‘How can capitalism better serve society?’ Reflections from the Brazilian Forum on Social Finance and Impact Investment

 

Elaine Smith

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The 1st Fórum Brasileiro de Finanças Sociais e Negócios de Impacto – Investir para Transformar took place in Sao Paulo, Brazil on 6 and 7 May. Over 500 people participated in the event, organized by Artemísia, ICE and Vox Capital. Sponsors included some of the major foundations and institutes in the country, plus the federal government, represented by the development bank BNDES.

Participants agreed that patience and time are required to reap the results of investments that will transform society and the reality of millions. Collaboration and partnership among multiple stakeholders (including government) could also help collective dreams come true.

Financial results and social impact were discussed in numerous panels. It is not about financial results or social impact – everyone now wants both. And discussion goes beyond ESG risk management and competitive returns to include topics such as opportunities in underserved areas, employment and growth.

The impact investing space is already well populated. Brazil has 10 impact investing funds and 5 social business accelerators. Artemisia alone researches about 1,200 social businesses. Business schools are focusing on social entrepreneurs. It is a very exciting time and history is in the making. A newly published JP Morgan/GIIN survey shows that in Brazil the sectors where entrepreneurs see most opportunity are education, health and infrastructure, while microcredit and financial services count for 42% of current investments worldwide, followed by energy with 11% and housing with 8%.

Impact investing has a strong connection with the local philanthropic community. Early international investments looking for targeted social impact have found it hard to invest in Brazil during the last decade for several reasons, including the country language barrier (Brazil is the only Portuguese-speaking country in Latin America) and high costs. But locals are learning how to measure the impact of social business, and realizing the need to apply global metrics such as IRIS or GIIRS to local and government indicators. Every local context is different and early stage businesses are complex and challenging to measure.

The main challenges mentioned by the international players are the shortage of high quality investment opportunities with a track record and the lack of appropriate capital across the risk/return spectrum, mainly for early stage businesses.

The Forum included a session where several social entrepreneurs pitched their wares, showing innovative solutions with social impact. A challenge was launched to the audience: pick among the three finalists chosen by the selection jury to win a money prize and a ticket to participate in SOCAP14 in San Francisco in September:

Livox in health
Programa Vivenda in housing infrastructure
Joy Street in education

To help the audience, the jury shared some of the parameters they used to select the top three:

• Profit-maximizing business, but differentiating between generating income and impact
• Impact going hand in hand with future growth
• Focus on the solution and possible impact (instead of focusing on the person or the organization)
• Why invest in one idea and not the other?
• Is it bringing innovation and possible change and transformation in scale?

Never mind the favourite. There were only winners at the end of the two-day forum.

But I don’t want to end without raising one recurring question: maybe it was my chosen panels, but I felt the environment was little discussed. I am not an environmentalist and I also know not all social problems can be tackled with social business. But I am now wondering if the environment has a toll to pay when we talk to people about social impact.

Elaine Smith is a Young Global Leader from the World Economic Forum; she helps organizations in their development process, focusing on innovative approaches to social issues.

Tagged in: Brazil Philanthrocapitalism


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