Message from SOCAP: philanthropy can help build impact investing marketplace

 

Geoff Burnand

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Geoff Burnand

The convening power of SOCAP  hit Malmo between 8 and 10 May, offering dozens of leading-edge keynotes, panels, workshops and co-created sessions. Billed as ‘Designing the Future’, the conference attracted delegates from as far afield as California, South Africa and Australia. It bought together valuable strangers, from young idealistic entrepreneurs to experienced investors, world-renowned scientists and academics to policymakers. It also served as an important statement about Sweden’s ambition to become known as one of the leading lights in Europe with regard to social innovation.

Perhaps not surprisingly for a conference based in Scandinavia, the core themes were to do with the best creative solutions to the complex interconnected issues of youth employment, immigrant inclusion and providing for the needs of a growing ageing population. New kinds of public–private partnership were discussed, using innovative new models of social enterprise and impact investing. The developments in the UK, particularly around social bond finance, were especially highlighted.

Despite the fact that there is no end in sight for the economic and fiscal crisis that is gripping many parts of the developed world, the growth of impact investing is a great opportunity to raise significant funds and share knowledge. However, a major challenge is the lack of absorptive capacity for capital. Many investors struggle to find good opportunities to invest in for both impact and a reasonable return. Several delegates were of the view that the sector is entering another phase of building the marketplace that may still take several more years.

Perhaps for this reason, less well represented at this conference were institutional and retail wealth managers. Contrasting views about this were expressed. One view was that while this group are increasingly seeing this market as an opportunity, they are also content for much of the hard early-stage development work and business models to be tested by the social finance sector first. An alternative view expressed by some social pioneers was that engagement with this group of investors will force an unacceptable dilution of their social mission, so alternative ways to distribute impact investments need to be anticipated and developed.

Many delegates were agreed that it is vital that the social finance intermediaries are sufficiently well capitalized to develop the range of services for the market to become more sustainable and to reach scale effectively. A proposal that all foundations should devote 20 per cent of their endowments towards programme related investments by 2020 was well received.

The conference provided many examples of ambitious social entrepreneurs choosing to take great risks for little potential financial reward but tremendous potential social value. These firms must develop and refine their models by trying them out the hard way, in an unforgiving low-margin marketplace. The role of philanthropy in closing this pioneer gap was well recognized, and there is almost certainly more potential to develop structures that combine both traditional philanthropy and impact investment.

SOCAP Malmo was a well-organized, friendly event and a great opportunity to collaborate and discuss new ideas. As might be expected, it was an inspiring environment, with many interesting conversations held off stage. Fortunately not all of these were captured by the team of videographers who roamed the conference to interview participants.

Geoff Burnand is Chief Executive of Investing for Good and Head of Funds at Social Investment Business.

Tagged in: Impact investing SoCap Social entrepreneurship Social investment


Comments (1)

Ben Sandzer-Bell

I find myself indeed in the category Geoff describes as "ambitious social entrepreneurs choosing to take great risks for little potential financial reward but tremendous potential social value. These firms must develop and refine their models by trying them out the hard way, in an unforgiving low-margin marketplace." The company I founded 3 years ago, CO2 Bambu, specializes in the design, manufacture and field assembly of low carbon footprint, BOP housing solutions. We do indeed struggle with "normal" business challenges, operating in a low margin environment. What is most, dare I say, frustrating is that as innovators in our field -- providing bamboo based houses for social impact while having significant positive environmental impact-- is that I can see several extremely high impact solutions that would in due time meet a market demand, but for which I cannot allocate scarce R&D funds. One especially impactful product I cannot fund today is the development of a low cost "amphibious house" (an amphibious house sits on the ground most of the time, on floating barrels, but can rise with flood water and return to ground once water recedes). This is a solution that is screaming to be developed for BOP communities that live in coastal regions of the world and which are at great risk of destruction due to rising waters, a phenomenon that is upon us due to our collective inability to orchestrate enough of a response to climate change. This indeed is a perfect match for philanthropy. I cannot yet build a business case and make bankable projections, as there is no equivalent solution today, thus no tangible market sizing data points. Yet we all know that flooding is an increasingly frequent destructive phenomenon and once we are in a position to demonstrate the resilience of low cost amphibious housing, I have little doubt that we can combine massive impact with capture of a yet to be developed market for the 600 million or so people living in coastal regions at risk of flooding. So, philanthropists out there: listen to Geoff and help companies such as ours, CO2 Bambu, navigate the difficult transition from start up to stable operations in low margin markets, without sacrificing important innovations that will benefit us all! (Please contact me at ben@co2bambu.com if you wish to find out more how you can help with your philanthropic donations).


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