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Social Capital Markets Conference
September 03, 2009
Social Capital Markets Conference
Efforts to Measure the Social Impact of 'Mission Investments'
Much like the long-running debate in the nonprofit world about how to measure a charity’s performance, a movement is under way to figure out how to evaluate whether investments that seek both financial and social returns are making a difference.
The absence of common standards means that investors can’t compare the social and environmental benefits of different investment opportunities, said Antony Bugg-Levine, a managing director at the Rockefeller Foundation. Even measures as simple as the number of jobs created through an investment might be counted differently from one social-investment fund to another.
For example, one fund might count only the number of full-time jobs created, while another fund might also include part-time or seasonal jobs.
Rockefeller has been working with the Acumen Fund, B Lab, Deloitte, PriceWaterhouseCoopers, and others in the field to develop a common set of terms to measure the social and environmental return on mission investments.
In June, the organizations released the first version of the taxonomy, the Impact Reporting and Investment Standards — also known as IRIS — and it is working with a set of social businesses and social investment funds to test the initial version.
A second version of IRIS that incorporates lessons learned during the first testing phase is scheduled for release in January and will be followed by public comment period.
Work has also begun on a parallel effort — Global Impact Investing Ratings System, or GIIRS –- which looks at how an independent, third-party ratings systems could be built on top of the information that is collected and eventually aggregated under IRIS.
Most institutional investors don’t want to sift through all the data social investment funds collect, said Andrew Kassoy, co-founder of B Lab.
“They want an easy way of telling the difference between two different companies or two different funds in terms of their social and environmental impact,” he said.
Organizers says that the goal of both efforts is to ensure that social capital moves to the investments that demonstrate the strongest returns, rather than to those that tell the best story.
“It’s about the ability to make a fact-based, emotionless decision that takes that passion for the mission and converts it to the right choice in the form of capital,” says Chris Park of Deloitte, “and to know that there’s an entire ecosystem behind that choice in terms of what’s being recorded, what’s being measured, and what’s being assured and verified.”
Listen to Antony Bugg-Levine, of Rockefeller, explain why he thinks a common standard to measure the social impact of mission investments will help answer the question of whether mission investments that return below-market rates of return necessarily have the strongest social returns.
Social Capital Markets Conference
The Financial Crisis: Maybe Not a Watershed Moment for 'Mission Investing'
The question of just how much the financial crisis has opened mainstream investors’ eyes to the potential of investments that combine both financial and social returns has permeated discussions at the conference.
“I just had this feeling that people with fiduciary responsibilities, asset owners would kind of step back and say, ‘Let me get this straight. My microfinance bond gave me 7 percent, but I just lost 30 percent of my portfolio with traditional assets,’” Jed Emerson, a managing director of Uhuru Capital Management, in New York, told conference participants.
But, he said, in the conversations that he has had with institutional investors over the last six to nine months, it hasn’t seemed like the critical evaluation of traditional investing approaches he expected has taken place.
“I was struck by how fast these folks just ran right back to the same wealth advisers, to the same strategies,” he said. “‘We’re going to go right back in to the main funds that just lost us 30 percent, because, well, there’s got to be an upside around here somewhere.’”
In at least one case, the strong performance of Goodwell Investments, a for-profit company that invests in microfinance institutions, actually worked against it, said Wim van der Beek, the company’s founding partner.
Mr. van der Beek said that a trustee of a pension fund that had already invested in Goodwell told him that the pension fund had been planning to invest more with the company but that the poor performance of other investments in its portfolio meant that it was now “overweighted” in that area so the pension fund couldn’t make the additional investment.
Other speakers saw reason for cautious optimism.
Amit Bouri, head of the new Global Impact Investing Network, said that even at the worst point of the downturn, Responsibility, a company in Switzerland that raises money from very wealthy individuals to invest in microfinance, was raising roughly $20-million of new capital every month.
“I don’t want to paint too rosy a picture,” said Mr. Bouri, “but it’s an important sign that there is still continued interest in this space.”
The amount of money under management by RSF Social Finance, a nonprofit organization that raises money from individual investors that it then lends or invests in social enterprises, rose by 10 percent in 2008, according to Don Shaffer, the group’s chief executive.
For the people who found the organization, it represented a “refuge from the traditional capital markets,” said Mr. Shaffer. But, he said, given the losses in mainstream markets, he would have expected more investors to show interest in his organization.
“We’ve moved from a shock and paralysis period to an inertia period,” said Mr. Shaffer. “It’s still very sluggish.”
September 02, 2009
Social Capital Markets Conference
A Different Kind of Donor-Advised Fund
The Calvert Giving Fund works much like other donor-advised funds, but with a twist –- the assets that donors contribute to set up their funds are invested in companies and other efforts that promote the social good.
“We believe that the philanthropic gifts that they’ve given to the donor-advised fund really need to go to work as soon as they are contributed,” says Shari Berenbach, chief executive of the Calvert Foundation, in Bethesda, Md., which runs the fund.
Started in 2001, the Calvert Giving Fund has always given donors the choice of investing money held in donor-advised funds in socially and environmentally responsible mutual funds run by the Calvert Group and in Community Investment Notes issued by the foundation.
The notes act like the program-related investments that foundations make. Money invested in the notes is lent to nonprofit organizations to build low-cost housing, provide small loans to entrepreneurs in developing countries, and for other charitable services. Investors receive their principal back, along with up to 3 percent interest.
