THE IMPORTANCE OF COLLABORATION AND SCALESUMMARY THE IMPORTANCE OF COLLABORATION AND SCALE
• To solve the problems of Sanitation on a systemic basis requires:
– Governments to change legislation – Tax treatment and Legal structures >> CIC, L3C
– Empower the bottom of the Pyramid / Community
– Collaboration from the Social sector / NGO’s
– Foundations / Donors – Leverage - HOW to draw in more Private capital - LEVERAGE THE 100% NOT ALLOCATE 5%
– Corporates to engage in “for profit” for social impact
– Banks bringing their skills to bear along the whole Value Chain
– Creation / Evolving of New Intermediaries to safeguard the interests of both players