Last year, the fund expanded the number of debt and equity investment products in which donor-advised assets can be held. Among the new investments are notes issued by:
- Acumen Fund, a nonprofit organization that invests in companies that provide health, water, housing, and energy services to people living on less than $2 a day in developing countries.
- Public Radio Capital, a nonprofit organization that makes low-interest loans for the purchase or expansion of public-broadcasting stations.
- Root Capital, a nonprofit organization that provides capital and expertise to help farmers and rural craftspeople in developing countries build businesses,
The Calvert Giving Fund has 400 accounts totaling $26-million. The assets are split roughly half and half between Calvert Group mutual funds and the program-related investment-style vehicles.
In a difficult time for investments of all kinds, the Calvert Giving Fund has fared better than many investors have. Over all, the fund ended 2008 down less than 5 percent.
“We really outperformed our counterparts handsomely,” says Ms. Berenbach.
Listen to Ms. Berenbach’s explanation of why she thinks donor-advised funds are an ideal environment for people to start to experiment with mission investing.
Social Capital Markets Conference
Evaluation Will Play a Critical Role in Work of White House Office
Measurements and evaluation will play an important role as government and the nonprofit world work together to identify and expand the best solutions to the country’s most pressing social problems, Sonal Shah, director of the White House Office of Social Innovation and Civic Participation, told conference participants.
“We want to scale what works,” she said. “We want to be able to define our outcomes and be accountable for the results.”
But good data on programs’ social impact are more than just a way to compare various approaches; it also allows organizations to learn and continue to refine their programs, Ms. Shah said.
Organizations also need to be able to talk openly about their failures and the challenges they face, she said. Not being able to discuss problems leads to “perverse incentives” such as evaluating programs to show whether money was used effectively rather than whether the activities it was spent on achieved their desired results.
“Just like business, which sometimes makes wrong decisions and needs to course correct, nonprofits and social businesses should be able to course correct and make changes,” said Ms. Shah. “They should only be considered failures if they fail to correct the problem.”
September 01, 2009
Social Capital Markets Conference
Why Mission Investing Matters, One Foundation Official's Perspective
Putting for-profit investment capital to work in ways that benefit society has the potential to unlock substantial sums of money to tackle the world’s problems, says Antony Bugg-Levine, a managing director at the Rockefeller Foundation, in New York. In time, he says, the scale could dwarf anything the nonprofit world could have dreamed possible.
But, he says, the goal of mission investing is not to supplant the efforts of philanthropy and government, but instead to complement them.
Using for-profit capital to achieve social and environmental ends, he says, allows scarce charitable dollars to go where they are most needed.
In an interview with The Chronicle, Mr. Bugg-Levine talked about why mission investing matters, and used the example of a school-finance company in India to show how harnessing for-profit capital allows government and philanthropy to focus on problems markets cannot solve.
Social Capital Markets Conference
Social Business Wins Big Investment
VillageReach, a nonprofit organization in Seattle, took a novel approach to trying to improve the health of people living in remote areas of Northern Mozambique. It started a propane-distribution company.
In 2002, the charity started VidaGas with the country’s Ministry of Health as its first and, at the time, only customer. With a reliable source of energy, clinics were better able to keep vaccinations cold, sterilize medical equipment, and offer night-time birthing services.
In five year’s time, the percentage of young children in the region vaccinated for diphtheria, tetanus, and pertussis climbed from 69 to 95 percent.
The company quickly began to expand its customer base to include hotels, restaurants, hospitals, small businesses, and eventually residential households. The business has had the added benefits of spurring economic developments and reducing the use of charcoal and wood for cooking.
Last year, VidaGas delivered 240 tons of propane, and is now the largest distributor in Northern Mozambique.
Impressed both by the company’s business prospects and the social benefits of its work, the Oasis Fund has made a $1.4-million equity investment in VidaGas. The money will allow VidaGas to expand its business in Northern Mozambique and potentially start exporting propane to surrounding countries.
The Oasis Fund is a commercial investment fund in Europe that invests in businesses that provide housing, health care, education, water, or other services to poor people in developing countries. But while the fund focuses on businesses that provide a social benefit, it also is looking for significant financial returns.
“I come from investment banking and then later dealt with private equity and venture capital, and I can tell you that the terms of this deal are as stringent as I’ve ever seen,” says Craig Nakagawa, co-founder of VillageReach.
In an interview with The Chronicle, Mr. Nakagawa talked about why he thinks a hybrid approach to social problems has the potential to “magnify the impact” of philanthropic dollars and create sustainable change.
Social Capital Markets Conference
Social Capital Markets Conference Opens in San Francisco
San Francisco
More than 800 investors, entrepreneurs, financiers, foundation executives, donors, and nonprofit officials have gathered here for Social Capital Markets 2009, a meeting that conference organizers describe as being “at the intersection of money and meaning.”
Discussions will focus on the range of ways that investment, enterprise, and business-minded approaches to giving are being married with a desire to do social good in areas such as health care, education, and the environment.
Scheduled speakers include Sonal Shah, director of the White House Office of Social Innovation and Civic Participation; Shari Berenbach, chief executive of Calvert Foundation; and Dave Chen, founder of Equilibrium Capital Group, a firm that invests in companies that focus on environmentally friendly building, resource management, and the food-supply chain.
We will post updates here throughout the conference.
Copyright © 2009 The Chronicle of Philanthropy